This Is Not A Drill : SGD Corporate Bond Update & Raffles Education New Issue Review
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 !
Thanks again Trade Haven,
Reference your narrative on Raffles Education. I commend you for underlining the word “Education” – sometimes this entity gets confused with other things “Raffles”. I recall that Raffles Education FY 2012 results announced in August last year were a real mess…………. some S$ 215 Mln Total Borrowings and a ~ S$314 Mln Total Trade & Other Payables Balance. It has been a loser four years on the trot and last year didn’t they a) cancel their dividend and b) pursue a deeply discounted rights issue? Raffles Education 3 year paper is one for the brave IMHO.
Just by two cents, JC
Hey JC,
So much for my 10 min analysis. Have to confess I did not have time for a thorough job so I just glanced at results and then the shareholding info.
I am glad you see the same but it pains me to say I am hearing that some European bank offering a >60% leverage on this paper which is a darn reckless act if you ask me.
Still insider rocks so maybe there is something that you and I have missed. (They are vested into China property for an Education company)
Btw, for those who are interested, HDB 10Y would give about the same yield as Raffles, when marketed on leverage. HDB gets between 80-90%.
Good luck !!
Just for posterity, I have a suggestion put forth by my fund manager friend that the Ezion
SeniorSUB Perp (Swiber is the senior one at about 12% yield) makes a good substitute/comparable for Raffles. And it is >7%, so all is not lost.Do you have news of any good SGD perpetuals or straight bonds offerings coming up?
Good ones like HDB got scrapped !
Do not hear of any new issues hitting the street at the moment. Maybe next week.
Raffles Education successfully prices SGD 80 mio at 5.8%.
Now offered just below 100 at ard 99.90 lvl. PB rebate was more than 0.10, I am guessing.
Thanks for your post as always. May I seek your views on dim sum bonds please?
Hi Daniel
Thanks for your support.
Dim sum not so hot since the repo news (withdrawal of liquidity) yesterday and tongues got wagging. But Singapore seems to have just started the CNH game. CNH bonds are a currency play and has nothing to do with the interest rates.
I think the world is missing a big point – Austerity and restructuring theme.
Unfortunately, I have no view on SGD/CNH. I do not like to invest in the unknown – does CNH exist if it is not a deliverable obligation ?
You just gave me an idea to start some CNH coverage since more retail investors will be involved now.
Thanks ! and wishing you good luck !
Hi again, seems like you are into almost everything from equities to FX and bonds etc.. it will be good if you can do a post on your portfolio!
And how do you keep track of all the news affecting your positions? Are you a full-time investor/trader? 🙂
Yes. I still have a day job (at the moment) where i spend the entire day staring at 3 screens of numbers. It can be called a trader but i prefer a fancier title sometimes like Supreme Commander.
Just because I happen to know what is happening does not mean I have a position in everything. How can you trade STI stocks if you don’t know what is happening in Turkey, for example ? Or buy bonds without know that there was a shift in the FOMC minutes last night ? And sadly, most of your bankers wouldn’t know too.
Will write about portfolio management one day.
Hi Tradehaven,
I found your log a day ago and have been lapping it up since. I am a banker myself and have to agree that most of my peers would not be able to connect the dots across the different asset classes for clients. I consider myself fairly well read but understand that the more you know, the more you realise you don’t know. Have always been a fan of the macro view although I also recognise the importance of the nitty gritty.
Cheers and please keep up the great work.
Derek
Hi Derek
Welcome on board. Looking forward to your comments and feedback going ahead !
Your contributions would be appreciated !
Best Rgds