SGD New Issue Review : Swiber 2.5Y, Not A Surprise

After Vallianz’s success, Swiber rushes out to borrow.


Issuer: Swiber Holdings Limited
Status: Direct, unconditional, unsubordinated and unsecured Notes
Rating: Unrated
Format: Reg S, S274 & 275 of Singapore SFA
Tenure: 2.5 Years
Issue Size: TBD
Redemption for Taxation Reasons: Yes, in accordance with the Programme
Redemption upon Cessation or Suspension of Trading of the Issuer’s Shares:  If
(i) the shares of the Issuer cease to be listed  or admitted to trading on the SGX-ST or
(ii) trading in the shares of the Issuer on the SGX-ST is suspended for a continuous period of more  than 14 market days, Issuer shall, at the option of noteholders, redeem the Notes at par
Payment: Semi-annual, actual/365 (fixed)
Use of proceeds:Refinancing existing borrowings of Issuer and its subsidiaries
Details: SGD250K/Multicurrency Debt Issuance Programme/Singapore Law/CDP
Listing: SGX-ST

– New Swiber SGD 2.5yr announced on the back of strong reverse inquiries

– Initial Price Guidance: 5.75% area

– PB Selling Concession: 50 cents

– Timing: This week’s business, as early as today

– Comps:
Swiber 7 2016 at 5.44%
Swiber 7.125 2017 at 5.93%
Ezra 4.75 2016 at 4.27%

Credit Highlights:

– Listed on 8 November 2006, Swiber is a world class integrated construction and support services provider to the offshore oil and gas industry, offering a wide range of offshore EPIC and marine support services across the Asia Pacific, Middle East, and Latin America regions.

– Swiber achieved record revenue and net profit for the second consecutive year-running for FY2013. Swiber’s FY2013 revenue rose 11.2% to hit US$1.1 billion from US$952.2 million for FY2012 and net profit increased 45.3% to US$90.9 million in FY2013, up from US$62.5 million in FY2012.

– Swiber’s order book stands at approximately US$800 million as of 27 Feb 2014.

If I am not mistaken, the net profit increase is only due to 1 factor.

“Other operating income increased by US$41.3 million or 169.4%, from US$24.4 million in FY2012 to US$65.7 million, the increase was due mainly to:

As announced via SGXNET on 3 October 2013, the Company has entered into an option agreement dated 2 October 2013 (the “Option Agreement“) with Vallianz Holdings Limited (“Vallianz“) pursuant to which Vallianz shall issue and the Company shall acquire an aggregate of 500,000,000 share options (the “Options“) with each Option carrying the right to subscribe for one (1) new ordinary share in the capital of Vallianz (the “Option Share“) at the exercise price of S$0.055 per Option . Such options were accounted for in accordance to FRS 39 – Financial Instruments: Recognition and Measurement, classified as financial asset that is designated on initial recognition as one to be measured at fair value with fair value changes recognised in profit or loss, as such, the Company recognised a fair value gain of US$56.8 million in other income.”

Bond Maturities – SGD 725 mio
Bank Loans – USD 258 mio

Swiber Bond Maturities

Swiber Bond Maturities

swiber loans

Working lines are typically secured on company assets and inventory etc. I am not sure if its the same in Swiber’s case, but if it were, that would make bonds subordinated to the loans.

Not that is bothers me that the market cap of the company is SGD 408 mio and they are running on 4.4 times financial leverage (Ezra 2.9 times, Ezion 2.7 times) because out of their US 90 mio profits, US 62 mio is attributable to the owners of the company, leaving only about 22 mio to the rest of the shareholders. Such companies are gems ! because the owners will ensure equity interests are protected.

Opps, but we are talking about bonds here.

Take a look at the poor Swiber bonds which will suffer because of this 5.75% i.e. all the 2016-2017 papers.

Issuer Name Coupon Maturity Curr Bid Price Ask Px
Swiber Capital Pte Ltd 6.5 Aug-18 SGD     99.45  100.35 6.65% 6.40%
Swiber Holdings Ltd 7.125 Apr-17 SGD    102.93  103.50 6.05% 5.85%
Swiber Holdings Ltd 9.75 PERP SGD     95.00    96.00 13.59% 12.79% callable 09/2015
Swiber Holdings Ltd 7 Jul-16 SGD    103.02  103.75 5.55% 5.20%
Swiber Holdings Ltd 6.25 Jun-15 SGD    101.25  102.00 5.19% 4.52%
Swiber Holdings Ltd 5.9 Jul-14 SGD    100.01  100.04 5.80% 5.70%
Swiber Holdings Ltd 5 Oct-14 USD    103.83  105.32

I also like the clause of a mandatory redemption at 100 if the shares of the company are suspended for more than 14 days. That is heart warming, if there is anything to distribute to bondholders in the event.

So 5.75% ? for 2.5 years ? i.e. Oct 2016 maturity.

Ezra did a 2 year at 4.75% and Vallianz, their 2 year at 7.2%.

If I put a gun to my head, I will give Vallianz a second look, no ? And this will not be such a hard sell as Vallianz as the bankers are only paid half the Vallianz commission this time.