SGD Corps : Hall Of Shame Update
I am not sure if folks will find this useful but I thought it would be good if readers got an update of last week’s market freeze and whether the risk asset rally after China’s surprise rate cut would have improved market liquidity for this week given that the Chinese real estate names have seen decent rebounds.
We are seeing Pakistan and Ethiopia in the issuance space and reit loans have been pretty active as well.
Mood of caution in the air even for investment grade darlings like Alibaba and the missing free lunch as their bond prices falter. http://www.businessweek.com/news/2014-11-25/bond-buyers-lose-easy-money-trade-as-alibaba-disappoints
And Pacific Andes gets some negative limelight from subsidiary China Fishery’s financial woes and the company is considering a CNH/SGD/USD bond offering to fund their redemption of their new Peruvian subsidiary’s debt. Pacific Andes is coming out with their own rights issue which should be safe for the bondholders of the Pac Andes 8.5% 07/2017 SGD paper.
“China Fishery in September failed to get noteholders of its Lima-based unit Corporacion Pesquera Inca SAC, or Copeinca, to agree to a deal whereby the business in Peru would guarantee as much as $1.2 billion of debt at the parent level. If a solution isn’t found by March 16, China Fishery may have to repay $520 million of a $650 million credit facility early, and redeem $300 million of its own bonds, S&P said last week.
China Fishery intends to redeem the $250 million of 9 percent Copeinca senior notes “by March 2015 in order to reduce future interest expense,” according to a statement to the Singapore stock exchange released after its earnings report on Nov. 22. It didn’t elaborate.” http://www.bloomberg.com/news/2014-11-24/china-fishery-sets-march-deadline-to-redeem-peruvian-unit-s-debt.html
Comparing prices from last week, we notice that bid-ask spreads appear to be tighter but it does not appear investors are willing to cross the wide prices yet and traders are unwilling to sell at a loss. All prices are unverified, of course.
Good luck !
Is Pacific Andes 8.5% a good buy at current price given the right issue being positive for bondholders? High or moderate risk?
Well, China Fishery Group has a rating of B2/B which is pretty junk and its outlook is negative until it comes to an amicable solution on their Peruvian venture (which I suspect will blow over smoothly once some spokes are oiled).
China Fishery has a USD bond, a 9.75% coupon 07/2019 paper that is trading at 90.5/91.00 (12.49%/12.34%).
Pac Andes SGD 8.5% 07/2017 at 98.25 is 9.25% giving us a premium of 8.13% over the current interest rates which is only 0.43% more than its issue spread whereas China Fishery has widened more.
Why not consider the 9 percent Copeinca notes ?
Cheer up TH 🙂
Many aftermarket bond prices have dropped in the past 2-months but you would notice that there are hardly, really hardly, any 2015-maturity SGD bonds(yield >3%) from local corporate issuers that are trading below 100 . (just about 3-5 at the moment)
The above observation reflects a tectonic shift in investor preference towards shorter-maturity bonds (within 2 years). It is not the End, as long as most 2015-maturity bonds continue to trades above 100.
The recent wider bid-ask spreads is also hinting that investors of longer-maturity aftermarket bonds are also seeking a little more than the underlying coupon in view of the rate upside from 2015.
Therefore, the yield curve for short-maturity bonds is still healthy, while it just got a little steeper (gradient) for those with longer-maturities.
Take care!
Haha, it only means 1 thing.
No margin calls yet.
Well, I wish there was a big correction ala Lehman time. It means another opportunity to get in !
How can we have Lehman when nothing has collapsed ?
It will not be so soon because we need to wait for companies to make payments for their orders and profit warnings etc.
Note we had a year lead time back in 2008.
Now what we need is price stability to return and I believe we can see another leg up in the chase for assets if oil prices stop falling and the ECB to start their purchases next month.
LOL, TH you so mean today 🙂
Dear RedBaron,
When that day comes, we just guai guai exit our bonds (even at prices below par) and switch to properties. hahaa
SGX to launch trading platform for Asian bonds
http://www.channelnewsasia.com/news/business/singapore/sgx-to-launch-trading/1495106.html
only G3 bonds (USD, Euro, JPY),
SGD-bonds will only be included in later stage
http://52.77.202.71/market/market-view-new-asian-bond-trading-platform-is-bad-news/
My RM just dated me for a salad buffet tonight. Maybe bond business is a little tougher now.
Perhaps my dear RM no-budget or KH is kachang puteh. Salad buffet is simple fare but it brings back lots of memories. In reality, I guess this RM really knows me well; Ponderosa and Sizzler were like comfort food to me, when I was young.
Let’s see what insights I can hear from him tonight.
You know you are there when you get EMPIRE bah kwa next year for CNY.
Sir, KH is considered his smallest client. He just passed me some nice calendar dairy last night. It was a nice casual dinner. LOL, I used to bring the girls that I loved to such places when I was a young chap.
He did offer me a LTV 95% fixed-income instrument. 95%!!!!!. hahahaa, wanna guess what is it? I buy you a book if you get it right.
Well, we have heard of 100% in the market now and at 1.88% funding cost too.
95% would be sovereigns – JGBs, Bunds, USTs and SGS.. perhaps HDB.
Thanks for sharing TH, your answers are valid but I was offered something else (exotic, not toxic, i hope)
Something like that, if i understand correctly:
– $1 LTV: 95% from the bank.
– Convert $20 to yuan and lend to the bank’s China branch.
– Bank’s China branch then issue loans to China customers
– I become the proxy for this intra-bank financing.
According to them:
– Low risk because my counterparty is their China branch
– Maturity: as short as 1-year (MOST IMPORTANT FEATURE)
– CNH depreciation risk is hedged and my loan interest is fixed (for 1-year)
– Net yields will be based on my desired duration and entry-date (to price in FX rate & hedging costs), but still much higher than LTV 95% for SGS Bonds.
Can chat further? I heard about LTV 100% when buying cars in the old days because the distributors have fat profits. ($1 Driveaway Deals)
Please enlighten me, what kind of money market instrument can qualify for LTV 100%? I will feel like a unsecured bond issuer if I obtain LTV 100%. 🙂
If you think about it.
If they lend you 95% of the money to lend to themselves, onshore, why don’t they just lend 95% of the money to themselves without letting you profit from it ?
That is because they can use you as an excuse to go and borrow that 95% from the local markets here and then lend to themselves onshore on both sides of the balance sheet.
Thanks for sharing your thoughts TH, yes, all these make sense.
You have a good weekend
Oh, and also the there is no quota for customers