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).
RICKMERS TRUST MANAGEMENT 3Y SGD: GUIDANCE @ 8.5% AREA
NEW 3Y SGD ANNOUNCED, DEAL IS ANCHORED
PX GUIDANCE AT 8.5% AREA
TIMING: AS EARLY AS TODAY
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 ?
Dear Tradehaven for the Gallant Venture issue does it mean buying the 2 year old issue off the market would be a better deal.Your assesment for the company seems to be less favourable this time.Thank you for the kind consideration and your precious time.
Haha. You caught on.
I did not like the idea that the coupon for the previous issue went under 6% and now a rush to get out more at >6%.
Well disciplined companies do not do that. Only Oxley and Swibers do.
Between the 2 and 3 years, not much difference because the main bulk of their debt is 567 mio due next year and another 429 (including the 2y bond) in 2016.
Depends on how much business you think Iskandar will take away from Bintan, I guess, and the additional political risk arising from Indonesia.
You may be interested to know that last year’s Indo SGD bond Trikomsel is 96.50/97.00 (7.152/6.874%). The bond matures in May 2016.
hi tradehaven.. thank you so much for the really helpful write ups again. May I ask, in your view is it a better deal to buy the 2 yr at market price or get the new 3 yr bond?
Do you have any idea what is the response so far for the new issue?
Thank you so much.
RICKMERS TRUST MANAGEMENT 3Y SGD
** ORDERBOOKS ARE AROUND S$170MM
** FINAL PRICE GUIDANCE AT 8.45%
** EXPECT ISSUE SIZE TO BE AROUND S$75MM WITH LITTLE ROOM TO GROW
** TIMING: BOOKS SUBJECT AT 4.30PM SG, TODAY’S BUSINESS
NEW ISSUE: GALLANT VENTURE SGD 3YR
– Orderbooks in excess of S$300MM
– Guidance remains 6.125% area
– Issue size: S$150MM (will not grow)
– Order book subject at 4.30PM SG time
GALLANT UPDATE
Order book : S$700MM
Final guidance: 6% area +/-10bps (will price in range)
Issue size: S$150MM
Hi tradehaven
Thank you so much for the various updates and information which I am sure is of great beneficial value to everyone. Thank you once again.
May I ask, comparing Trikomsel SGD 3Y and Gallen, in terms of credit strength and gearing, which is better? I am really sorry to be asking this.
May I also ask, for the Trikomsel SGD 3Y, did it fall to 96.5 region on the first day it started trading or did it start with above par price on first day and subsequently slowly worsened as Indonesian situation made a turn for the worse?
Hoping the gallen bond coupon wont be less than 5.95 and hopefully close to 6.1%. I supposed if it is close to or lower than 5.95 it will be quite catastrophic cos it will be lower in coupon and longer in tenor than the 2Y gallen bond?
Thank you so much for everything again.
It’s Gallant, not Gallen. I am not issuing any bonds 🙂
Oppps…. I am so terribly sorry for the mistake… my apologies… Gallant =)
Oldfolk,
Major Freudian slip man !
Gallen vs Gallant ?
Cannot really compare Trikomsel with Gallant except that they operate in Indonesia and Gallant has a major subsi in vehicle leasing whilst Trikomsel is the biggest retailer of telecommunications products with outlets in 175 cities (bit like Courts, although I would put Courts in the money lending business instead of retail).
Trikomsel launched their first SGD bond last April to much fanfare and the bond rallied up to 101 due to overwhelming demand. It fell to a low of 94 cts before rebound back up to 96 level.
And of course, the BIGGEST DIFFERENCE BETWEEN TRIKOMSEL AND GALLANT ??
TRIKOMSEL IS A PROFIT MAKING COMPANY !!
Hi tradehaven, thank you so much for sharing again. May I ask, for OTC bonds is it usually alright to sell by contra? Btw I supposed Gallant Ventures is junk bond also? Or cos of its major shareholder it is deemed to be a bit better off than junk rating?
Wondering how much it will close today.
Hi Oldfolk,
There is no contra for bonds that I know of. Very rarely, do bonds nett settle.
The general rule of thumb is that if it not rated BBB- and above, it is junk.
Unless it is a name like HDB.
Gallant 5.9% 05/2017 closing price 100.05/100.25
Rickmers 8.45% 05/2017 closing price 99.65/100.05
Hi tradehaven thank you for sharing all the thoughts and information. May I just seek your kind advice on this. I rememebred there were a few bonds last time, shortly after they are launched, I dont see any bid and ask price in ur bond price table anymore. It probably become very illiquid and it is very hard to sell it anymore. In general what features of a bond will make it very illiquid? Does Gallant 5.9 look like it is going to become one of those illiquid ones? Thank you so much.
On the part of liquidity risk, I thought I’ll help out tradehaven a bit so he could better use the capacity to churn more insights.
For corporate bonds, Credit Rating, Issue Size, distressed or default status matter together with general liquidity risk parameters (http://en.wikipedia.org/wiki/Liquidity_risk)
Thank you Banana for the link and information. Thanks!
For the smaller corporate names, we should not expect every bank to quote the bond price. The bank may not have the ability to deal in the bond. Sellers have only a handful of counterparties if they want to sell.
That is how some people become hostage to the bonds that they buy.
Thanks Banana !!
Hi tradehaven, many thanks for your kind explanation. Very deeply appreciated your kind explanation. I was asking this cos I was following the price of quite a few of the new issue in your bond price list that time eg. United enviro 7.5, hankcore etc (I think I may have spelt the companies name wrongly), there was no bid or ask quote quite soon after it was launched. I do understand all these while that if a bond is too near maturity or when there is a crisis and price fell too much no one will want to sell nor is there anyone willing to buy so there may not be any quotes.
Btw am I right to say that Gallant Venture has quite a high chance to fall under the category of the smaller corporate names so there is reasonably high chance that it get quite illiquid soon after the launch? I am so sorry to be troubling you with this. My most sincere thanks again.
Waiting for tradehaven’s godly comment.
I am interested in buying this as the returns are godly with leverage but the business does not seem sustainable. Running on debt for so many years.
Gallant Venture 3Y 5.9% SGD 150 mio.
Current mkt price 100.25/100.45
Gallant old 2Y 5.95% 100.70/101.05
Rickmers 3Y 8.45% SGD 100 mio.
Current mkt price 99.45/99.95
Thank you for the price updates. Will look out for more price updates later part of the day or as and when it is available too.
The financial statement for Gallant Ventures in the last few years, in SGD ‘mln.
FY2010 FY2011 FY2012 FY2013
Rev 220.10 203.37 204.23 1,854.75
Cost of Rev (168.02) (161.19) (160.82) (1,584.05)
Gross Profit 52.08 42.17 43.41 270.70
Op Exp (30.89) (24.64) (4.58) (117.07)
Op Income 21.20 17.53 38.83 153.63
Others, Net – – (16.63) (67.39)
Income b4 Taxes 21.20 17.53 22.20 86.24
Tax (13.84) (10.93) (12.43) (16.04)
Extraordinary Items and Adjustments 1.96 1.68 1.42 (22.74)
Net Income 9.32 8.28 11.19 47.46
Yikes… MY BIG MISTAKE.
It is just the operating income that is negative because I use a different source from you.
I think your numbers add the non operating income into the picture.
FY 2010 FY 2011 FY 2012 FY 2013
Revenue 220.10 203.37 204.23 1,854.75
Cost of Revenue 168.02 161.1 160.82 1,584.05
Gross Profit 52.08 42.17 43.41 270.70
Other Operating Revenue 6.69 8.31 5.65 81.87
Operating Expenses 75.82 77.58 76.90 246.22
Operating Income (17.05) (27.10) (27.85) 106.35
Interest Expense 14.20 15.74 18.53 75.21
Foreign Exchange Losses (Gains) 0.40 (3.12) (11.73) 3.81
Net Non-Operating Losses (Gains)(52.84) (57.25) (56.71)(58.91)
Pretax Income 21.20 17.53 22.07 86.24
Income Tax Expense 13.84 10.93 12.42 16.04
Income Before XO Items 7.35 6.60 9.65 70.20
Extraordinary Loss Net of Tax – – – –
Minority Interests (1.96) (1.68) (1.43) 22.74
Net Income 9.32 8.28 11.08 47.46
LATEST PRICES
GALLANT 5.95% 2016 100.65/100.95
GALLANT 5.9% 2017 100/100.15
RICKMERS 8.45% 2017 99.65/100.05
Hi tradehaven, may I ask do you have any idea what is the latest indicative price of the two Gallant bonds (5.9% and 5.95%) and the UOB 3.5% 12 yr bond issued recently?. Much thanks!
Gallant 5.95% 2016 101/101.30
Gallant 5.9% 2017 100.40/100.70
UOB 3.5% 05/2026 100.05/100.15
Good morning tradehaven, many thanks for the information. Have a fantastic day ahead!
Sorry if I am going to offend anyone. While we are all here to share and at the same time learn, I cant help but feel bothered about the fact that some people are buying bonds (that are at 250k a pop) without understanding basic terms of the bonds. I feel upset when I see people asking for very basic information such as “what does credit rating means” or “what is the difference between a perpetual and a straight bond”. I am just giving very broad examples here. While many, including me, are not experts on bonds, this basic knowledge is just one click away -> www,google.com.
And personally, I feel that without this very basic knowledge of bonds, one should not even consider investing in bonds. Tradehaven, you should be more mean to these people in the future. 🙂 It will be much more beneficial (in terms of bond knowledge) for them.
On the other side, I do see insightful comments from people. So.. keep them coming!
Hey Newbie,
Then you have to blame the RMs who are supposed to have taken the FSA modules !
And it looks like no one really bothered to read my Education tab on this site.
After so many years of doing this, I guess these are not the same people who have died in the mini bonds or the JEL or the various defaults we have witnessed. Those people will not be buying bonds again or reading this website.
I have not met many private bankers in my old line of work because all I did was to make a price to the sales person who would then deal with the dealer from the private bank that was transacting, but I do feel sorry for many of the clients when I see the final transacted price (which is not even the final final transacted price that the end client got).
And I have heard many stories of customers who claim to have been misled, throwing chairs through the windows of the banking hall; clients who lost 15 mio on a structured deposit of 5 mio on a flash crash day etc.
Everyone is motivated by greed especially when there are incentives.
Oldfolk,
And I am afraid I cannot get reliable prices for the Hankore’s and United Envirotech so I left them blank. No point misleading people by putting a fake price.
Good luck !!
Hi tradehaven, thank you so much for your kind explanation on the Hankore and United Envirotech. Many thanks for everything again. Will always look out for the various updates when you happen to have too.
Morning Prices
Gallant 5.9% 2017 100.00/100.15
Rickmers 8.45% 2017 99.70/100.10
Thanks again TH,
Long chain this particular one, with some good insights.
As regards the Rickmer’s paper, two points / questions:
A. Am I wrong to be troubled by the fact that Rickmers are raising this 3Y debt in order to pay off existing Bank loans, which should normally be at a much lower (interest) cost, as compared to 8.45%? May be I’m being presumptuous.
B. I understand that some punters have been able to pick-up some of this 3 year paper in the secondary market at prices just under par. I wonder who is dropping the stuff into the market so early on? And why?
Thanks again TH. As always, appreciated.
Hi JC,
1. Don’t presume their loan rate is lower. Do note that as I have mentioned in this week’s Bonds in Conversation piece that a Hong Kong listed China Water Property raised 2.5 year senior money at 13% HKD (and HK rates are close enough to SG rates). Their market cap is slightly smaller than Rickmers.
Also bank loans are almost always secured which will tie up their assets on more stringent terms and it could also be that they have run out of assets to collateralise.
Their parent company also issued a 5Y EUR bond recently whose spread is in line with this bond’s spread.
2. The cost price of this bond is in its low 99’s because Rickmers has been very generous with their sales rebate. I don’t typically reveal the private banking rebate on my commentaries because I feel it is unfair to the bankers. Thus if they landed some extra stock, they can offload it under 100 and still make money.
Hope it helps.
Thanks for the fast response TH – it does indeed help,
Excellent, clear answer to my first question. I realise that Banks impose encumbrances and liens on Companies and their assets when taking loan exposure ……….. but I can now only conclude that Rickmers has a cost-of-capital somewhere in the teens. Ouch. And one of the reasons I say this is because I understand this is a business trust where distribution policy is laid down rather than within their control. I note that the share price is now about 1/3rd of what it was at listing seven years ago and distribution levels are down more than 70% as compared to what they were initially. Who would be a(n equity) shareholder?
As regards your second answer, I suspected it was the banks who were dropping the paper – but I find it striking that the Banks are getting out (or more politely stated, diluting)with such haste, even before the settlement date for the initial issue. Sends a strong negative signal.
When you post your weeklies going forward, I’ll be looking at the offer price for this Rickmers paper with more than passing interest. Interesting.
Thanks again TH
Even faster response.
Answering your question again. There is no question to Rickmers getting a bank loan at the moment especially when they are under financial restrictions placed on by their creditors, as I mentioned in the post.
You cannot say they have not been generous in their payouts… I noted last year in my post, http://52.77.202.71/market/reits-insolvencies-why-no-more-delifrance-for-me/, that Rickmers had the highest payout ratio in the entire bevy of reits and business trusts listed in the SGX. It is even higher now at 11% and the main beneficiary is its parent.