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04.07.2012 11:32:00

Singapore Technologies Engineering Ltd. -- Moody's Disclosures on Credit Ratings of Singapore Technologies Engineering Ltd

Singapore, July 04, 2012 -- The following release represents Moody's Investors Service's summary credit opinion on Singapore Technologies Engineering LTD and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for Singapore Technologies Engineering Ltd and its affiliate.

Moody's current ratings on Singapore Technologies Engineering Ltd and its affiliate are:

Singapore Technologies Engineering Ltd

Long Term Issuer (foreign currency) rating of Aaa

ST Engineering Financial I Ltd

BACKED Senior Unsecured (foreign currency) rating of Aaa

BACKED Senior Unsecured MTN Program (foreign currency) rating of (P)Aaa

RATINGS RATIONALE

As a Government Related Issuer (GRI), STE's Aaa rating takes into account its Baseline Credit Assessment (BCA) of 4, which is equivalent to Aa3 under Moody's Global Rating Scale, as well as the presence of very strong support from Temasek under the Joint Default Analysis approach.

STE's BCA reflects its strategic role as a major supplier of defence products to the Singapore government. Its importance as a key defence contractor for the government is further demonstrated by the special share in the company held by the Minister of Finance.

The BCA also reflects the company's strong technological capabilities, which drives its commercial business, while its defence contracts continue to support underlying operations. At the same time, STE's diversified portfolio, focusing on four different segments -- aerospace, electronics, land systems and marine - partially mitigates demand volatility in any individual segment. Notably, the company is a leading player in the global commercial maintenance, repair and overhaul (MRO) segment in the aerospace industry.

Over the past years, STE has achieved a track record of stable revenues and operating margins. As of 31 December 2011, its order backlog stood at SGD12.3 billion, which is approximately twice the size of its FY2011 revenue. Although the company has maintained sound credit metrics and a good liquidity position, its cash flows remain weak because of its high dividend policy.

Rating Outlook

The outlook for STE's Aaa rating is stable, reflecting Moody's expectation that (1) the outlook for Temasek is stable; and (2) STE will continue its current business model and prudent financial profile of maintaining excellent liquidity with a net cash position.

What Could Change the Rating - Up

Since STE's rating is Aaa, there is no further possibility of an upgrade.

What Could Change the Rating - Down

A downgrade in the rating of STE could develop if (1) MOF's special share is converted to an ordinary share, signifying lower support from the Singapore government; (2) there is a change in the relationship between Temasek and STE, which includes, but is not limited to, a reduction in ownership below 50.1%; or (3) a change in STE's role as a key defence and government supplier; or (4) Temasek's rating is downgraded.

STE's rating could also be downgraded if its standalone credit profile showed consistent deterioration due to (1) further pressure on its profit margins, in turn caused by weak market conditions; or (2) decreased liquidity, arising from new acquisitions, substantial capital expenditures, a shrinking order book, or a high capital distribution. In such a scenario, its credit metrics could deteriorate with adjusted net debt/EBITDA remaining above 1.0x.

The principal methodology used in these ratings was the Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include the Government-Related Issuers methodology published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these ratings.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Alan Greene VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service Singapore Pte. Ltd.50 Raffles Place #23-06 Singapore Land TowerSingapore 48623 Singapore JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (65) 6398-8308 Philipp Lotter Associate Managing Director Corporate Finance Group JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (65) 6398-8308 Releasing Office: Moody's Investors Service Singapore Pte. Ltd.50 Raffles Place #23-06 Singapore Land TowerSingapore 48623 Singapore JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (65) 6398-8308 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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