Bonds In Conversation – Excuse Me, Can I Borrow 20 Billion dollars, PLEASE ?

Behold, the world just saw the largest Junk Bond offering in history.

April 24 (Bloomberg) — Billionaire Patrick Drahi is winning friends in the junk-bond market.
After selling the equivalent of about $23 billion of bonds and loans in the biggest such offering ever, prices are surging
as buyers begin trading the securities in secondary markets.

He has just bought Vivendi’s French mobile unit, SFR (the second largest mobile provider in France) for $20 billion.

Extracted from Bloomberg.
Vivendi SA, preparing a spinoff of its French phone business SFR, is also weighing a possible sale of the unit to Numericable Group SA and its biggest investor Altice SA, people familiar with the matter said on 1/21/2014. Altice is said to be preparing a USD 20B cash-and-equity offer and has secured debt financing from nine banks. On 03/14/2014, Vivendi announced that it has decided to enter into exclusive negotiation with Altice for three weeks. On 04/06/14 Vivendi accepted Altice’s increased offer of EUR 13.5B with potential additional payment of EUR0.75B.

IT DOES NOT ADD UP. 20 bio and borrow 23 bio ! It means he did not pay a single cent !

Why don’t we get deals like these in our lives ?

Well, not by the looks of it.

This week we saw Latvia, Dominican Republic, Pepsi among other names. In Asia, Tencent, CNOOC, Vista Land, Banglalink, Union Bank and Sinochem all coming out to tap the markets as Chinese equities retreat but India makes new records on a daily basis.

But people are wising up. Remember the Chinese takeover of Smithfield ? Borrowing the entire sum of 7 bio and then trying to IPO on top of that ?

Boo ! They are halving their IPO because not a lot of suckers left for the current owners to dump on.

But things take time to go turn pear shaped and markets are more than forgiving to snake oil salesmen.

London’s iconic Gherkin tower that was bought for US 1 bio back in 2007 has just filed for bankruptcy as their funding arrangement collapsed.

Singapore is off on its own little tangent.

People chasing privatisation rumours in the stock market and also buying lots of bonds on leverage if the new Far East Horizon SGD 4 bio worth of orders for a SGD 400 mio issue is anything to go by. 52% went to private banks.

April 25 (Business Times) — FAR East Horizon Ltd (FEH) has
made a strong debut in the local bond market as Chinese bond
fever reaches Singapore. The Hong Kong-listed Chinese financial
services company launched its maiden, $400 million 31/2-year bond
issue yesterday, pricing it at 4.25 per cent.
     The final order book was $3.8 billion, almost 10 times
subscribed, said DBS Bank, one of the two joint lead managers,
along with Standard Chartered Bank, for the deal.

Golden Agri-Resources also launched well received 3 year issue at 4.2% suggesting that the market is still very comfortable with interest rates.

Overseas Education 5.2% 04/2019 and Stanchart subordinated  4.4% 01/2026 are the 2 best performing bonds on the street this year, going above 102 in price. The rest are catching up, if they don’t continue to tap the markets like what I am hearing for Gallant.

We have a Singapore Government Bond re-opening on Monday of the 2.75% 07/2033 issue. The current yield is around 3.1% which beats CPF’s 2.5% although it should look even better on leverage. Not very exciting until we get closer to 3.5%.

If only everyone could just borrow a billion dollars to buy their own companies.

Leaving you with the prices.

US Bonds Listed In HK and SGX


2014 SGD Issues