New Issue Review : Ezion SGD 7YNC3 5%
**Ezion SGD 7NC4
– New Ezion 7NC4 announced
– Initial price guidance @ 5% area
– Step-up of 2% if not called on the first call date (4yrs later)
– UOP: to fund the proposed tender/repurchase of existing notes due in May 2015 (ISIN: SG6V18981831) and for general corporate purposes
Comps:
Ezion 4.6 2018 @ 101, 4.34% (remaining tenor: 4yrs 3 mths)
Ezion 5.1 2020 @ 101, 4.90% (remaining tenor: 5yrs 10mths)
Read : EZION REVERSE TENDER FOR EZION SGD 5.25% 05/2015 NOTES
Ezion is buying back the Ezion 5.25% 05/2015 at 103.25 /1.98%. This bond issue will not add to their total debt outstanding.
4 year interest rate is at 1.30% vs the new issue’s yield of 5% and the step up of 2% is a nice consolation.
I wouldn’t be surprised if they raised enough to buy back a couple more issues but this looks like a market tester deal.
any idea the purpose of issuing the bond with a call structure?
why not just a 4 year or a 7 year maturity?
They make money on the swaption, because customers are selling a put option.
The step up premium is probably covered in the cost and is good insurance for them.
EZION SGD 7NC4- BOOK IS IN EXCESS OF S$200MM
Ezion is a growth company. As long as the growth continues, Ezion should be able to rollover its debt, and safe for bond holders.
Since this bond does not have ratings, I need to do my own credit analysis.
Debt to equity ratio is 159% and there is no sign of falling as debt levels has been rising since 2009.
Generally I will not buy a bond that has debt to equity of more than 100%. This means that the debt is bigger than the company.
Looking at its cashflow statement, the capital expenditures are constantly higher than its operating cashflow.
This means that the company has no ability to repay its bond holders using internal cash.
The only way it can pay its bond holders is to rollover its debt.
Haha. Isn’t it the same for more than half the corp bonds issued this year ?
The saving grace is that their assets are supposed to last a long time, so hopefully the capital expenditures will bear fruit.
Ezion SGD 7NC4
– Orderbook is in excess of S$500mm
– Final Price Guidance at 4.875% (the number)
– Expect issue size at S$150mm
– Timing: Today’s business, book is subject
Ezion SGD 7NC4 Statistics (unverified)
Orderbook in excess of S$500mm, 49 accounts
By Investor Type:
Private Banks 76%
Fund Managers, Banks and Others 24%