S$ bonds' covenant evolution

Author: Ashley Lee | Published: 19 Aug 2015

The proliferation of private banks has made the Singapore-dollar debt capital markets an attractive destination for foreign issuers. But a flurry of lower credits could be changing its composition

Singapore-dollar bonds were previously dominated by well-known local issuers, such as real-estate developer CapitaLand. As a result, the market evolved differently from the international markets, most notably including maintenance- instead of incurrence-based covenants.

That has changed as the private bank market has deepened. The Singapore markets are now considered a destination for credits from other Southeast Asian jurisdictions. This may necessitate a change in the covenant packages previously included in bond issuances – which differed from what’s seen in the international market.

"Singapore dollar bonds are hybrids between investment-grade bonds and loan-type covenants," said Timothy Hia, partner at Latham & Watkins in Singapore.

"They’re a slightly different animal," he added, noting that they generally track investment-grade covenants, although some elements of a...