SGD New Issue Review : Otto Marine 2 Year 7%
NEW ISSUE: OTTO MARINE SGD 2Y ISSUE
Issuer: Otto Marine Services Pte. Ltd.
Guarantor: Otto Marine Limited
Status: Senior Unsecured Fixed Rate Notes
Format: Reg S, Bearer, Section 274/275 of the SFA, issued off the S$500 million Multicurrency Medium Term Note Programme
Issue Ratings: Unrated
Tenor: 2 years
Initial Guidance:7% area
Payment:Semi-annual, actual/365 (fixed)
1. Minimum Consolidated Total Equity of US$250,000,000
2. Maximum Consolidated Net Borrowings to Consolidated Total Equity of 2.5x
3. Maximum Consolidated Secured Debt to Consolidated Total Assets of 0.6x
4. Minimum Interest Coverage Ratio of 2.5x, subject to Interest Reserve Account (see para 1 under Appendix of the draft Pricing Supplement attached)
Interest Reserve On Issue Date, to be funded with an amount equal to 1 Account: coupon payment. If the Guarantor does not meet the required minimum Interest Coverage Ratio, the Guarantor shall deposit an additional amount equal to 1 coupon payment, which can be withdrawn once Interest Coverage Ratio is met. The Interest Reserve Account will be pledged
to the Trustee for the benefit of the Noteholders
(see para 1(iv) under Appendix of the draft Pricing Supplement attached)
Redemption at Option of Noteholders upon Cessation or Suspension of Trading of Shares: At par, see para 2 under Appendix of the draft Pricing Supplement attached
Redemption at Option of Noteholders upon Change of Control: At par, in accordance with the Programme
Redemption for Taxation Reasons: Yes, in accordance with the Programme
Details: SGD250k denoms / Singapore Law / CDP / SGX-ST
– New Otto Marine SG 2yrs announced post successful SG roadshow.
– Initial price guidance: 7% area
Vallianz 7.25 2016: 102.50, 6.07%
– Otto Marine is an integrated offshore marine group with a core business of owning and operating a fleet of offshore support vessels (OSVs) (comprising PSVs, MPSVs, AHT/AHTS, accommodation work barges, utility/work maintenance vessels, tugs and barges), and a complementary shipyard in Batam, Indonesia.
– Young diversified fleet – Focused on supporting the entire oil and gas project life cycle through the ownership, chartering and management of OSVs. The group currently owns a fleet of 59 vessels, with an average age of below 5 years.
– Focus on high growth & cabotage-protected area – Key partnership with the GO Marine Group to develop strong local knowledge in markets like Indonesia and Malaysia gives greater access and allows the Group to capitalize on our growth.
– Access to Australian markets – Enjoys access to the Australian oil and gas markets through Go Marine’s wholly-owned subsidiary, Go Offshore Pty Ltd
– Healthy order book – The group has long term cashflow visibility from securing multi-year vessel charter contracts. As at 30 June 2014, the group’s offshore chartering orderbook stands at approximately US$400 million, with an average contract tenor of 3 to 5 years. In addition, the group’s healthy order book is strengthened by its long-term relationships with oil and gas majors and tier-1 oil and gas contractors.
– Favorable sector fundamentals – Oil and gas supply growth is expected to come from growing offshore production. Demand for OSVs will continue to grow as global offshore E&P capital expenditure increases.
A nice headline to kick start a new bond issue for banks will only bring out the bonds on good news ! and their liability ends 2 weeks after settlement.
14 Jul 2014 : Otto Marine wins US$404m worth of contracts in H1 2014 http://www.businesstimes.com.sg/breaking-news/singapore/otto-marine-wins-us404m-worth-contracts-h1-2014-20140714
USD 404 mio is more than their market capitalisation of SGD 312 mio, a number that has seen better times when their share price was trading at 47 cts back in 2010 (and 51 cts in 2008) instead of its 7 cts today.
Otto Marine had counted Stanchart as one of their substantial shareholders till 3Q13. Their share price dipped to a historical low back then as they fought a contract dispute which is the risk for such companies that depend on chartering and maintenance services as their main business.
Still they operate one of the largest shipyards in Batam and is majority owned by a Malaysian tycoon, Yaw Chee Siew (61.86%). Covered by only 2 analysts, one calling for overweight in their shares (note this analyst research company does not have a single underweight in his call list).
And they are heavily indebted indeed, even after divesting 2 vessels to bring that debt down last year. Financial leverage ratio of 4.5 times (Swiber is 4.4 times, Vallianz 4.6 times).
That is why the COVENANTS ! Because if we let them borrow up to the SG 500 million that their MTN programme allows, they would be up to their Eyeballs like OXLEY (11.3 times, God Forbid !).
This is how I see it.
When your operating income is running at 20 million (they just recently turned profitable again) and you run and issue say, 200 mio of bonds at 7%, that would make your interest expense 14 mio per annum just on the bonds alone, and there are other borrowings to take care of ?
Project and contract dependent services companies like Otto and Swiber and gang, all run that risk – when the projects overrun in cost and time and contracts get cancelled.
Yet, I better keep my mouth shut because Vallianz is 102.50 these days so there is absolutely no reason for Otto not come in under 7%, 10 times oversubscribed and happy investors all round. For the savvy investors, perhaps ask the lead banks to buy your Vallianz paper at 102.50 and snag some of the new Otto ? And lets see if a 250k or 500k order to sell Vallianz at 102.50 will move the bid lower or much much lower ?
OTTO MARINE SGD 2YRS – BOOKS IN EXCESS OF S$70MM
Hi tradehaven.. thanks for the updates again. Btw mind i ask what is the issue size? thank you
Issue size: Capped at SGD75M
yes! 5m of debt payment a year for a company that makes less than 20mio a year with short term debt of 236m…well done!! my kopitiam downstairs is worth 2m, makes 10m a year, i wont even lend him a single cent.
anyone recall that their old bond matured in 2013 was trading as low as 80 handle at default level.
Your kopitiam coupon is 500% ?
24 hr kopitiam ?
Even if 24 hour means must make >1k per hour to make 10 mio/annum.
You should securitise the kopitiam and sell debentures paying 100% p.a. then keep the rest. Use the money, buy another kopitiam and do the same.
Soon, you can list on Catalist. Then mainboard !!!
OTTO MARINE SGD 2YRS
– Order book is now over 100MM SGD
– Final guidance 7% (the number)
– Issue size capped at 75MM SGD
Final size SGD 70 mio.
Final coupon 7%.
high 5 tradehaven.. on our way to be millionaire kopitiam owners!! best partner ever.
I am serious !
They are even securitising strawberry harvests now.
Trouble with kopitiam business is that income will have to be declared and above board.
And also high risk – Look what happened to Banquet which went bankrupt or something.
OTTO MARINE SG 2YRS- STATS
Books in excess of S$100mm, 30 accounts
By Investor Type:
Take note that after this bond issue, there is a chance of a covenant breach of their Minimum Interest Coverage Ratio of 2.5x which may not happen because their income stream is expected to improve.
Any idea what’s the LV given out for this?
Not aware of lv for this one.
New Otto Marine 7% 2016 99.85/100.10
Hmmm… 99.50/85 now.
Very busy 250k trades moving market.
99.50/85 and signing off for now
dear TH and fellow bond investors. Which private bank provides the best and aggressive financing for bond purchase? I have been using Citigold for years but selection of bonds with financing is very limited. Only NOL bonds with only 50% financing for the last few months. Any other good banks to recommend? Thanks.
Citi is not active in SGD bond space which could be a good thing because they are saving you from certain folly ?
I am jesting.
I believe that most aggressive financing also comes with most risk of margin calls and I do not like the banks that hold investors captive as well.
You may try the new players in SGD space because they would be the most hungry for business and willing to negotiate on the fees as well.
If you are talking about unrated bonds, then you should go for the local types of banks ie. Singapore and Malaysia.
For rated bonds, most of the foreign private banks (other than Citi) should be decent.
Hi tradehaven, any views on the dyna 4.75 new issue? Thanks!
Otto Marine 7% closing price 99.00/99.70
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
Hi Tradehaven, need your adv on the latest announcement