SGD New Issue Reviews : Central China Real Estate 3Y and Vallianz 2.5Y


ISSUER: Central China Real Estate Limited (the “Company”)
ISSUE: Senior notes (the “Notes”)
SUBSIDIARY GUARANTORS:     Certain of the Company’s Restricted Subsidiaries outside the PRC
SECURITY TO BE GRANTED:    Capital stock of all of the initial Subsidiary Guarantors owned by the Company or the Subsidiary Guarantor Pledgors
ISSUER RATINGS:  Ba3 Stable (Moody’s) / BB- Stable (S&P)
FORMAT: Regulation S Registered
SIZE:  SGD Benchmark
TENOR: 3 years
PRICE GUIDANCE: High 6% area
DETAILS: SGX-ST listing; S$250,000/1,000 denoms; New York Law
UOP:  Refinance the 2009 Convertible Bonds with Warrants and the remaining amount for general corporate purposes


CENCHI  10.75 04/16    107.25    6.625%   — /BB-/–
YLLGSP  6.20  05/17    100.90    5.86%    Ba3/BB-/–

– Central China (CCRE) is a leading residential residential property developer in Henan Province

– CCRE has a strategic partnership with Capitaland since 2006. CCRE provides Capitaland with a platform to gain exposure to central China Region.

– As of 31 Dec 2013, Capitaland holds 27% of CCRE. Capitaland has 2 board seats, providing oversight and risk control and is also a member of strategic and investment committee and audit committee

Singapore 3 year interest rate 0.95%. Thus this bond would be paying a premium of under 6% for 3 years.

CENCHI USD 6.5% 06/2018 is trading at 91.50 cash price which is a premium of 7.2%. The bond is callable in 2016 but at 91.50, we assume that they will not be calling it back anytime soon.

CENCHI USD 8% 01/2020 is trading at 93.50 cash price which is a premium of over 7% as well. The bond is callable in 2017 but again, we assume it will not be called back.

We saw the Cenchi SGD 10.75% 04/2016 issue run up to a high of 112 since it was launched in 2012. The public perception of this name is favourable especially with the Capitaland stake as a selling point.

The company is listed in Hong Kong under 832 HK and is pretty highly leveraged at 5 times with its inventory growing. S&P has recently reaffirmed their BB- rating with a stable outlook after the company reported higher sales for April.

The market consensus is for the double B names to be able to weather out future storms better than the single B names in the Chinese property space. And Cenchi is in an apparent safe zone with its decent cash position.

Having said that, the SGD bond is paying a discount to local bond buyers whom I expect are not very discerning and thus, it matters not what I think except that the bond would be a private bank sell out considering that institutional demand will be limited due to its junk rating.

Do note that the equity is paying 7.8% gross dividend.


Issuer: Vallianz Holdings Limited
Status: Direct, unconditional, unsubordinated and unsecured Notes
Rating: Unrated
Format: Reg S, S274 and/or 275 of Singapore SFA
Issue Size: [S$50,000,000, with an option to upsize]
Use of proceeds: In accordance with its Multicurrency Debt Issuance Programme
Tenor:  2.5 Years
Coupon Rate: Fixed rate, per annum payable semi-annually in arrear
Price Guidance: [7.50]% area
Issue Price: 100 per cent
Issue Date: [22] May, 2014
Maturity Date:[22] November, 2016
Details: SGD250K/ Singapore Law/CDP
Listing: SGX-ST


VALISP 7.20% Apr-16  100.875  6.687%
SWIBSP 5.55% Oct 16  100.875  5.154%
EZRASP 4.75% Mar 16  100.750  4.318%

I did say before that they are not going to stop borrowing. Vallianz 2Y then Swiber 2.5Y and now Vallianz again, then ?

It is a big, hefty commission the bankers will be getting to sell this bond. So it shall sell well.

Now what would I do if I had some of the Swiber 5.55% 10/2016 (2.5 years) issued last month ?

If the bank says that it is indeed trading at 5.15%, then why not switch into Vallianz even if SGD 150 mio worth of bonds they will have after this will exceed all the assets they have in their books as of end 2013 ?


That is because they achieved 4 times higher earnings in this first quarter of this year (year on year growth) and have closed another US 82 mio contract for 2014-2015 which brings their order book to US 524 mio !

Having said that, I wonder why the bonds would be a hard sell at all to pay all that commission (3 times Cenchi) ?

It looks like some people will be getting this bond real cheap then !!!