SGD New Issue Review : Swiber Holdings 3Y Sukuk (Updated)

NEW ISSUE: SWIBER SGD 3 YR ISLAMIC TRUST CERTIFICATES***

Issuer:  Swiber Capital Pte. Ltd.
Obligor: Swiber Holdings Limited
Wakeel: Swiber Holdings Limited
Status:  Unsubordinated, Unsecured Trust Certificates
Rating: Unrated
Format: Reg S, S274 & 275 of Singapore SFA issued off the USD500mn Multicurrency Islamic Trust Certificates Issuance Programme
Tenor:  3 Years
Issue Size: TBD
Payment:  Semi-annual, actual/365 (fixed)
Use of proceeds:In accordance with Programme, mainly for refinancing existing borrowings and remaining for financing working capital and general corporate purposes of Swiber Holdings Limited and its subsidiaries
Details: SGD250K/Multicurrency Islamic Trust Certificates Programme/Singapore Law/CDP
Listing:  SGX-ST
Series Shariah Adviser:RHB Islamic Bank Berhad
Timing:   This week’s business, as early as today

*** SWIBER HOLDINGS LTD 3Y SGD SUKUK – UPDATE 1 ***
–    New Swiber SGD 3Y announced
–    Deal is anchored
–    Initial Guidance at low-mid 6s

Comps:
Swiber Capital 6.50% 8/2018 at 99.80, 6.56%
Swissco 5.7% 4/2018 at 100.50, 5.54%
Falcon Energy 5.5% 9/2017 at 99.80, 5.57%
ASL Marine 4.75% 3/2017 at 100.30, 4.62%

Stock price at a 5 year low.

swiber stock price

Expecting to make an operating loss this year.

swiber operating loss

Gearing remains dangerously high with financial leverage at 4.4 times (giving Olam a fight).

Debt/Equity at 174% !!

Good thing is that their debt mostly falls due in 2016 -2018.

2015 SGD 95 mio
2016 SGD 305 mio
2017 SGD 254 mio
2018 SGD 150 mio
Perp SGD 80 mio

This company has 2 borrowing programmes – normal one for SGD 1 bio and islamic one for USD 500 mio.

For a company that runs a market cap of SGD 242 mio, that is a lot of money to be borrowing. They are currently running about SGD 740 mio in bonds, including their 3Y  CNH 7.75% 450 mio issue done last month that is yielding an estimated 8.64% now, and another SGD 150 mio off their sukuk programme.

Just when I pulled out the list of 6% bonds for the Tee Land deal.

Let’s take a look at them again. Wow, Swiber and Vallianz wins !

high yield sgd

Not my favourite company and not high yield enough for the risk . In addition, more than half their bonds are under 100 and few ever trade above it. Bad track record and very unfriendly to bond holders.

Unless you pledge your Swiber shares, that will not be paying dividends, for a loan to buy the bonds and get the PB rebate thrown in as a free gift because you are a big client, there is little justification to buy.

 

Postscript : A little more about Sukuks.

We typically should like the idea of sukuks more than senior bonds because the traditional sukuk bond always has a reference asset tagged to it and we like to think it is “secured” in that sense.

However, this has been diluted in the new world that makes sukuks alike senior bonds and no different although it has yet to be challenged in the courts during a default because the market does not appear to have a precedent case for such an event.

I like to take comfort in that it is possible for a sukuk to be superior to a senior paper but I cannot be sure and thus believe it is prudent to just treat a sukuk like a  normal senior bond that Shariah funds can buy.