SGD New Issue Review (rehashed) : Olam 5Y 4.5%

I am re-writing this after receiving a few urgent SMS-es that some people may be grossly misled by my comment that Olam is an equal credit to Temasek.

For avoidance of doubt, Olam is NOT AN EQUAL to Temasek and a subsidiary status does not imply a DEBT GUARANTEE, no matter what we can speculate or infer from Temasek’s actions on the company.

A debt guarantee is an explicit undertaking and cannot be inferred from just ownership.

Temasek has 47 known subsidiaries of which 7 are listed. Olam is a subsidiary of a subsidiary, Breedons Investments just like Stats Chippac (Ba1/BB+) is a subsidiary of a subsidiary, Singapore Technologies Semiconductors.

Stats Chippac is rated the highest junk rating we can get, at Ba1/BB+.

I have come across some opinions that Olam is, at best, comparable to Stats Chippac which has 2 USD bonds trading at the following levels.

Stats Chippac 4.5% 03/2018 101.30/101.90 3.98/3.74%
Stats Chippac 5.375% 03/2016 102.625 3.45%

Plotting the bond price of the Olam 6% 10/2022 bond, we note that the bond price has more than recovered from its Muddy Waters attack, on Temasek’s capital stake.

olam 6pc Oct2022

To their credit, the company is cleaning up and have arrested the growth of their leverage.

olam financial leverage

Now they have more than doubled their MTN programme from USD 2 bio to USD 5 bio. I suspect because they have USD 2.845 bio worth of debt  and loans and revolving credit maturing this year (nothing next year). And it looks like they have chosen the bond path to renew all those liabilities to the benefit of rich Singaporeans investors.

I hope Temasek buys some of these bonds too, given that their total shareholder return for the period, which includes dividends, shrunk to 1.5 percent from 8.9 percent in its previous fiscal year.

4.5% would go a long way in helping them claw back some returns !




What was published this morning…….



ISSUER: Olam International Limited
SERIES:   005
STATUS: Direct, unconditional, unsubordinated and unsecured
RATING:  Unrated
FORMAT:  Reg S, S274 & 275 of SFA, Bearer form, issuance off  US$5 billion Euro Medium Term Note Programme
TENOR:   5 years
ISSUE SIZE: Benchmark
PAYMENT:  Semi-annual, actual/365 (fixed)
DETAILS: SGD250K/Euro Medium Term Note Programme/English Law/CDP

Olam is back although it is not the Olam that we knew.

It is Temasek (Olam).

I will not bother to go into detail on parent – subsidiary relationships and debt undertaking because we are all going to assume that Temasek will be there to bail out Olam forever after the steps they have taken for this whole exercise.

So Olam = Temasek = AAA/Aaa/AAA ??? (NOT TRUE !!!!!)

This 4% should be a sell out. Olam 5.8% 07/2019 is going at 4.5% area too. And perhaps the next one will come at 3% handle.

Kris Energy sold like hot cakes and is still in demand all because of Keppel’s measly 31% stake.

Let’s salute Olam with its 58% Temasek stake.


Will embellish more this afternoon when I return.