Horror Halloween Special : SGD Corporate Bonds – New Vanke, Tata and Tata and Ananda

Vanke SGD 4yrs announced and deal is already well anchored by real money accounts

Coupon guidance :  3.30%

Comps:
Keppel land 3.1575 2017 @ 101.75, 2.67%
Capitalmall Asia 3.95 2017 @ 104.85, 2.60%
FCT 2.85 2017 (BBB+) @ 101.90, 2.29%

Vanke is the largest property developer in China in terms of contract sales. It is one of the largest listed homebuilder in the PRC with a total market capitalization of RMB 100 billion as of 30 October 2013. China Vanke and Keppel land limited have entered into a strategic partnership that will see both companies jointly develop properties in Singapore and China.

Only 1 other paper in the market, the  Vanke 2.625% Mar 2018 (approx 4.4 years)  in USD that is trading at around 4% today which makes it about 3.61% in SGD terms.

So the 4Y SGD Vanke at 3.3% is comparable in that sense.

This BBB/Baa3/BBB+ bond will definitely get private banking leverage which I am expecting at somewhere between 60-70% although I could be wrong because Oxley bonds get leverage too, as I have been informed. In any case, the leverage can only be more and I am hearing smaller banks give up to 75% for such names.

Assuming 70% leverage and funding at 1M Sibor of 0.3%, we should get a 1mth annualised return of >10% ? This is hypothetical because funding typically comes at Sibor + spread for us, similar to housing. Still a decent close to 10% return on a bond that is a safe name.

Now, let us look at the price chart of the only other Vanke bond out there that was issued in March this year.

VANKE USD BOND PRICE GRAPH

Prepare for thrills and spills for it is not for the faint hearted, biggest property developer in China or not.

The Grab For Cash

The grab for cash continues with Ananda doing a Senior CNH Perp.

Ananda Senior CNH Perp

Initial coupon guidance :  9.5%
Structure is a Perp NC 3 with 600 bps step up and reset
CNH benchmark size

This comes hot on the heels of Modernland PT which issued in USD last week at 11%. CNH perps are tricky business to me and I wonder what law they will be subject to.

A friend commented that 600 bp step up is OTT, why not 500 ? which signals they are really eager to get the deal done. And also, a peculiar step up in coupon on covenant breaches, which I do not have the details on. In all, a deal that is priced to sell !

And they are not stopping with Tata Communications doing another SGD roadshow tomorrow with a likely SGD deal to follow.

Tata Motors is planning a USD 500 million loan facility which is not really good for bondholders, I would imagine as they would be paying more.

By Anurag Joshi
Oct. 30 (Bloomberg) — Co. hires ANZ, DBS, First Gulf Bank,
State Bank of India and Standard Chartered to arrange dollar-
denominated borrowing, according to a person familiar with
matter, who asked not to be identified because the details are
private.

The name of the game is BORROW AS MUCH AS YOU CAN LAY YOUR HANDS ON NOW !

Did I mention that the unfailable failed ? OGX, owned by once the 8th richest man in the world, filed for bankrutpcy last night.

““He tried to do too much, too fast, and he tried to do that with borrowed money,” says Arthur Byrnes, who oversees almost $1 billion of assets as senior managing director at Deltec Asset Management in New York.” http://www.businessweek.com/articles/2013-10-30/brazils-once-richest-man-gets-ready-for-oil-company-bankruptcy

 

Printing this now, to be followed by Horrow Halloween Part 2 – SGD Corporates Bonds : What Fund Managers Are Saying