New Issue Review : Swiber Senior 4Y SGD 7.25% & What Happened to Ezra ?
Tell the truth guys !
When I wrote about Swiber senior perpetual a couple of months back, a few friends approached me to ask if the bond was worth a look at about 12% yield to call. I was ambivalent for several reasons.
1. Swiber has debt maturing this year for SGD 230 mio.
2. Their market cap is SGD 393.7 mio.
3. Swiber has difficulty raising >100 mio for longer dated papers.
Then they had that headline just last week.
DISCREPANCIES BETWEEN UNAUDITED ACCOUNTS AND AUDITED ACCOUNTS * FINANCIAL
STATEMENT AND RELATED ANNOUNCEMENT
Where some 30 mio in current receivables were transferred to long term receivables, amongst other changes.
What do we have today ?
*** SWIBER SGD 4YR ***
– Swiber new SGD issue announced on the back of strong reverse inquiries
– Tenure: 4 yrs
– IPG: 7.25% area
– Timing: This week’s business, as early as today
– Swiber achieved record-high revenue of US$952.2M and net profit US$62.2M
for FY2012, the highest since its listing in 2006
– Swiber continues to secure sizable contracts with orderbook of
approximately US$1.35bn as of Feb 2013
SWIBSP7 07/16: 100.50, 6.82%
EZRASP5 09/15: 102.00, 4.12%
EZISP5.25 05/15: 102.50, 4.00%
ASLSP4.75 03/17: 101.45, 4.35%
Selective dissemination indeed. Where is the Senior Perpetual in this list ?
The Swiber perpetual is a senior paper too and was marketed as recently as last week to my friend at >12% in yield to call, which is 09/2015 ! (even shorter than this paper)
Believe me, if Swiber does not redeem that perpetual in 2015, this bond is going to be in much deeper trouble.
You know what I say ? Just look at the book runners and you know who the target audience is.
And they are paying a hefty rebate to the private bankers to sell a senior paper that is hot on demand (almost as good as the rebate they got for selling the perpetual last year).
Anyhow, I bet that rebate will get alot of bankers and brokers pushing hard to their clients who will make it a self fulfilling success story of an issue.
Now can anyone tell me what happened to the Ezra subordinated perpetual ? It is offered at 95.00 today which makes it yield 11.15% to call date of 09/2015. (I guess no rebates there for re-selling eh ?)
Table of real comparables (prices unverified)
- SGD Bond Alert : Swiber Glaring At Me (tradehaven.me)
Books in excess of SGD$100m.
Books >200 mio final price 7.125%.
If they were smart, they would do 150 mio.
OCBC Research sent out an Underweight credit piece on Swiber just today but you will have to be BOS client to read it and I do not have their permission to publish it here.
7.125% (final) yield implies around 6.40% above the 4 year swap offer rate. This kind of credit spread is only payable by companies which have a single-B (deep into junk territory) credit rating. As Swiber’s credit is not rated, one can only guess what it is based on mkt.
This is not a bond for the masses as junk bonds have a much higher probability of default.
Let’s consider the numbers: Swiber had total debt of US$767m as of Dec 2012 (incl finance leases but excl perpetual bonds) whereas its mkt cap today is S$388m. I do not bother using net debt since in many if not most cases, the cash cannot be used to offset the debt anyway.
The assets acquired in the last few years appear to be progressively less productive. Return on assets has collapsed nine-tenths since 2005 – I prefer to use ROA when considering debt issues – to below 3% in 2012, and leverage – no matter how it is defined – has shot up as management has a preference for debt financing.
When companies of this size come to the bond mkt I am always very suspicious. The natural question is: why borrow from the bond mkt when bank loans are much cheaper?
The bonds may be senior unsecured, they are subordinated to the senior secured bank loans and finance leases (US$411m).
I find it odd that just last month, my banker was emphasising NO BIDS.
Yes. The secured loans are a major problem especially if we take a look at their Receivables and last week’s 30 mio change from Current to Longstanding.
I bet this bond has 75% PB/retail take up, at least.
Tradehaven, Gus : Many thanks – clearly DBS were pushing very hard the Swiber 4 year paper yesterday – they seem rather chuffed with themselves at the result of their running.
And in the last couple of weeks my RM tried a couple of times with me to take up Swiber’s Perp (93.5-94 range) and more of Ezra’s Perp (95’ish). Seems like a concerted campaign – quite the opposite of “NO BIDS”.
I’ll be interested to see how the price of Swiber’s 4 year paper evolves in the coming weeks.
CWT Ltd. trying to place some 6 year debt this morning – 4’ish coupon. Terms not compelling to my eyes – not going into this one.
Their financial leverage exploded in the past year. Something fishy about it. Imagine they are leveraged (3.8 times before this bond issue) closer to Olam (4.9 times) than GPack (under 2 times).
Very astute of you !
I have now come to the conclusion (finally!!) that I will never understand corporate debt markets ……………..
I understand that the runners for this CWT debt paper issue – StanChart & DBS – had absolutely no problem getting almost three times oversubscribed in a matter of hours. They were able to reduce the coupon to 3.9% and still put away ~S$ 100 Million worth, with some applicants not receiving their full allocation. I simply don’t understand it. Too much money chasing too few opportunities OR convincing sales people in the banks OR both?? I wonder how much is being picked up by retail investors?
Back to the bottle,
That is why we are here to provide an alternative viewpoint.
Bankers do what they all have to do – make money.
Besides CWT is a household name for the local investor, who probably still thinks there is some govt ownership left.