REVISITING SGD PERPETUALS
Perpetuals are hybrid securities that combines elements of both debt and equity securities.
SGD 1 billion OCBC 5.1% retail pref share maturing on 29 July.
UOB quickly launches the very first SGD bank loss absorbing perpetual in Singapore to replace its own SGD 1.32 bio retail perp maturing in Sep.
Books are heavy as we speak >1 bio. Latent demand emerging from the holders of both perpetuals.
There are only 4 retail tranches of perpetual bonds left. DBS 4.7%, Genting, Hyflux and OCBC 5.1%, the rest are OTC traded.
A quick summary.
We note that some perps are doing worse off than the rest. For instance, Cheung Kong is going at 5.5% mainly because it does not have a coupon refix. Yet Genting is not much better and at least Cheung Kong is a senior paper, which means it ranks along with senior bonds in a time of default. However, for established companies like Cheung Kong, the probability of default is seen as distant and thus, the added comfort does not amount to much.
The senior status of Swiber’s perp is thus more assuring to the buyer but the fear is that given Swiber’s high level of leverage and liens, there will be little left if it does go under.
I notice that local banks have the bad habit of issuing without coupon refixes since 2008 and DBS’s 5.75% issue. Afterall, they have a captive audience of buyers.
This new UOB comes with a refix because it is priced to sell with the new loss absorption feature.
Good luck !