SGD New Issue : United Envirotech 3Y 7.25% Guaranteed

Aug. 22 (Bloomberg) — According to a person familiar with
the matter.
• Borrower: United Envirotech Ltd.
• Currency: Singapore dollar
• Tenor: 3y
• Guidance: 7.25% (the number, will not tighten)
• Issue Size: S$50M (with an option to increase)
• Use of Proceeds: To finance part of the cash consideration
of the Memstar acquistion and for general corporate purposes
• Timing: Today’s business

 

ISSUER:  United Envirotech Ltd
RATINGS: Unrated
STATUS: Fixed Rate, Senior, Secured
FORMAT: Regulation S Bearer and Subject to S274 & S275 of the SFA
ISSUE SIZE :  S$50 million (with an option to upsize)
PRICE GUIDANCE:  7.25%
TENOR: 3 Years
IRESTRICTED ASSETS:    The assets to be subjected to a specific Negative Pledge provision comprise the  following treatment plants:
1.  Liaoyang;
2.  Xintai; and
3.  Xinmin
FINANCIAL COVENANTS:

1. Gearing: Consolidated Total Net Debt at the end of any Relevant Period shall not be more than 1.5 times of Consolidated Total Shareholders’ Equity within two years from Issue Date, and not more than 1.2 times thereafter.
2. Interest Cover: The ratio of Consolidated EBITDA to Consolidated Net Finance Charges (the “Interest Coverage Ratio”) in respect of any Relevant Period shall not be less than 2.0 times within the first year from Issue Date and shall not be less than 2.5 times thereafter. If the ratio is not satisfied the Issuer shall deposit an  additional coupon into an Interest Reserve Account until the time at which the ratio is restored.
3. Total Shareholders’ Equity: Consolidated Total Shareholders’ Equity at the end of the Relevant Period  shall not be less than SGD200 million.
4. Dividends: The Issuer shall not pay, make or declare any dividend or other distribution in respect of any  financial year until the aggregate amount available for distribution to its shareholders in respect of that financial  year has been determined and then only in an amount not exceeding 30% of the Issuer’s consolidated profit for the year (after tax).
ISRA:  The Issuer shall establish an Interest Service Reserve Account (“ISRA”) and shall deposit an amount equal to one interest payment into the ISRA upon issuance of the Notes.
CHANGE OF CONTROL PUT: At any time following the occurrence of a CoC, the Noteholders will have the right, to put the Notes back  to the Issuer at 101%, together with interest accrued but unpaid (if any). CoC Event occurs when:
(i)    any person or persons (other than the Existing Shareholders) acting in concert acquires Control of the Issuer;
ii)   the Issuer consolidates with or merges into or sells or transfers all or substantially all of  its assets to any other Person, unless the consolidation, merger, sale or transfer will not result in the other person or persons acquiring  Control over the Issuer or the successor entity; or
(iii)  the adoption of a plan relating to the  liquidation or dissolution of the Issuer.

Small company with market cap SGD 527.5 mio (still bigger than Freight Links). Not highly geared.

Strong covenants and the ISRA account is an interesting addition.

My question is, with this game changer coupon that we are seeing, I wonder what happens to the rest of the comparable bond issues that were placed out in the past month that pales in comparison.  Should their yields be recalibrated to higher levels ?

The main worry is liquidity. Given that this is a sole lead managed bond, there will not be many other banks making prices for it. But for 3 years, what is there to grumble about ?

Comparables

Freightlinks 4.6% 05/2017 approx yield 4.62%
Aspial 5% 07/2016 approx yield 4.88%
Oxley Holdings 5.1%05/2017 approx yield 5.29%