SGD Bond Alert : Swiber Glaring At Me
It wasn’t me because I am usually not the most attentive person around which makes it good to have old friends who are complementary partners to my life.
Swiber came up over lunch yesterday and hold on to your horses here, the senior Swiber perpetual is up 3.8% (in yield) this year. Its cash price has fallen from 98.00 to somewhere between 92 to 94 just on Friday. We are looking at yield to 09/2015 call levels of 12.56% – 13.55% here.
This is one of the few senior perpetuals around abeit its small issue size of SGD 80 mio.
Scanning at news headlines, we do not seem to have anything major and its equity price is holding up. Kim Eng Securities issued an overweight call on offshore marine companies early last month.
I ran through the rest of the Swibers and they do not appear too poorly off. In fact, the Swiber senior 06/2015 yield has fallen 0.12% since 31 Dec 12.
Comparables like Ezra and Ezion are holding up too which makes this Swiber perpetual glare out at me like a sore thumb.
Granted, they have SGD 230 mio of debt to refinance this year and another SGD 164 mio next year and their market capitalisation is holding at SGD 418 mio, their earnings are expected to be announced on 27 Feb. Any doubts ?
I am too chicken to make an outright Buy call on the Swiber senior perp. But if you happen to be holding on to some China Central Real Estate CENCHI10.75 04/2016, you may want to know that its price has risen 2.5 cents since end 12 and it is quoted at the 110 handle now ie. 6.9-ish%. Property rhetoric out of China has been discouraging. Therefore, a switch into our local Swiber may not be a bad idea for a bond that could be called 7 months earlier in 09/2015 ?
PS : OLAM 6% 2022 chart for reference, as well.
Hi tradehaven,
When you mentioned the “3.8% up this year”, are you refering to the yield to call increase? As I do not see any price increase. Thank you in advance
Yes, Peter.
Price has fallen and thus its yield to call is 3.8% higher or thereabouts.
thank you tradehaven once again
Hi tradehaven
Thank you for this latest discussion on Swiber Perpetual bond. You mentioned it might be good for CENCHI holders to switch to Swiber Perpetual, what would be your opinion on Olam 6% bond holders switching into Swiber Perpetual?
Does Sir happen to be able to grab hold of a chart for Olam 6% 2022 bond like the one above too? It will give a very clear illustration of what has happened last few months.
Thank you so much.
Hi Oldfolk
Harder to compare Swiber vs Olam 2022. Diff tenors. Diff credits. Besides, I dare not give an opinion on Olam cos they may sue, as usual.
Will grab the chart for you and insert into post so you can take a look. Note that prices are unverified.
Good luck.
Hi tradehaven,
Much thanks for the Olam 2022 chart. The price seems to be constant for quite a while. I am wondering if its the same for the other 6% Olam bond which matures in 2018 or it has been steadily increasing instead. I am wondering what caused the Swiber Perpetual price to keep falling and whether it is projected to move down further. If you happen to know the worse is over for Swiber Perpetual, pls do share your views and it’ll probably be a good time to go in. Thank you so much.
Hi Oldfolk
Demand and supply.
I think some trading books have cut their buying limits and so customers who have to sell cannot find a willing buyer.
It happens especially for smaller and more illiquid names.
I just called my banker and she confirmed that they can offer Swiber perp but cannot buy any more of that stuff.
So if you are considering buying, be prepared to hold !
Good luck !
Hi Tradehaven
It was reported this morning that GIC is selling a huge part of its stake in GLP and I think the percentage of shares it holds will drop from 50+ % to 30+% percent. I think there’re some clause in the GLP 5.5% perpetual prospectus stating it may increase the coupon or redeem the bond if there is change of control. May I quote this from the prospectus:
“In the event that a Change of Control has occurred, if the
Issuer does not elect to redeem the Securities within
60 days of the occurrence of such Change of Control in
accordance with Condition 5(h) (Redemption and
Purchase—Redemption upon a Change of Control) the
then prevailing Distribution Rate applicable to the
Securities shall be increased by 5 per cent. per annum
with effect from (and including) the next Distribution
Payment Date (or, if the Change of Control occurs on or
after the date which is two Business Days prior to the next
Distribution Payment Date, the next following
Distribution Payment Date).”
May I ask, do they mean they will increase the coupon from 5.5% to 10.5% if not redeemed or do they mean increase 5% of 5.5% which makes the coupon 5.775%? Wondering if you have any news or rumours as to whether GLP is redeeming this perpetual bond.
And, does Sir happen to know what is the unverified indicative price of GLP perpetual today?
Thanks a lot. Looking forward to your kind advice.
Wow. Dreaming of 10.5% !
What you have is the STEP UP AFTER CHANGE OF CONTROL if the issuer does not redeem the securities.
This is what I have ….
Redemption upon a Change of Control: The Securities may be redeemed, inwhole but not in part, at the Issuer’s option, upon giving not less than 30 nor morethan 60 days’ notice (which notice shall be irrevocable) to the holders of the Securities following the occurrence of a Change of Control.
Upon the expiry of the notice period pursuant to the Issuer’s election to deliversuch notice with respect to the terms above, the Issuer will redeem the Securitiesat (i) 101 per cent. of their principal amount plus Distribution accrued to such date (including any Arrears of Distribution and any Additional Distribution Amount) if such redemption occurs prior to 7 April 2017 and (ii) their principal amount, together with any Distribution accrued to the date fixed for redemption(including any Arrears of Distribution and any Additional Distribution Amount) ifsuch redemption occurs after 7 April 2017……
The “control” is defined as 50% of the voting rights of the issued share capital.
So, given that the securities are trading at 103.50-104 level, there is a high chance they would call at 101.00 once the trustee officially announces that because, like you said, the alternative is 10.5% and that is not very nice for shareholders.
Looks like its byebye bond profits !
Good luck!
Hi tradehaven,
Thanks for your insight and explanation. I am not exactly dreaming of 10.5% la, hoping it will be just 5.775% instead so they wont call back 🙂 Because I would like to keep this GLP perp. as it has a refix 5 yrs later. Gentings, Cheung Kong perps dont have any refix I think.
May I also seek your advice on these:
a) Did Moody etc downgrade or plan to downgrade the GLP perp after GIC reduce its stake significantly?
b) Wondering if Sir have any idea how the GLP perp bond price responded to the news of GIC reducing its stake. It would be wonderful if you happen to be able to grab hold of a GLP perp price graph to share with us. All the while I only have the impression its staying above 100 most of the time but not sure actually if its trending downwards or upwards.
Wishing you a fruitful and rewarding investment day ahead. Thank you in advance.
Hi Oldfolk
Price unchanged. Still 103.50/104.25 level.
Swiber’s stock suspended today with a good announcement of contracts. Should be positive.
Rgds
Hi tradehaven, what is the likelihood of swiber perps that it will be called on 09/2015 in your opinion? What would be the typical circumstances which would influence the company’s decision on calling.Understand that there is a step up if not called. Thanks
At 92-94. the bond should technically not be called at 100 because SOR+12.035% (refix + step up) it would work out to be 12.60% at current levels.
If, however, the 3Y interest rates much lower then and the cost of issuing a new bond is less (ie. lower yield), then the call will be exercised.
Excellent posting on Swiber Tradehaven – makes me stand up and think ……….for one.
Before reading what follows, I would like to be clear that I hold some Swiber 5.8%’s which are due to mature this coming August and some Swiber 6.25%’s due to mature in June 2015. I am therefore biased. I went into these during the initial offerings and I am sitting on (very) slight capital losses today – I agree with you Tradehaven when you say that the near term Swiber stuff hasn’t been too badly hit in recent weeks, unlike some other issues.
I have always viewed Swiber as one of Singapore’s less risky Offshore O&G sector bets. Personally speaking, I would rank Swiber behind of Ezion and Nam Cheong (in which I have bond holdings – Ezion 7.7% Perps and Nam Cheong 6%’s maturing in November 2015) but I would rank Swiber ahead of Ezra, i.e. ahead in terms of balance sheet robustness and “building their niche”. The Swiber 5.8%’s were issued as a one year bond and I was able to get decent financing – currently they are trading at about par (plus brokerage), this bond paid out its first (of two) semi-annual dividends a couple of weeks ago. Swiber usually issue paper just before announcing a major contract award (i.e. when they start having to spend money on kit construction) and this was no exception. I thought a 5.8% coupon for a one year maturity was worth the trouble (and the risk).
While Tradehaven quite correctly IMHO makes the case for Swiber’s Perpetual, I wonder if Swiber’s 6.25%’s are also worth looking at – currently trading at S$ 99.50 (plus brokerage) if my bank has it correct. This is ~ 6.27% yield for a paper with Twenty-Eight (28) months left to maturity, with a seemingly decent order book from bankable counter-parties and decent (i.e. not-Ezra-type-very-high-geared) financials. Not bad. If the price of this paper remains below par and the oil price holds up, then when Swiber’s 5.8%’s mature in early August I’ll be tempted to plow the matured funds back into their 6.25%’s.
Regarding Swiber’s Perp’s (in which I’m not vested), I wonder if they will exercise their call option in 2.1/2 years time – I don’t think that can be banked on by any stretch, IMHO. I do not recall the step-up details and if there is a coupon step-up. I am not sure I would bank on any of Ezion, Ezra or Swiber etc. O&G types exerciising their Perpetual maturity call options, particularly if interest rates are (much) higher in a couple of years time. For comparison purposes ……………. I am a tad more confident that, for example, DBS will call time on their 4.7%’s in 2020 – reputation and all that.
As I said up front, I’m biased. Sorry if that comes across too overtly.
Hi JC
I cannot say I know how to answer the question(s).
Swiber is down the hierachy in the oil & gas marine cos. pecking order, being the baby too.
I never did like analysing them because if you strip out the lien assets, you will probably only be left with some photocopy machines (tongue in cheek) and senior bond or senior perp, the photocopiers are all you will get if the company goes under.
We are playing for a a non distress situation here.
Then Swiber senior 6.25% (at 99.50 yield is 6.48%) and the senior perp (at 94.00 yield is 12.56%) will be maturing and called within 3 months of each other. At 6.48%, the Swiber senior is under 2% yield pickup over Ezion and Ezra’s of the same maturity. Is that good enough for you ?
Having said that, I am not insisting the perp is a strong buy without doing some proper research into their cash situation.
Yet at >12%, it may be worth the effort.
Good luck !
Sorry …………… should have been Ezio 7.8% Perps (not 7.7%’s). JC
Tradehaven – Interesting to note that since your piece about a week ago on Swiber’s paper, the prices have hardened a tad. Good! The 5.8%’s, due to mature in five months time (early August) are now being offered at S$ 100.50 plus brokerage and the 6.25%’s, due to mature in June 2015 now command a price of about par plus brokerage. I don’t have the latest Swiber perpetual prices to hand but I understand they have risen somewhat over the last week.
It has been a good week for Singapore Oil & Gas Services stocks in terms of i) pleasing Financial Statements (i.e. vs. previous year/quarter financial performances), ii) Share Issuances and ii) New Order & Contract Win Announcements. This can’t have done any harm to how the debt paper of Ezion, Swiber and Nam Cheong is viewed by potential investors. My broker offerred me par for my Ezion 7.8% perps on Friday and I understand the Nam Cheong 6.0%’s (due to mature in November 2015) are now trading comfortably above 101.0. The laggard in my O & G Service Company Bond holdings – and by some margin – is the Ezra 8.75% Perpetual – I was quoted 95.0 on Friday. Ugh! I understand the market believes Ezra’s gearing is at the high end of where it needs to be.
I see there hasn’t been any new debt offerings this last week – my banker seemed pre-occupied with the MapleTree China REIT IPO – I tried with a S$ 250,000 application for the placement units – even if the financial quantum of my application had been 10 times higher, I would have gotten the same allocation, i.e. zero!! For a 40-50% geared China focused REIT likely yielding something like 5.5% p.a., I cannot understand the fever to get a piece of this. I am obviously getting too old since I believe this is a sign the market is going more than a bit “nuts”.
Thank you again for your thoughtful commentaries Tradehaven.
Great news, JC.
Yes, poor Ezra has suffered some contagion from all this.
I am not too bullish on shipping in general and even O&G as China continues to ramp up natural gas production and reliance on their shores. Note that freight rates and volumes have fallen hard in the recent months, by that I mean indices like the Baltic Dry which is lower than 2011 levels.
Fully agree on the Mapletree China Reit IPO.
This story should inspire you.
Chinese ‘Dubai’ turns into deserted island
http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/1256132/1/.html