ST Engineering to issue S$1 billion worth of five-year notes at 1.5%

The technology and engineering group’s share price fell over 3% the morning after the announcement was made.

Technology, defence and engineering group Singapore Technologies (ST) Engineering's subsidiary ST Engineering RHQ has priced US$750 million (S$1.07 billion) worth of five-year notes at a fixed interest rate of 1.5% per annum.

ST Engineering shares are down over 3% to S$3.22 per share as at 11:00 SGT on Thursday 23 April 2020, a day after the announcement was made.

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ST Engineering’s new S$5 billion Multicurrency Medium Term Note Programme

The notes, announced as part of the group’s S$5 billion Multicurrency Medium Term Note Programme, are expected to be issued on 29 April 2020. The notes will have a maturity date of 29 April 2025, if no prior redemptions, purchases or cancellations have been made.

The notes will be issued in denominations of US$200,000 and integral multiples of US$1000 in excess thereof, the group said in a press release.

The net proceeds of the issue will be lent by ST Engineering RHQ to ST Engineering for the purpose of funding new capital expenditures, acquisitions, general corporate purposes and/or refinancing existing borrowings.

DBS Bank Ltd. and J.P. Morgan (S.E.A.) Limited are the joint global co-ordinators for the notes, while DBS Bank Ltd., J.P. Morgan (S.E.A.) Limited, Crédit Agricole Corporate and Investment Bank, Singapore Branch, Mizuho Securities Asia Limited and Standard Chartered Bank (Singapore) Limited are the joint bookrunners for the notes.

Application will be made to the Singapore Exchange for permission to deal in and the listing and quotation of the notes.

The Multicurrency Medium Term Note Programme was established on 18 March 2020 to support the overall group’s long-term strategy to enhance shareholder value. According to ST Engineering, this will enable it to tap the debt capital market for longer tenor financing to optimise its short-term to long-term debt mix and its capital structure.

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ST Engineering’s latest guidance regarding Covid-19

Last Tuesday 14 April 2020, ST Engineering had issued an update regarding the coronavirus pandemic’s impact on its financials.

It had stated that its balance sheet is still looking ‘strong’, and that ‘a diverse business portfolio’ covering defence and various domains in the aerospace, electronics, land systems and marine sectors, allows it to mitigate the overall impact on its various entities.

It was also revealed in the same announcement that the group’s Board of Directors has decided to reduce Board fees by 10%, alongside a salary reduction of 10% for the President and CEO. The senior management team will reduce their salaries by percentages ranging between 5% and 10%, with changes to take effect from 01 May 2020.

In a separate release posted on the same day, the company also announced that Dr Beh Swan Gin will be retiring as an independent non-executive Director of the company at the upcoming 23rd Annual General Meeting (AGM), and will not be seeking re-election.

A day after those updates, ST Engineering’s share price fell as much as 3.2%.

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