SIA

SIA is raising $500m via 10-year fixed rate notes due in 2020. This is the first tranche as part of a $1bn multi-currency medium-term note programme announced several years ago. The notes bear an interest rate of 3.22% p.a. payable semi-annually and will be issued in July. This also coincides with SIA’s $900m 4.15% notes due in Dec 2011 that were issued in 2001. SIA says the funds will be used for general working capital purposes and financing of capital expenditure.

We believe SIA is tapping the market at a time when interest rates are at record lows. SIA has a capital expenditure budget of some $10.2b over the next 5 years, mainly on its new additions to its fleet including 20 A350XWB, 20 B797 and another 19 A380s on order. Our outlook for SIA’s loads also remains positive despite some concerns for an economic slowdown. No change to our house’s TP of $18.90, based on 1.7x P/BV.