SGD New Issue Review : Pacific Andes Resources Development 3Y 8.75%
PACIFIC ANDES RESOURCES DEVELOPMENT SGD 3YRS
– New Pacific Andes Resources Development SGD 3yrs announced. Deal is anchored.
– Initial price guidance: 8.75% area
– Comps:
Midas Holdings 5.75 2017 – 100.20, 5.67%
Cenchi 6.5 2017 – 101.25, 6%
Credit Highlights:
– Pacific Andes Resources Development (PARD) is principally involved in the development, marketing and distribution of fish and fishery products. PARD integrates the entire supply chain, sourcing frozen seafood products from oceans all around the world. Besides providing a full range of at-sea transportation and logistical services to fishing companies, through their subsidiaries China Fishery Group Limited and Copeinca, PARD also operate one of the world’s most sizeable fishing fleets and fishmeal processing facilities in some of the world’s most important fishing grounds.
– PARD is one of the world’s largest fishing companies with substantial presence in the PRC and diversified customer base abroad. Being one of the largest frozen fish supplier to China, PARD is well positioned to leverage on China’s growing fish consumption.
– PARD also has a strong presence in the fishmeal processing sector in Peru and access to controlled fishing grounds with abundant fish.
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I suspect the above credit highlights are slightly misleading and not referring directly to Pacific Andes Resources but the operations of the entire group including China Fishery and Pacific Andes International.
Still, this is one of the highest coupons we are seeing in a year. We only had 2 issues last year that gave 8.5% and they were Enviro-Hub 2 years and Miclyn Express Offshore, also 3 years.
Rickmers gave us 8.45% for a 3 year bond earlier this year.
Back to Pacific Andes Resources. Together with China Fishery, both companies are Singapore listed subsidiaries of Pacific Andes International Holding (1174 HK) which is listed in HK.
All 3 are seeing floundering share prices as profits at the parent dived 49% for the first half of their fiscal year that ended in Mar 2014.
The entire group is undergoing a capital and debt rationalisation exercise that started in Mar this year, after a series of financial and business set backs, hit by ethical fishing concerns and fishing rights, weather concerns with El Nino striking at the core of their fishing operations in Peru, increasing competition from other fish suppliers and funding issues that affected China Fishery on their takeover of Copeinca ASA last year. http://www.undercurrentnews.com/2014/07/07/pacific-andes-backed-us-processors-profit-slides-20/
Thus we are seeing divestments of assets in the backdrop of lowered profits, which are nonetheless, still profits.
China Fishery, a fellow subsidiary is rated B2 (Stable) by Moodys in Apr this year although S&P has not removed their negative watch issued in May 2013 on their higher B+ rating. Fitch has the company at BB- and negative watch as well.
China Fishery has an outstanding bond issued in Jul 2012 – CFG Investment USD 9.75% 07/2019 for USD 300 mio.
The bond has 5 years left to run and is trading at 97.75/98.75 (10.335/10.073%), or a credit premium of 8.15%.
My initial reaction was one of surprise that the coupon Pac Andes Res is on the high side, given that many a lesser company has been issuing at ridiculously low levels and this is a more established company that can count the Norwegian oil fund as a small investor.
8.75% delivers a credit premium of 7.7% over the 3 year interest rate which is fair value and just 0.45% shy of CFG’s 8.15% 5 year premium.
As a credit, Pac Ande Res is not as highly leveraged as its parent, Pacific Andes Intl. The company is running on 2.7 times financial leverage and 100% debt/equity compared to its parent running at 4.5 times fin lev and 245% debt/equity.
The group has resolved to bring their leverage down which is assuring compared to other bond issuing corporates.
It is a largely family owned business and a household name in the local stock market that has been around for a while and I daresay we will see a huge take up of this bond in the private banking space, especially with the enticing PB rebate.
Good luck !
Pac Andes Books > 350mio.
Anyone knows how much LV this bond gets ?
Hearing about 55% LV from local bank.
Hearing LV of 55% from local bank.
Wow. That is decent.
Book in excess of S$1bln
hearing dbs pb themselves not even recommending this name (thats why no selling pt report on this). =P v strong conviction i see…
Then why are they giving 50% loan ?
giving 55% LV and recommending the name is different thing/team.
Level of LV given is decided by risk team.. so depends on rating/structure etc and most importantly.. relationship with the bank ie dbs. if the issuer relationship wif dbs is poor.. the LV can be lower than those who are bread n butter clients wif dbs.
recommending of name is usually decided by the advisory team in the private banking sector. depends on their view etc. if u call up ur rm and ask them what is the good thing about this deal.. they probably cant find a good reason other than the 8.75 coupon and the 55% LV. they themselves might not know the risk u are getting into… =P
Then they should have brought it out yesterday and Halcyon today to maximise the success rate.
Pacific Andes is a tougher name to sell so perhaps timing wise… they can only launch it on a good day which usually involves a strong equity day or a day after a super junk deal like Halcyon does up (+$1.25)… launching Halcyon first is strategy since its a easier name to sell being a relatively well known name in sgx and not too mention they gave 70% LV to further ENSURE that the deal will do well in order to lay the stage for Pacific Andes.
Anyway, all conspiracy theory.. doesnt mean much… buy at your own risk!
PACIFIC ANDES RESOURCES DEVELOPMENT SGD 3YR
– Book at S$2bln
– Final price guidance at 8.5% (the number)
– Issue size capped at S$200MM
– Timing: Today’s business, book is subject
2 bio is enough to buy out the entire group of companies ?
yea.. all padded orders. hearing allos gao gao.. everyone got what they want… nobody starved.
Pacific Andes Sells 92% of S$200m 3y Notes to Private Banks
• By investor type:
• Private banks 92%
• Fund managers, banks, others 8%
• By Geography:
• Singapore: 85%
• Hong Kong and others 15%
Morning Price for New Oversubscribed Pac Andes
99.50/99.70
still above cost price of 99.25.
Hi trade haven, what do you mean cost price by 99.25? Aren’t bonds you get from ipo @ 100 and 0.2 to 0.4 service charges?
Different for different customers.
I am not certain but surely if you are the owner of the company say, and you buy your company bonds, they will be obliged to give you the PB rebate back ? Service charge is not the usual practice but a good reason to allocate to a customer who is willing to pay the charge and a customer who isn’t.
Secondary Market Prices
Halcyon 6.5% 07/2019 100.25/100.75
Hyflux 4.8% 2yNC Perp 99.25/99.70
Pacific Andes 8.5% 07/2017 99.98/100.10
Secondary Levels
Otto Marine 7% 08/2016 99.25/99.75
Halcyon 6.5% 07/2019 100.75/100.90
Pac Andes 8.5% 07/2017 100/100.25
Hyflux 4.8% Perp NC2 99.80/100.00
I am new to those min 250k bond. Is it a safe investment to buy all this bond. Such as pacific Andes at 8.5%
Replying to that would be asking me to paste CSM (Come Sue Me) over here.
It depends on your risk profile and how you would like to position yourself.
Typically bonds are safer than their equity for the same name.
As for whether Pacific Andes is safe ? I doubt your banker would know the answer too.