SGD New Issue Review : Far East Horizon 3.5Y 4.5%

FAR EAST HORIZON LIMITED (BBB-)SGD 3.5YR

– New Far East Horizon SGD 3.5yrs announced post roadshow
– Initial Price Guidance: 4.5% area
– Issue Rating: BBB- (S&P)
– Size: S$ Benchmark
– Timing: As early as today

Comps:
Freshk 4.625 2017 USD        – 101.08, 4.27%, Z+ 335bp
Vanke 3.275 2017  SGD        –  99.72, 3.36%, Sor + 210
Eximbk 3.375 2017 SGD (BBB-) – 101.00, 3.06%, Sor + 185

Credit Highlights:
–    Far East Horizon (FEH) is an industry- focused financial leasing company with leading position in PRC’s financial leasing industry
–   FEH has strong and diversified shareholders. FEH is 27.94% own by Sinochem, 17% by KKR, 9% by Cathay life, 7.35% by GIC
– Taking advantage of China’s continuous economic growth, Far East Horizon is dedicated to China’s eight pillar industries including healthcare, education, printing and infrastructure construction etc.

3.5 year interest rates 1.25% which gives us a premium of 3.25% for this bond, a tad tighter than Golden Agri’s 3 year paper.
(Although I am now hearing that Golden Agri is going lower at 4.25%)

Their USD 3 year (not 3.5 year) paper is going at premium of 3.25% as well which means they are not short changing investors.

I am not familiar with Chinese leasing companies but I suppose, in the wake of their financial turmoil, the big ones should be sound especially if they sell a lot of bonds to raise money in Singapore that they may otherwise have difficulty borrowing onshore.

A point to note is that most of their financing is secured which does not give a lot of comfort to senior bond holders and they have USD 3.4 bio in outstanding debt with 0.5 bio maturing this year and another 1.35 bio in 2015.

At 4.5% for 3 years and a BBB- rating with a recent Stable outlook in Jan 2014, this issue should be well taken up.