New Issues Review : Noble USD Perp and Koh Brothers SGD
NEW ISSUE: NOBLE US$ REGS PerpNC5 | IPG: 6.000% AREA
NOT FOR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR IN ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW
ISSUER: Noble Group Limited
ISSUER RATINGS: Baa3 (positive)/BBB- (stable)/BBB- (stable)(Moody’s/S&P/Fitch)
EXPECTED ISSUE RATINGS: Unrated
EXPECTED EQUITY CREDIT: 50% Moody’s / 50% S&P (for first 5 years) / 50% Fitch / 100% IFRS
SECURITY DESCRIPTION: Subordinated Perpetual Capital Securities
STATUS OF THE SECURITIES: Subordinated, senior only to ordinary shares
FORMAT: Reg S, Registered
ISSUE SIZE: US$ Benchmark size
MATURITY: Perpetual non-call 5 Year
INITIAL PRICE GUIDANCE: 6.000% area
DISTRIBUTION RATE: From Issue Date to Year 5, at the Initial Distribution Rate
From Year 5 to Year 10, reset 5YR UST + Initial Spread over UST
From Year 10 to Year 25, reset every 5 years at 5YR UST + Initial Spread over UST + 25bps
From Year 25, reset every 5 years at 5YR UST + Initial Spread over UST + 25bps + 75bps
OPTIONAL DEFERRAL: Cumulative and compounding
DIVIDEND STOPPER: Dividend stopper on Junior and/or Parity Securities if Distributions are deferred
CALL OPTION: Callable at Par at the end of Year 5 and every Distribution Payment Date thereafter
EARLY REDEMPTION EVENTS: Withholding Tax Event (Par), Equity Credit Classification Event (101% to Year 5; par thereafter), Minimal Outstanding Amount Event (Par), Accounting Event (101% to Year 5; par thereafter)
USE OF PROCEEDS: Refinancing of 8.5% Perpetual Capital Securities issued on Nov 1 2010 and general corporate purposes
TERMS: SGX Listing, 200k/1k denoms, English Law (subordination provisions governed by Bermudan law)
** PRICE GUIDANCE 6% AREA
** EXP DEAL SIZE: US$ REGS BENCHMARK
** TIMING: AS EARLY AS TODAY’S BUSINESS
PRE-ANNOUNCEMENT COMPS
NOBLSP 3 5/8 03/20/18 400MM 102.500 2.916% T+122 G+169
PTTEPT 3.707 09/16/18 500MM 103.832 2.743% T+105 G+132
PTTEPT 4 7/8 1MMM 100.625 4.733% T+304 G+303
CHINLP 4 3/4 03/19/20 500MM 108.115 3.193% T+150 G+130
CHINLP 4 1/4 750MM 101.125 4.015% T+232 G+221
I really would not expect anyone who had their Noble USD 8.5% perp called so unceremoniously,to be buying into this issue or anyone who had liked the Far East Horizon SENIOR perp yesterday to be interested in this one.
https://tradehaven.net/market/very-vague-on-sgd-perpetuals-to-worry-or-not-after-noble-perp/
Yet, strange things do happen.
CIC is behind them for 13.92% and it gives Noble some clout much like Olam with Temasek’s 58.44%.
Far East Horizon only has GIC’s measly 5.96% stake.
An interesting observation in an article out of Reuters over a year ago is that Asian retail investors prefer unrated perpetuals that do not abide by rating agencies’ regulations for lower step ups of less than 1%.
For that reason, retail investors should not find the call option terms too enticing.
NEW ISSUE: KOH BROTHERS 3.5YR SGD
NEW ISSUE ANNOUNCED FOLLOWING GOOD INTEREST FROM ROADSHOW
PRICE GUIDANCE: 5% AREA
EXPECTED SIZE: BENCHMARK
Familiar SME name. SGD 136 mio market cap and so a benchmark issue which is 200 mio would be good work and a great accomplishment for the company. Besides they are already running on 3 times financial leverage which is alot (assets of about 700 mio/equity 228 mio). Throw in another 200 mio, and what is the difference ? Oxley still looks worse at 11 times and much more like a bank, if you ask me.
3.5 year interest rate is about 1.2% which gives this bond a 3.8% premium.
But with a 40 year track record in Singapore, anyone who buys this bond will be a sure fan of the company and there is no need to delve too much into analysis.
Even KSH Holdings with 2 years left issued last year at 5.25% for 2.5 years, is trading at 101.90 4.2%.
Thanks again TH,
1. So Noble are going through with their “Perp replacement scheme” eh?? Lest we have short memories …….. less than a 18 months ago their then 8.5% US$ Perp was trading below US$ 0.90 !! And now they are pushing a Perp which has a coupon > 250 bp’s less!! Sign of the hot-headed times we live in I suppose. As regards this raising, I only hope that that Noble’s ethics gives them the response they deserve ………… but that probably will not happen. But I will not be testing the waters on this one. I have seen what happens when the price goes above par………… and how they treat their bondholders.
2. I’ll be interested to see how appealing an issue the Koh Brothers one is?? “Traditional Singapore Company”. I notice quite a few issuers are going for 3.5 years tenor paper now – dumb question: is there something clever vis-à-vis the yield curve that drives this??
All the best TH. Forgive the naïve questions.
Hi JC,
Last traded price of perp before the call was 103 ish. They waited and waited and pounced so they can issue the new one at the 103 spread (and not the 90). Such brilliance !
But at least you know they will not be calling this new one back because it is 50% equity status and will not be downgraded going ahead.
3.5 years for Koh Brothers ?
1. probably so they can retap within the next few months
2. also that the 3-4Y spread is pretty steep at 0.38% which makes the coupon look good
3. perhaps to balance their cashflow projections or financials (so it qualifies as long term liability for longer ?)
I am confused about the word benchmark because for over a decade, the assumption of a benchmark was always SGD 200 mio because it could then go on ahead to potentially qualify for statutory liquid assets on the bank’s balance sheets (which is impossible for Koh Brothers for other reasons, of course).
It seems that benchmark size in this bond’s case is SGD 50 mio but familiarity sells well in Singapore !
NEW ISSUE: KOH BROTHERS 3.5YR SGD
** BOOKS IN EXCESS OF SGD180MIO
** FINAL PRICE GUIDANCE: 4.80%-4.85% [WILL PRICE IN RANGE]
** EXPECTED SIZE: BENCHMARK
** TIMING: BOOKS SUBJECT AT 4PM SG TIME. PRICING LATER TODAY.
More share buybacks for Koh Brothers today.
300,000 shares this time.
Bonds priced at 4.8% SGD 50 mio.
Hi,
On the comparison of the Noble Perp 8.5% and the current 6%, will the reset at 5 years for the 6% perp make a good difference ? Thanks.
Km
New Bond – reset 6% (potentially reset in 5 years time at 8.08%, using current prices)
Old Bond – no reset 8.5% but was trading at ard 6.2% before the call so people who had bought at 103 are the only losers.
Good morning. TH,
I understand that some bid over 1.1/2 Million Singie for a piece of the Koh Brothers issue. And they got nothing! Would be interesting to know how these people allocate lots when they are over-subscribed.
Take care, 8888
Hey JC,
Couldn’t get much info on the client stats although I would personally estimate >75% to PBs.
Not surprised on allocation. I never get any myself because my banker would give her quota to the clients who pay a hefty tip of 101 etc because some clients are not aware that 1 ct in bond terms is alot and assume the coupon is their yield.
Noble 6% USD Perp
100.50/100.60 (5.88/5.86%)
Koh Brothers 4.8% 01/2018
100.85/101.15 (4.53/4.36%)
New Noble 6% USD Perp day closing 100/100.10