SGD New Issue Review : Halcyon Agri SGD 5 Year NC3 6.75%

*HALCYON AGRI SGD 5NC3

– New Halcyon Agri SGD 5NC3 announced post successful SGD roadshow in SG. Deal is anchored.
– Step up margin: 2.00% if not called on the first call date in year 3.
– Initial price guidance: 6.75% area.

– Comps:

Olam 4.25 2019: 100.20, 4.20%
Wilmar 4.1 2019: 102.25, 3.55%
Amtek 6.9 2019 NC 2014: 104.90, 4.91%

Punter’s stock during its IPO days, rising 200% ($ 1.11)  post IPO ($ 0.36) in 2013.

Halcyon Agri to Buy Lee Rubber Unit Anson Co. for S$450m
July 11 (Bloomberg) — Halcyon to buy rubber factories for s$450m in Indonesia.
• Acquisitions more than double capacity to 748,000 tons
• Not currently intent on equity fund raising
• Purchase to be funded via internal resources

“The acquisition will be financed through a combination of internal resources, co-investment from Angsana Capital Ltd (wholly owned by CEO, Mr Robert Meyer), and syndicated loan facilities with Credit Suisse AG, Singapore Branch and DBS Bank Ltd as joint mandated lead arrangers and/or the issuance of debt securities. Halcyon Agri does not currently intend to undertake an equity fund raising exercise in connection with the acquisition. The transaction is subject to approval by Halcyon Agri’s shareholders at an Extraordinary General Meeting to be held in early August 2014.” http://halcyonagri.listedcompany.com/news.html/id/415923

Good timing for acquisition as Rubber prices hit 5 year lows and as mentioned in the above announcement, it is Halcyon’s 4th acquisition since listing last year making them the 5th largest producers of TSR (Technically Specified Rubber) in the world and Indonesia’s 2nd largest producer and exporter.

There is little to analyse in their financials given it is their maiden year.

This Anson acquisition takes them onto the big stage but blows out the balance sheet as Anson, valued at 450 mio, is a larger company that Halcyon’s 340 mio market cap. And the concentration of shares lie in the hands of a few, which will be boosted after the issuance of new shares to the CEO’s company, Angsana Capital, for their stake in the joint investment which will give CEO Gunther the controlling interest.

Ambitious company going places and that is the only reason why they would be issuing bonds backed by the largest bank of Singapore who would not be selling distressed corporate debt to customers, bringing out bonds only when the issuing companies are riding on a high note.

And they are paying up at 6.75% and not ungenerous about compensating for the high risk nature of the business, a bit like Geo Energy, I would suppose with their comparable coupons.

Geo Energy 7% 01/2018  pricing at 99/99.50 (7.33/7.16%)

If I had to rank the recent 3 high yield >6% issues (we leave Kris Energy out because they use the Keppel stake unfairly to their advantage and it is grave falsehood if people assume that Keppel would be there to bail them out), I would likely pick Perisai, Halcyon, Geo Energy, in that order.

Would be a well received issue. PB rebates high enough compared to Hyflux.

Good Luck !