July 19, 2010 / 6:45 AM / 9 years ago

UPDATE 3-Temasek selling 700 million pounds of sterling bonds

* First sterling-denominated issue by S’pore state investor

* 200 mln pounds in 12-yr bond, 500 mln pounds of 30-yr debt

* Pricing by the end of London trading hours - source

(Adds details from initial term sheet)

By Harry Suhartono and Saeed Azhar

SINGAPORE, July 19 (Reuters) - Singapore state investor Temasek Holdings [TEM.UL] is selling 700 million pounds ($1.1 billion) worth of bonds to diversify its funding sources as it makes its foray into the sterling-denominated debt market.

Temasek will issue 200 million pounds of 12-year debt at 97 to 100 basis points above gilts and 500 million pounds of 30 year at 92 to 95 basis points above gilts, according to a term sheet seen by Reuters.

“Neither size will change,” according to the term sheet that was distributed to potential investors.

The Temasek bonds, rated AAA by both Moody’s and Standard & Poor’s, will be priced before the end of London trading, said a source briefed on the issue.

Sources with knowledge of the deal said the Temasek fundraising was not linked to any investment in BP Plc (BP.L) or another British firm.

“They see sterling as an additional pool of capital for them,” said one of the sources, who declined to be named because the deal had not been made public. “They want to create a yield curve in different currencies.”

Deutsche Bank (DBKGn.DE), UBS UBSN.VX, HSBC (HSBA.L) and RBS (RBS.L), the managers for Temasek’s sterling bond, declined comment, as did the Singapore state investor.

Temasek, which manages a portfolio worth S$186 billion ($135 billion) at end-March, has distanced itself from speculation it could invest in BP, which has approached several sovereign wealth funds for cash to ward off a takeover and help pay for the worst oil spill in U.S. history. [ID:nSGE66708P]

Its biggest investment in the United Kingdom is Asia-focused Standard Chartered (STAN.L) in which it has a stake of about 18 percent.

Analysts said Temasek was taking advantage of the low interest rates to raise long-term funds at attractive levels.

“There is demand but with AAA (-rated paper) being so low on the yield, it doesn’t come on as so attractive so we are advising clients to go down the risk spectrum but cherry-pick the better ones,” said Joseph Tan, Asian chief economist for private banking at Credit Suisse in Singapore.

Temasek has sold bonds worth $6 billion under its existing $10 billion medium-term note programme, mostly in the Singapore and U.S. dollar, according to its annual report released earlier this month. (Additional reporting by Kevin Lim in Singapore and Saikat Chatterjee in Hong Kong; Editing by David Cowell) ($1=.6541 Pound) ($1=1.376 Singapore Dollar)

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