SGD New Issue Review : United Energy 2Y 7%
*** NEW ISSUE: UNITED ENERGY GROUP SGD 2YR – IPG 7.0% AREA ***
Issuer: United Energy Financing (Bermuda) Limited
Guarantor: United Energy Group Limited
Series: 001
Status: Direct, unconditional, unsubordinated and unsecured Notes
Format: Reg S, S274 & S275 of Singapore SFA, issuance off SGD 1 Billion Multicurrency Medium Term Note Programme
Tenor: 2-years
Initial Price Guidance: 7.0% area
Issue Size: TBD
Issue Date: [●] October 2014
Maturity Date: [●] October 2016
Change of Control: Change of Control investor put at 101% plus accrued interest, in accordance with the Programme
Financial covenants:
– Consolidated Total Equity is not less than US$900,000,000
– Consolidated Total Debt / Consolidated Total Equity ≤1.2x
– Consolidated Secured Debt / Consolidated Total Assets ≤0.6x
– Consolidated EBITDA / Consolidated Interest Expense ≥6.0x
Redemption for Taxation Reasons : Yes, in accordance with the Programme
Use of Proceeds : General corporate purposes and such other purposes as the Group may specify in the applicable pricing supplement.
Listing/Law/Clear: SGX-ST/Singapore Law/CDP
Denoms: SGD250k
Comps:
KRISSP (KrisEnergy) 6.25% 06/17 @ 103.00, 5.02%
KRISSP (KrisEnergy) 5.75% 08/18 @ 100.55, 5.59%
MIEHOL (MIE Holdings) 6.875 02/18 @ 100.50, (USD Yield 6.70%)
Coming out on a day when I wake up feeling like taking it easy and realising that this site’s income for last month was a pathetic 105 bucks – 30 from Google ads, 75 from the banner ad on the side. I was actually surfing the web for dogs that look like Christine Lagarde when news of 2 new SGD bond issues come along …
Thanks to the currency war that the FOMC minutes have turned the world into, banks are quick to bring out the new issues before investors change their minds tomorrow.
When I wrote about up coming bond issues, United Energy stood out as a “highly interesting” issue that would make some of our new local issues LOOK BAD. https://tradehaven.net/market/3-upcoming-sgd-bond-issues-to-note/
But on closer scrutiny, there are reasons why 1. United Energy is trying to raise money in Singapore (instead of their home base in HK) for up to 1 bio SGD and, 2. the coupon is a highly attractive 7%.
The company is 71% owned by one man and his daughter is an executive director. The owner, Mr. Zhang is also the Deputy Chairman of China
Minsheng Banking Corporation Ltd.
They have 2 geographical areas of operations – Pakistan and China.
At first glance, the accounts look decent on the summaries. That is until a friend suggested I take a closer look at their annual report which is not audited by any of the Big 4 audit firms.
Link to annual report : http://www.uegl.com.hk//UserFiles/EW00467%20UEG%20Annual%20Report%202013.pdf
First oddity is that their balance is buoyed to a very heavy extent by INTANGIBLE ASSETS.
If u strip out the “Intangibles”, the Net Assets becomes just less than 100 mio HKD.
But then again, they are great friends with the Pakistan government.
” During the year under review, the Government of Pakistan agreed to grant approximately 900 km2 of exploration areas to the Group at no cost…”
Recent announcement on 30 Sept, I like the “may or may not materialise” bit which sounds Intangible.
And their share capital account has quite a bit of this Accumulated Losses thingy that I do not quite understand.
And their net capital is only about HK 130 mio.
I guess I answered the question of why they are paying 7%.
Why are they issuing in Singapore ?
“Singapore’s bond market is getting a boost from Chinese borrowers tapping the island’s millionaires for record amounts at rates almost 30 percent cheaper than home.
Private investors in Singapore took almost all of the S$380 million ($299 million) of local dollar-denominated notes sold by mainland Chinese companies excluding banks last month, according to people familiar with the matter. Offerings in the currency by all Chinese borrowers rose to S$1.7 billion this year, almost double such sales for the whole of 2013, according to data compiled by Bloomberg.
China’s issuers are increasingly targeting Singapore’s surging millionaire base to raise funds amid record borrowing costs at home. Debut issues from offshore companies rose to 10 in 2014 compared with none five years ago, supporting a market that makes up just 20 percent of bond sales in the Asean region compared with about 32 percent each for Thailand and Malaysia.”
Anyone following the AGILE scandal ??
Given main asset of united energy is in Pakistan.. There’s single asset risk.
Pakistan sovereign is rated (CCC+) and the usd 2 year bond is trading ard mid 6%.. That’s the key reason for 7% pricing
Agreed.
Coupon speaks and its a fair one.
Better than some banks who push off junk onto unwary but captive customers and tell them its gold.
Just met a poor chap who bought MICLYN at 104 !!!
UNITED ENERGY GROUP 2YR SGD
– Books S$350MM
– Final price guidance 6.90% (+/- 5bps) (will price within range)
– Expect final issue size of S$75MM to S$100MM
– Timing: Book subject at 3.45pm
6.85% SGD 100 mio
thanks for the article once again tradehaven…reading this is abit concerning but im already long on it.
figured 2yrs risk and a good headline coupon vs 30yrs of the oilfields in operation and never stopped producing thru all that political turmoil, as well as pakistan being gas-deficient. decided to just go for it! anyway, see it quoted higher this morning…100.10/100.40
Look at the owner. I guess that is why the control clause is thrown in.
Opening price 100.10/100.20 but now 99.75/85.