Singapore's STATS ChipPAC delays benchmark bond sale

Mon Aug 11, 2008 4:51am EDT

(Updates with figure in first paragraph, adds underwriters)

By Rafael Nam

HONG KONG, Aug 11 (Reuters) - Singapore-listed STATS ChipPAC delayed its planned benchmark dollar bond sale of about $500 million, but is looking to relaunch the deal as early as September, a source close to the deal said on Monday.

The sale highlights difficulties Asian issuers, particularly those with lower credit ratings, face in raising funds in debt markets, as risk-averse global investors gravitate to safer bets.

STATS ChipPAC's planned benchmark bond sale had been put into doubt when the chip firm -- which is majority-owned by sovereign wealth fund Temasek [TEM.UL] -- said on Saturday it had cancelled a bond buyback, saying "the financing condition had not been satisfied."

STATS ChipPAC had announced in June a debt buyback that was to be financed at least partly via the issuance of new bonds, but the firm was unable to get a sale done by last Friday's deadline due to adverse market conditions, the source said.

Both the debt buyback and the sale of new bonds will have to be postponed until after the summer, the source said.

The firm had initially been looking to raise as much as $1 billion in five-year bonds, but later pared down its expectations to a benchmark deal, typically of about $500 million.

"Conditions in July and early August prevented the deal from pushing over the line," said the source, who declined to be identified because he was not authorised to talk to the media about the sale.

"More normal post-summer conditions should be more favourable and the global investor base will be fully focused," the source added. "The deal is likely to come back to market after the August break."

AUGUST BLACK HOLE

The deadline for STATS ChipPAC's tender offer for the buyback of its $150 million bonds maturing in 2010 <85771TAE4=RRPS> and the $215 million 2011 bonds <85771TAC8=RRPS> was on Friday.

But the following day, the microchip firm announced the termination of the tender offer, effectively cancelling the planned debt buyback, as it had been unable to raise the financing needed to back the purchases.

The tender offer deadline had already been pushed back once from July 22, to allow STATS ChipPAC more time to find the financing needed for the debt repurchase from investors.

Credit Suisse and Deutsche Bank are handling the debt buyback and the new bond sale.

Investors are demanding hefty premiums to purchase new debt, particularly those rated below investment-grade, or the so-called "junk" ratings.

A global credit crunch that marks its one-year anniversary this month is being accompanied by increased worries about slowing global economic growth, highlighting the risks to profits in the region.

STATS ChipPAC's proposed debt was rated BB-plus by Standard & Poor's and Ba1 by Moody's Investors Service, both one notch below investment-grade ratings.

Debt sales in G3 currencies, or dollars, euro or yen, dropped 48 percent to $19.9 billion so far this year compared with the equivalent period in 2007, data from Thomson Reuters show.

August is traditionally a slow month. This year has seen only a single deal worth $100 million this month, compared with a meagre $894.6 million seen in 2007. (Editing by Jacqueline Wong)