SGD New Issue Review : Oxley 5Y callable 3Y

***NEW ISSUE:  Oxley Holdings 5NC3 SGD Senior Unsecured***

Issuer       :  Oxley Holdings Limited
Status       :  Senior, unsecured
Rating       :  Unrated
Format       :  Off Issuer’s SGD300Million Multicurrency MTN Programme
Structure    :  5NC3
Issue Size   :  TBD
Initial Coupon for first 3 years    :  4.75% area
Step-up Coupon for 4th and 5th year :  6.75% area (Step-up of 2.00% from Initial Coupon)

Financial Covenants    :
(i) Consol. Tangible Net Worth S$175mil (until 31 Dec 2015) and S$225mil (from 1 Jan 2016 onwards);and
(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

Financial covenants remain the same as the old issue.

I do not know which planet the issuer and the issuing bank think they are from but we have a global credit widening scenario here.

Explained in plain layman terms.

Oxley issued SGD 150 mio in May, right before the crash. That was 4Y at 5.1%. The 4Y interest rate was 0.70% then.

Today the 4Y interest rate is 1.33%. That means if Oxley issued the 4Y today, the coupon should be 5.63% which works to be a cash price of 98.17. This excludes the credit deterioration going on around the world and the impact of the new property loan rulings.

The company is 9 times leveraged (Total Assets/Total Equity) and their interest expense will be soaring through the roof.

One thing for sure : Their equity will not be paying more than 25% of consolidated EBITDA for dividends because 1 financial convenant is already in breach.

My Opinion : Coupon does not justify the risk of this bond.

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