This Is Not A Drill : SGD Corporate Bond Update & Raffles Education New Issue Review

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I just got this from the grapevine.

Apparently, Reuters is reporting that the HDB 10Y new bond sale has been scrapped.

“HDB’s planned 10-year bond sale cancelled

– But the bankers struggled to price the 10-year piece as the Singapore doillar SOR rates widened sharply on the back of rising US Treasury yields
– A syndicate banker said it was getting more challlenging finding investors who still have room for the HDB credit
– As the delay pushed toweards the pre-Lunar New Year holidays, the borrow and its leads decided against completing the transaction, letting the mandate lapse” Source : Reuters

The yield for the 10Y paper would be looking like 2.35-2.4%, for a credit that is as close to government bonds as we can get.

Take note that this is not the first time HDB has failed to issue after awarding a mandate. During the GFC, there was also a deal that was scrapped on lack of demand.

From HDB to 3Y Raffles Education which is likely to be a mini deal off its SGD 300 million MTN programme.

I have a bad feeling that retail investors are going to be lapping this up which is not a bad thing if you are switching out of 10Y HDB for example. From conversations with investors, I realise that 3 year is the sweet spot for investors these days (FED has pledged zero rates till 2015).

This is a SGD 300 mio market cap loss making company. 5.8% is decent considering that THEY ALSO FAILED TO LAUNCH last year at 4.875%.

I am just observing that their interest expense last year (at lower rates) is 90% of their operating income. What sort of business is this ? But not to worry, Oei Hong Leong is 5.87% shareholder for his reputation !

I would also be surprised if there is any leverage offered for this one. Keep me posted.

Good luck !

Category : Market, Op-Eds