New CNH Bond Warning : Swiber 3Y CNH

Issuer:  Swiber Holdings Limited
Issuer / Issue Ratings: Unrated
Status:  Fixed Rate, Senior Unsecured Notes
Format: Reg S Bearer form off the S$1,000,000,000 Multicurrency                         Debt Issuance Programme
Denomination: In the denomination of CNY1,000,000 x CNY10,000, to be  represented by a permanent global note
Tenor: 3 Year
Currency: Offshore CNY
Issue Size:   CNY Benchmark
Price Guidance: 7.75% area
Selling Restrictions:   Reg S; Singapore (Sections 274 and 275 of the  Securities and Futures Act (Cap. 289))
Clearing Systems: CDP with linkage to Euroclear/Clearstream
Listing: SGX-ST
Governing Law:   Singapore Law

It is a Chinese holiday today, Mid Autumn Festival.

Swiber tries to borrow CNH in a new bond issue and they have to rush because soon Singaporean investors will have to “opt in” as accredited investors to  buy bonds and the people who buy Swiber are Singaporeans of course (86% of their last issue went to Private Banks and 97% of the issue was sold to Singapore based investors).

Swiber share price chart.
swiber share price

Near its 5 year low.

Analysts rate the stock Hold (2 – Maybank/KimEng & OCBC) and SELL/REDUCE (UOB/KayHian & CIMB).

Results have been weak and the company is expanding quickly in Latin America – the land of high defaults.

It DOES NOT mean buy the bonds !

Swiber is growing – yes. It’s interest on borrowings is up 94% on the year, it’s trade receivables up 28% on the  year. The debt situation looks stable but depends on how much more they will borrow for the rest of the year although their MTN is SGD 1 bio (currently SGD 640 mio used), they have another Sukuk MTN for USD 500 mio (SGD 150 mio used).

Yet this is one of the highest coupons we are seeing in CNH space this year. I can only find 7 CNH bonds issued higher – 361 Degrees, Lai Sun Garment, ITNL INTL, Times Property, ESUN Intl, Modernland China and Trade&Dev Bank Mongolia. Out of these 7, only 5 are yielding higher than 7%.

Singaporeans probably think they are in for a windfall and I am hearing overwhelming demand for the bonds with books swelling past half a bio so far.

The trouble with these bondstoo, from my experience, is that banks have limited ability to buy back much of it when folks sell which is why private banks are a good place to park them because retail folks are expected to suffer in silence when the bids dry up. Swiber has quite a bit of bonds out there already (SGD 790 mio compared with Ezra SGD 620 mio and Ezion SGD 650 mio) and if anything, for me, the liquidity risk is too high.

Good luck.