In Parliament yesterday (5 Jun), Minister in the Prime Minister’s Office Indranee Rajah said that it was a “wrong assumption” that loans are being provided by GIC and Temasek to bail out companies.
She was responding to Workers’ Party NCMP Leon Perera who asked about the Government’s role in loans provided by GIC and Temasek to companies affected by the COVID-19 crisis.
Mr Perera said, “When they (GIC and Temasek) provide rescue packages, be it through loans or through other instruments, to help to support the viability of some companies, but not others, that sometimes creates questions among some members of the public.”
“Given that these are public funds, is there any way that the public can have some transparency about the thinking behind these probably quite significant decisions, which may continue to happen as this crisis winds its way forward?”
Indranee Rajah: We don’t interfere with GIC’s and Temasek’s investment decisions
Ms Rajah told the House that the role of GIC and Temasek is primarily to invest Singapore’s reserves and to work within their investment policies to get the best returns possible. They do so using a variety of instruments, including debt instruments like bonds and loans, she said.
She made a distinction between loans made in the investment context and loans provided by banks and finance companies, such as mortgage loans and working capital loans. “(GIC and Temasek) don’t do business the way banks do, or other kinds of entities in the context of rescuing,” she said.
She reiterated that the government does not meddle with any of GIC’s and Temasek’s investment decisions, including decisions on whether or when to invest in a loan, she noted.
PIL under deep financial stress
Earlier in the year, Temasek had pledged to underwrite an effort by Singapore Airlines to raise $15 billion through the sale of shares and convertible bonds.
A unit of Temasek is also in talks with shipping company Pacific International Lines run by PBM holder S S Teo. In particular, it was reported that the Temasek’s unit is considering sinking at least US$400 million (S$565 million) into PIL, taking a combination of equity and debt in the struggling PIL (‘Temasek’s unit in talk to sink more than $0.5b into PIL run by PBM holder S S Teo‘).
According to sources, the reason given for the investment into PIL is to help “secure logistics for food supplies” to Singapore amid the coronavirus pandemic. Straits Times reported that “Pacific International Lines is also in talks with a unit of Temasek on a potential investment aimed at keeping itself afloat.”
PIL is currently under tremendous financial stress. According to Alphaliner, a company which specializes in providing worldwide data and information on shipping, PIL’s total outstanding debt is “worrisome”. It said, “More worrisome for PIL is the total debt outstanding of $3.46bn as at June 2018, of which $1.08bn was short term debt payable within 12 months.”
In Apr, PIL even came out to issue a strong statement denying rumours of bankruptcy. WSJ reported that DBS Bank is one of PIL’s biggest lenders, with a US$260 million exposure, and Bangkok Bank in Thailand is owed US$220 million. Temasek-linked entities are also owed around US$140 million. Besides bank debt, PIL has a $60 million bond that is maturing in November.
In any case, Temasek sold off state-owned Neptune Orient Line (NOL) to the French 4 years ago (2016) to get out of shipping business. It looks like it’s going back into shipping again if it decides to invest in PIL.