Singapore Technologies Engineering's Proposed Guaranteed MTN Program, Notes Issuance Rated 'AAA'

SINGAPORE (S&P Global Ratings) March 18, 2020--S&P Global Ratings today assigned its 'AAA' long-term issue rating to the Singapore dollar (S$) 5.0 billion multicurrency medium-term note (MTN) program by Singapore Technologies Engineering Ltd. (STE; AAA/Stable/--). ST Engineering RHQ Ltd. and ST Engineering Treasury Pte. Ltd., both wholly owned subsidiaries of STE, are co-issuers under the program. At the same time, we assigned our 'AAA' long-term issue rating to the proposed senior unsecured notes to be issued under the program.
STE irrevocably and unconditionally guarantees the program and the notes. It will use the proceeds of the issuance to refinance part of the group's outstanding US$1.1 billion commercial paper.
We equalize the issue ratings on the program and the proposed notes with the 'AAA' issuer credit rating on STE. This reflects our view that STE's modest leverage limits the likelihood that any debt would be significantly disadvantaged relative to other debt in case of stress.
The proposed issuance is largely neutral to STE's debt level and, therefore, the company's credit metrics. STE's order book of S$15.3 billion, as of Dec. 31, 2019, will continue to provide revenue visibility and stability to the company over the next two to three years. We expect STE to maintain its sources of liquidity, consisting of cash on hand, cash flows from operations, and committed credit lines, at 1.2x above its uses in 2020. This is based on our assumption that STE will renew its 364-day committed revolving facility on a timely basis to maintain effective maturity of the instrument beyond 12 months at all times. As of Dec. 31, 2019, the size of the facility was US$1.1 billion. Our base case does not assume any sizable acquisition in 2020-2022.
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