New Issue Review : Any Tom, Dick Or Oxley 4Y NC3Y 5.25%?

When I saw this, I really did not want to write much about it. Afterall, it is brought out by the bank who gave you Aspial.

Details : 4Y NC3Y Coupon : 5.25%

My thoughts were, looks like any Tom, Dick or Harry can issue bonds, huh ?
As long as it is brought out by a reputable bank. YOU ARE NOT BUYING THE BANK’S REPUTATION, in case you don’t know it.

So I was chatting with an old friend and this is what he said, ” Oxley total equity 154m, market cap 1 bn, debt/equity 7 times! wah lau like dat still can issue bonds…..”

Horror story : FINANCIAL LEVERAGE at 9.1 times looks WORSE THAN OLAM (4.9 times)!!!

Muddy Waters, where are you ?

They were sitting on a whole load of inventory (SGD 1.3 bio) as of Jun 2012 and only have 1 term loan of SGD 197 mio due in 2017. No wonder they need to boost their long term borrowings, which is not very little (SGD 809 mio as of Jun 2012).

Only good thing is that they are tightly held new firm (listed in 2010) with not a lot of free float out there and linked to the Lian Beng Group.

And there are some loose and convoluted financial covenants but remember what is happening with Aspial ?

Financial Covenants :
(i) Consol. Tangible Net Worth ≥S$175mil (until 31 Dec 2015) and ≥S$225mil (from 1 Jan 2016 onwards;
(ii)Consol. Total Borrowings / Consol. Total Assets ≤0.75x (until 30 Jun 2016) and ≤0.70x (from 1 Jul 2016 onwards)
Div Payout Restriction : Cash dividend payout ratio cannot exceed 25% of Consolidated EBITDA if the Debt/Equity Ratio is more than 4.0 times.

And they are diversifying into Australia when the rest like Capitaland are exiting.

I don’t know what to say except that this should be in the HIGH YIELD category ie. coupon >7%. But if folks think that 5.25% is good enough for the risk, then be my guest because I am hearing that books over 100 mio by now.