New Issue Review : Ezra Holdings 5Y SGD
***NEW ISSUE: EZRA SGD 5YR ISSUE***
Issuer: Ezra Holdings Limited
Status: Direct, unconditional, unsubordinated and unsecured Notes
Rating: Unrated
5 Years
Use of proceeds: Mainly for refinancing the existing borrowings of the Issuer and its subsidiaries (“Group”) and remaining for financing general working capital and general corporate purposes of the Group
This week’s business, as early as today – Ezra new SGD issue announced on the back of strong reverse inquiries –
Tenure: 5 yrs –
Cpn : 5% area
Comps: –
EZRASP5 15: 101.75, 4.22%
EZISP5.25 15: 102.50, 3.99%
ASLSP4.75 17: 100.75, 4.54%
Nearly skipped this one – BORING ! But lets take a look at them for good order’s sake, as if anyone bothers to read this because the order books at >150 mio as we speak and the coupon will be <5%.
They have neatly excluded the new Swiber 7.125% 4Y (trading now 101/101.75) as a comparable. Swiber is smaller at 366 mio mkt cap vs Ezra’s 978.8 mio. Both are trading at 6 month lows for their equity. Ezra’s earnings had a miss yesterday and has been cut to underweight by some brokerages.
Ezra is less leveraged but is 5% or less good enough ? It is all about the pricing.
Hmmm. I suggest people look closer to home. At the Ezra 8.75% perpetual which is callable in 09/2015 and offered at 96.00 (10.65%) today.
This perpetual is cumulative and compounding. It is not as secure as Swiber’s senior perpetual and its price has suffered along with the SGD perp contagion and market re-positioning in Q1.
Questions to ask – is the price good enough ? Under 5% would be the cheapest they have paid for 5 year money.
| CPN | MATURITY | AMT | CCY | BID | ASK | YIELD | ||
| Ezra Holdings Ltd | 8.75 | PERP CALL 09/2015 | 150 MIO | SGD | 95 | 96 | 11.40% | 10.65% |
| Ezra Holdings Ltd | 5 | 07-Sep-15 | 200 MIO | SGD | 101.25 | 102.3 | 4.33% | 4% |
| Ezra Holdings Ltd | 4.78 | 21-May-13 | 50 MIO | SGD | 100 | 100.2 | ||
| Ezra Holdings Ltd | 4 | 25-Nov-14 | 100 MIO | USD | 98.574 | 99.57 | ||
Would appreciate very much if you could share how you access such bond details and prices. I hate to be totally dependent on bankers providing prices upon specific request. Thanks and regards BC
Hi BC
Quite easy if you have a Bloomberg terminal or friends who are in the trade.
There is no direct trading market for corporate bonds, so one bank’s price could differ greatly from another’s.
And there are only about half dozen banks making prices to customers.
We are working on building something that will make your life easier – a directory.
Do look out for it in the coming month.
Good luck.
Hi BC,
I really enjoy your blog. When you evaluate bonds like the Ezra-one, do you have access to the credit research following the issue?
Hi PP,
Not all the time. Like in Ezra’s case, I believe there is no credit coverage on them except for equity reports.
This is the same for most local corporates.
Hope you do not mind my own home made unorthodox recipe !
Hahaha
Hi tradehaven,
Ezra perpetual 8.75 has a call in sept 2015. It has a step up of 3% if not called.
Since they are able to issue new 4-5 year bonds paying around 5%, do you think that it would be likely that they will call back the perpetual , since new bonds are lower cost to them?
What are the main considerations the company will consider to determine whether to call back the perpetual?
Thanks
Hi Lalim10,
The Ezra perpetual is likely to be booked in their balance sheet as equity and coupons not recognised as interest expense.
It would be different considerations for them if they decide to call it back at 100 when it is trading at 95-96 cts now because the replacement cost of issuing another perpetual could be higher.
Nonetheless, if they are able to issue senior debt at 5%, then the difference between the senior and the perp may be significant enough for them to switch out of equity into debt.
Just my 2 cts worth.
Best Rgds
New Ezion issue today.. 4.5% thereabouts.. yield dropping again. Tradehaven, thanks for the post on Unicredit. It helped me not to be blinded by yield and stick to my investment comfort zone. 🙂 Of course, that also meant limited opportunities in the current yield hungry market now
Hey
I hope I did you a service. Don’t blame me if it suddenly rallies to the moon.
Bill Gross said this yesterday, I think.
“Never have investors reached so high in price for so low a return. Never have investors stooped so low for so much risk.”
how do you see Ezra 8.75% perpetual? Seems unfairly priced compared to its straight bonds?
Swiber contagion.
Yes. I agree. Ezra perp vs bond huge divergence which is why I say the senior paper makes no sense.
what prices and YTM do you see for Olam SGD straight bonds 2018, 2019 and 2022?
forget my earlier question.. seems like Ezra perp can be considered..
They have a call in 2015.
If they don’t call, the cpn step up is 3%.