Analysis : Guocoland and Petra Foods – Bonds Not In the News

Guoco Group 

Dec. 12 (Bloomberg) — Hong Leong subsidiary Guoline
Overseas offers to buy shrs in Guoco Group it doesn’t already
own, paying HK$8.25b for 93.7m shrs: H.K. stock exchange.
• Offer is HK$88/shr; 25% premium to last trade of HK$70.50
• Guoline holds ~71.5%: Bloomberg data.
• Malaysian billionaire Quek Leng Chan owns 49.27% in Hong Leong
• Guoco: offer to be financed by debt financing, cash resources

Guoco Group has 1 affiliate bond, USD 500 mio of Dynamic Talent Ltd GUOLTD 4.75% 08/2017 issued in Jul this year.
The bond price has suffered a 1.5 ct fall since the announcement, quoting at 99.95/101 now.

Guocoland, a major subsidiary of GuocoLand Assets Pte Ltd and over 65% owned. GuocoLand Assets is wholly owned by the Guoco Group in Hong Kong.
There are 7 SGD bond issues out of Guocoland Singapore and their prices have suffered a similar fall.

GLL IHT Pte Ltd 4.35 12-Sep-17 99.5  105 MIO      100.92       (1.42)
GLL IHT Pte Ltd 4 25-Nov-14 100.375  100 MIO      101.70       (1.32)
GLL IHT Pte Ltd 5 23-Feb-17 101.375  160 MIO      103.13       (1.75)
GLL IHT Pte Ltd 4.25 23-Feb-15 100.25  260 MIO      101.77       (1.52)
GLL IHT Pte Ltd 4.125 13-May-15 100  267 MIO      101.37       (1.37)
GLL IHT Pte Ltd 4.875 11-Mar-16 101.5  333 MIO      103.23       (1.73)
GLL IHT Pte Ltd 4 17-Jan-14 100.32  205 MIO      101.65       (1.33)

This could be attributed to partly, the Olam contagion effect as well as the new announcement on their parent which is a double whammy.

Theoretically, privatisation is viewed as bad. In this case, the fear of a leveraged buy out (lbo) is less, and thus the bond prices have not deteriorated in a big way as there are less fears of the owner killing off his own company.

In any case, Guocoland Singapore will still be listed for the time being, its fate still undecided.

Recommendation : No need for panic.

Petra Foods

Dec. 12 (Business Times) — Petra Foods Ltd on Wednesday
announced the disposal of its entire cocoa ingredients business
to Barry Callebaut AG for US$950 million.

Little announcement lodged with SGX may be of interest to bond holders.$file/Petra_MTN.pdf?openelement

It seems that the proposed disposal constitutes a technical default on the notes as “the Company has agreed that its principal subsidiaries shall not dispose all or substantially all of its assets.”

Given that a couple of equity houses have upgraded Petra Foods to a BUY, a default scenario is remote and Petra 5% 04/2017 issued earlier this year is still trading at 101.50/102 level.

The company would have a few options for themselves.

1. Allow Trustee to declare a default which means bonds can be put back to the company at 100

2. Solicit to buy back by honourable consent, the bonds at a premium, say 100.50 or 101 etc.

Petra has SGD 185 mio and USD 14 mio worth of bonds out there.  Lets hope they have the decency to choose Option 2.