SGD New Issue Review : Kris Energy 4 Year 6%
KRISENERGY 4YR SGD
NEW 4 YEAR KRISENERGY SGD BENCHMARK ANNOUNCED
PRICE GUIDANCE: 6% AREA
MINIMUM CASH COVENANT INCREASED TO USD20MM – COVERS MORE THAN ONE YEAR OF DEBT SERVICE OF NEW SGD NOTES & OUTSTANDING 2017 BONDS
I have to apologise because I saw this announcement earlier today but clean forgot about it which does not mean I believe it is not worth mentioning.
As it is, the books are at 1.6 bio and the issue size will be fixed at SGD 200mio and at a coupon of 5.75%. For those who are interested, their MTN programme is for SGD 500 mio and they have used up SGD 330 mio in 2 months.
Still banking on Keppel’s 31% stake, I guess there is nothing more to comment on because the company is new and unproven. But PM Lee did singled them out as an impressive company last night in the National Day Rally speech.
My previous opinion on their 3 year note holds. https://tradehaven.net/market/sgd-new-issue-review-kris-energy-3y-6-5/
They are also warning us not to expect miracles with convenant “- Consolidated EBITDAX / Consolidated Interest Expense ≥ 1.5x until 31 Dec 2015, and ≥ 3.0x thereafter”. Meaning we should not see results till end of next year. Then again bondholders are not shareholders.
The old bond Kris Energy 6.25% 06/2017 is trading at 102.20/102.90 5.87/5.12%.
It is a mighty expensive paper if you ask me but I am hearing that private bankers are hawking this like there is no bond left on the street.
Good luck.
Puzzles me why a company with 4 year losing streak (going on to 5 from the looks of 2H14 results) isnt hauled up on the name and shame SGX watch list which has a 3 year losing streak condition to be included (http://rulebook.sgx.com/net_file_store/new_rulebooks/s/g/SGX_Mainboard_Rules_December_6_2007.pdf)
The EBITDAX (X stands for exploration cost which is the killer) thats the industry reporting norm for exploration firms sounds the likely reason but for bond holders there is really not much upside considering the p&l related covenants only kick in end 2015 and the yield on offer is not spectacular given the numbers prima facie. “Discovering Hidden Value” is the one of the tag lines in the investor materials published; but from the looks of this 2nd issue, there isnt much value to be uncovered in the eventual tight pricing (priced @ 5.75%; low 5% yield after taking into account commissions).
Hypothetically speaking, unless explicitly and clearly stated in the bond indenture that there is a full guarantee from the name sake parent in respect of the bond payments, I dont see a need for such a steep pricing discount.
“Discovering Hidden Value” ?? Is more applicable to stock price, no ?
The bond coupon has already priced in a hefty, hefty premium.
Is there a “change of mind/control” clause in case Keppel exits ?
New Kris Energy 5.75% 08/2018
100.42/100.50
and this is not a joke.
Kris Energy 5.75% 08/2018 100.35/100.50 5.65/5.61%