2 New SGD Issues : Gallant and Rickmers Trust 3Y

New Gallant Venture SGD 3yr announced on the back of strong reverse inquiries
May 5 (Bloomberg) — Person familiar with the matter says.
• Issuer: Gallant Venture Ltd.
• Tenor: 3-yr
• Initial Price Guidance: 6.125% area
• Format: Reg S
• Status: Senior unsecured

Issuer: Gallant Venture Ltd.
Status: Senior, unsecured, off USD500m EMTN Programme
Rating: Unrated
Format: Reg S, S274 & 275 of Singapore SFA
Tenor: 3 Years
Issue Size: TBD
Payment: Semi-annual, Actual/365 (fixed)
Issue Date: [ ] May 2014
Maturity Date: [ ] May 2017

Delisting Put:  If, on any date, (A) the shares of the Issuer cease to be traded on the Singapore Exchange Securities Trading Limited (the “SGX-ST”) or (B) trading in the shares of the Issuer is suspended for more than seven consecutive business days on which normal trading of securities is carried out, the Issuer shall, at the option of the holder of any Note, redeem such Note at par together with interest accrued to the date fixed for redemption which shall be the date (or, if such date is not a business day, on the immediately preceding business day) falling 45 days after the relevant Effective Date. The Issuer shall, within seven consecutive business days of the relevant Effective Date, give notice to the Trustee, the Paying Agents and the Noteholders of the occurrence of either event specified in (A) or (B) above (provided that any failure by the Issuer to give such notice shall not prejudice any exercise of such option).

Use of Proceeds:  Partial refinancing of existing syndicated terms loans, of which CIMB and Standard Chartered Bank are part of the syndicate

Denomination:  SGD250K
Governing Law: English Law
Clearing:  CDP
Listing: SGX-ST

Comparable bonds :
LMRTSP 4.48 17 at 4.17%
GUTGTS 3.70 18 at 3.70%

Now what have we done ?

They were supposed to be paying 6.125% coupon for 2 years not 3 years and almost half their outstanding debt are secured. https://tradehaven.net/market/2-new-sgd-issues-gallant-venture-2y-overseas-education-5y/

Coming back in such a hurry is a good sign that they are keen to borrow at this 6% target when people are willing to lend. They probably have to pay higher if not.

Taking a closer look at the company, it would appear that they have not paid a single cent dividend since 2006 (although I am not 100% certain of that) which is to be expected when they have been running losses, only to break into profit in 2013 with an acquisition.

The delisting put is a nice addition given the 70% majority ownership by the Salim Group.

Still interest expense of SGD 75 mio took up 70% of their operating income of SGD 106 mio in 2013.

The not so old Gallant 5.95% 04/2016 issued a few weeks ago is going at 100.40/100.85 (5.73/5.48%) today after touching a high of 101/101.40 (5.40/5.19%).

Profits announced on 2 May for 1Q14 is loss of SGD 2.9 mio (only).

I guess that Singapore bond buyers are an optimistic lot indeed (even including the nice little sales rebate for private banks).



Comparable Bonds :
NAM CHEONG  5.0%    2017         S$90M      101.50  / 4.50%
SWIBER      7.125%  2017         S$160M     103.625 / 5.76%
NOLSP       4.25%   2017         S$400m     102.95  / 3.20%
AMTEK       6.9%    2019 (5NC3)  S$200M     103.45  / 5.57%

Credit Highlights:

* Rickmers Maritime Trust is a Singapore business trust formed to operate a containership chartering business. The Trust’s business objective is to own containerships and charter them to container liner shipping companies under long-term, fixed-rate time charters.

* Rickmers Maritime Trust was listed on the SGX-ST on 4 May 2007. Since the Trust’s establishment in 2007, the Trust’s fleet has grown through accretive acquisitions. As of 31 March 2014, the Trust’s fleet comprises 16 vessels with a combined capacity of 66,410 TEU and an average age of 6.5 years.

* Rickmers has long-standing relationships with leading container liner shipping companies such as Maersk Line, CMA CGM, Mitsui OSK Line (“MOL”), Mediterranean Shipping Company (“MSC”), Neptune Orient Lines (“NOL”), Evergreen, Orient Overseas Container Line (“OOCL”), Nippon Yusen Kaisha Line (“NYK”)

This name would not have come out anytime last year but markets back to running on a high.

Market capitalisation SGD 250 mio.

Size of MTN programme SGD 300 mio.

33% owned by Rickmers Holdings (private company in Germany) which has a EUR 8.875% 06/2018 bond going at 8.91% after a 2 cent run up in recent days. This would place their 4 year premium at about 8% over the 4 year interest rate.

Therefore 8.5% for a SGD 3 year (3 year interest rate at 1%) would be paying a 7.5% premium which is fair enough.

Dividend yield is roughly 10.2% but most of their assets are secured already on loans, thus 8.5% could be considered slightly subordinated.

This business trust has seen better days (IPO SGD 1.57 or 1.34 with stock split adjusted, Current share price SGD 0.295)  and is attempting to exit financial restrictions placed on it by its creditors via equity and bond options.

”     The shipping trust opted to maintain its borrowing costs and
its quarterly DPU payout of 0.6 US cents in exchange for the
banks extending an existing value-to-loan covenant waiver period
from May 14, 2013, to end-2014.” http://www.businesstimes.com.sg/premium/companies/others/rickmers-hopes-begin-growing-business-again-20130503

At 8.5%, is it high yield enough for this tier 3 name ?