Why are big US firms choosing to issue bonds in Singapore?

Why are big US firms choosing to issue bonds in Singapore?
Pepsi and IBM among companies selling debt via subsidiaries in the city state.
FEB 27, 2024
By  Bloomberg

A potential tax benefit is spurring US companies including PepsiCo Inc. and International Business Machines Corp. to sell bonds through their Singapore subsidiaries, fueling a record surge of sales from borrowers in the city state.   

The tactic can allow companies to deduct interest expense from their taxable income in both the US and Singapore. That double deduction means that effective borrowing costs — after taxes — can be materially lower than they would be with a bond issued in the US.

The mechanics of qualifying for the benefit are complicated and a rule that emerged from the Organisation for Economic Cooperation and Development in December may wind up stopping firms from using the technique. But companies may be able to take advantage of it for at least the next three years.

 

As companies sell bonds, they are pushing debt sales volume from Singapore ever higher. Last year, corporates sold $51.5 billion of notes from the city state, more than double the previous year and an all-time record. That mainly came from Pfizer Inc.’s sale of $31 billion of bonds, one of the biggest corporate bond offerings on record, in May 2023 through a Singapore unit to help finance an acquisition.

The sales have continued this year: PepsiCo Singapore Financing sold $1.75 billion of bonds earlier this month, and IBM International Capital sold $5.5 billion of securities in late January. 

A spokesperson for IBM declined to comment. PepsiCo and Pfizer did not respond to requests for comment.

New global tax rates are taking shape through the OECD to ensure minimum tax corporate rates are levied globally. Singapore domestic tax law allows a company, including a local subsidiary of a foreign corporation, to deduct interest payments on debt from their taxable income in the nation state. At the same time, the US tax code might allow companies to deduct a foreign branch’s interest expense from its US taxable income. 

Copyright Bloomberg News

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.