SGD New Issue Review : Ping An 5.5Yrs SGD 4.375%

*** NEW ISSUE: PING AN 5.5-Year SGD ***

Issuer: Value Success International Limited.
Guarantor: China Ping An Insurance Overseas (Holdings) Limited.
Keepwell Provider: Ping An Insurance (Group) Company of China, Ltd.
Status:  Senior, unsecured
Issue Rating: Unrated
Issue Size: TBD
Format/Docs: Reg S / Section 274 and 275 of SFA (Singapore) /registered / Issuer’s USD 2 billion MTN Programme
Price Guidance: 4.375% Area
Tenor: 5.5-Year
Denomination: SGD250K
Governing Law: English Law
Listing: SGX-ST
Clearing: Euroclear

COMPARABLES
Vanke  SGD  3.275% 2017     100.05   3.26%
Henderson Land SGD  4% 2018     103.55   3.15%

If the question “Why Are They Issuing In SGD For Their First non CNH Issue ?” did not cross your mind, I suggest you call your banker up and ask “What happened to all those Tata bonds issued last year ?” (which you obviously have not bought or you would have asked the aforementioned question)

This is the imaginary conversation I am dreaming up between banker and client.

Client : Why is Ping An issuing in SGD dollars ?Banker : For working capital etc etc etc
Client : Why is the issue not rated ?
Banker : Ping An Insurance Group Co China Ltd, the keepwell provider is rated AAA by Dagong Global Credit. China Ping An Insurance Overseas (Holdings) Limited, the parent of Value Success International is similarly unrated. Another subsidiary of the ultimate parent, Ping An Property & Casualty Insurance is rated A (-ve outlook) by the S&P.
Client : Why should I buy this bond ?
Banker : Ping An sees an opportunity in raising money in Singapore and Singaporeans are savvy bond investors. This is a rare opportunity to buy at such a good yield. There is a great deal of demand especially from Chinese investors to put their money into SGD.
Client : That is what you said about Tata bonds last year.
Banker : Aha…. That is a different story ……..blah blah blah…

Ping An is one of the gems of the SHCOMP with a 1.2% weightage (9th highest) on the index, much like Tata weighs heavy in India.

Lets see where the Tata bonds are in SGD (Tata International has not price so I left it out).

Tata Motors TML Holdings 4.25% 05/2018 96.75/97.75 cts
Tata Communications 4.25% 02/2016 99.50/100.25 cts
Tata Steel ABJA Investment Co 4.95% 05/2023 88/89 cts

To be caustic, Ping An is here because Singapore is sufficiently illiquid and can be trusted not to sell off too much besides the fact that Singaporeans are known for their generosity.

Having said that, the pricing is fair compared to their CNH issuance levels which means they could have exhausted their CNH fund pool (after raising CNY 1.6 bio so far this year) and have ventured farther afield for funds. And I can make an educated guess that the probability of a Ping An bailout if ever, would be far higher than the probability of a Tata bailout.

Comparing the price of 4.375% to the other investment grade Chinese name in SGD bond space, Vanke of Bestgain Real Estate 3.275% 11/2017 which is going at around 100, this bond looks attractive. Cenchi, Shuion and United Envirotech are not really comparable.

Risks :
The structure is complicated. Issuer is SPV, guaranteed by China Ping An Insurance Overseas which has a keepwell agreement with Ping An Insurance Group.
Group assets have grown 4x in 5 years to Dec 2012 vs China Life 2x in 5 years.
Needless to say capitalisation is weak and assets quality is a big unknown since disclosure is scanty.

Note that a keepwell agreement is a common and legally weak form of guarantee that chinese companies use for their offshore deals that falls far short of an explicit guarantee. But it is universally accepted so far.

No, I should not be thinking about Tata bonds but I just cannot help it. Books are now well in excess of SGD 300 mio by now.