SGD New Issue Review : Yanlord 3Y 6.5%
April 28 (Bloomberg) — Price guidance in “6.5% area”: exchange filing.
• Format: Reg S, according to a person familiar with the matter
• Expected Issue Ratings: Ba3 / BB- (Moody’s/S&P), person said, asking not to be identified because the terms aren’t set
• Use of Proceeds: Refinancing of the 2010 revolving credit facility, the 2011 credit facility and the shareholder loan, according to the person
• Timing: Expected as early as today’s business, person said
3 year interest rate 1.045% which gives this bond a 5.455% premium for 3 years.
There are a handful of Yanlord USD bonds out there which make good comparables.
Yanlord 10.3525% 03/2018 callable 03/2015 at 105.31. Current price 107.95 yield 7.185%.Yanlord 9.5% 05/2017 callable 05/2014 at 104.75. Current price 104.50 yield 7.05%, assuming no call till 2016 at 100.
Market Cap SGD 2.26 bio. Financial leverage 3.4 times but sitting on cash pile of CNY 7 bio as of Dec 13.
The company has SGD 1.668 bio worth of debt due in the next 5 years and the purpose of this issue is, in part, to repay a shareholder loan as well.
According to news reports, Yanlord marketed a US 400 mio 3 year loan at a premium of 4.5% just last week. The loan is likely to be secured on assets.
I would not say that Yanlord is a Tier 1 Chinese property name and I dug up some of the BB rated Chinese HY property names because I am not an expert on them and they do tend to trade on very technical grounds.
Franshion 4.7% 10/2017 BBB-/Ba1 5.38%
Gemdale 7.125% 11/2017 BB-/Ba3 7.06%
Soho China 5.75% 11/2017 BB+/Ba1 5.67%
Agile 8.875% 04/2017 BB-/Ba2 7%
Central China 6.5% 06/2018 BB-/Ba3 8.45%
Evergrande 8.75% 10/2018 BB-/B2 10.45%
Most of them are trading wide on at least a 1 cent spread and buyers are coming from 1 sector which is the private banks with real money still keen on selling.
Thus my word of caution to the enthusiastic private bank buyers here, running on cloud 9 after the last few successful issues on the street.
This is what the Yanlord 9.5% 05/2017 price chart looks like since its issuance in 2010. Holy Moly, 61 cents ?
On another note, we have a host of USD bonds today again ….. San Miguel perp, CLP perp, Lenovo, Stategrid ….
Hi Tradehaven, thanks for the wonderful write up again. May I ask, why did it fell to 61 cents that time? Short Seller? May I also ask, u have any idea what is the issue size of the bond and how is the response? Thank you.
I recall it was due to the Chinese government’s measures to bring down property prices announced shortly after a record amount of bond issuance by Chinese property developers on their solid earnings and results.
Hi tradehaven, many thanks for the various updates and explanations. I think I got wrong impression all along cos I thought bond price only go to such distressed levels when it is on the edge of default rather than poor business. CapitaLand bonds seems to be doing pretty okay despite its share price going down quite a bit due to the sg cooling measures.
May I also ask Ba3 is considered “investment grade” similar to GLP or Mapletree Logistic so a default for such bonds is not very likely though its gearing is high?
Thank you so much for everything.
Yanlord is junk i.e. high yield.
Not the same as GLP or MLT.
Yanlord 6.2% 05/2017 high dealt 100.50.
Current market 100.15/100.35.
77% of issue to private banks. Final order book ~ SGD 5 bio.
April 29 (Bloomberg) — Person familiar with the matter says.
• Fund managers take 19%, banks 4%
• Investors in Asia buy 99%, EU 1%
Hi Tradehaven, so much thanks for your kind clarification again. Many many thanks! Have a great day ahead!
Yanlord closing price 100.45/100.60. Breaking under 6%.
I am wondering if Olam were to get its bond rated now, will it be better or worse than Ba3. Cos the coupon is quite similar.
Good question but no answer. There is a reasonably high chance Olam would be non investment grade. As to the actual rating, it is anybody’s guess. Because we would not know what is the weight the agencies would put towards Temasek’s recent expression of interest and the probability of Temasek sponsorship and commitment etc.
All we know is that they would have less problems with raising capital/cash in the future.
Ba3 would be a good start, as you observe.
Hi tradehaven, thank you so much for your kind explanation on the Olam bond rating again. Many many thanks!
Glad the Olam bond price are all quite stable now 🙂
Books last >1.5 bio SGD.
Issue size 200-300 mio.
Closed 4 pm.
YANLORD 3Y SGD
* BOOKS IN EXCESS OF S$5BN
* FINAL GUIDANCE AT 6.2% (THE NUMBER)
* SIZE: SGD BENCHMARK
I don’t cover Yanlord myself so my knowledge of the firm is limited. However, I might be able to comment on the relatively value between Yanlord’s new SGD bond and other USD bonds, in particular, the Yanlord’s USD 2017 bonds.
– The USD 2017 Notes is a great benchmark as it matures just 4 or 5 days before the SGD bonds.
– The SGD 2017 Notes yield only 6.2% while the USD 2017 Notes yield 7%
– Swapping a fixed-rate semi-annual yield of 6.2% in SGD will yield 6.34% in USD.
– Thus, the SGD 2017 Notes provide much less value for money.
– You can get better return in SGD, assuming you want SGD exposure, by buying the USD 2017 Notes, and enter into a currency swap to convert the cash flow into SGD, resulting in 6.8% (assuming also minimal transaction costs in the cross currency swap), or 60 bps pick up over the SGD 2017 Notes.
– I believe the yield for the SGD 2017 Notes is lower than the fair value based on the USD bonds because: i) generally yields for the SGD bonds are very low, 4-5% and thus, 6.2% seems attractive for SGD bond investors; and ii) many of SGD investors do not have the mandate to buy the USD bonds nor to enter into any cross currency swaps.
– The USD 2018 Notes yields about 7.2%, just 20 bps more than the USD 2017 Notes. Thus it doesn’t provide enough yield to compensate for the one-year extension. I would rather stick with the USD 2017 Notes. In terms of Options-Adjust spreads (OAS), the USD 2017 Notes yield 650 bps OAS spread while the USD 2018 Notes yield 645 bps only. Both bonds are callable so I believe OAS spreads are more accurate and more reflective of the yields/spreads.
– If you do not have such institutional constraints, I believe the USD 2017 Notes provide better relative value among Yanlord’s three outstanding bonds.
The 2018 note is callable in 2015 at 105.313 while the 2017 is callable next month at 104.75.
I agree that the SGD yield does not compensate although Yanlord trades wider than some of its peers.
Yanlord continues to run up in price and run down in yield.
100.65/100.85 (5.96/5.89%) today.
On a separate note, Evergrande Real Estate 8.75% 10/2018 is down 3 cts to 91.73 cts after S&P downgraded their ratings yesterday.
Evergrande Rating Cut to BB- From BB by S&P; Outlook Negative
China-based property developer’s leverage could deteriorate because co. is “likely to continue to make large debt-funded land acquisitions,” according to S&P
Negative outlook reflects expectation that Evergrande’s debt leverage and cash flow coverage could weaken further due to continuously aggressive debt-funded growth over the next 12 months.