Singapore Bond Market Digest : Winners and Losers
Some market statistics for us to chew upon.
There has been approximately 147 new SGD dollar corporate bond issues in 2014 and 138 new issues in 2013.
Extracting those that are trading under 99.50, to allow for margin of errors in the prices, I compiled this list of 2013 and 2014 papers that are “underperforming” and ranked them according to their losses.
I found that 42 (29%) of the 2014 issues are trading under water, i.e. trading under 99.5, compared to 32 (23%) of the 2013 issues, assuming that the reference prices I used are accurate enough.
We note that, invariably, these are those smacked down O&G names with some, recently issued as well.
But in the list, we have the HDB, CDL and supranationals, as well, reflecting the higher short end, 1-5 year, interest rates over the past year
My first thoughts are that it is not that bad at all.
Nothing under 90 bucks which means we have no margin calls to worry about.
As to whether the prices work, I am not sure as I am hearing that some banks are full up on some names and thus there is little liquidity left on the bids while the offers mostly work.
If we go back to last year to the last time we had general market weakness, some of the perpetuals were trading under 90 bucks and we had Tata Steel at a low of 80-81 bucks when it is a respectable 96 now.
Thus, it is no wonder that Koh Brothers, Mencast, Marco Polo and gang are opting for share buybacks this week instead of worrying about their bonds. The shares offer better value.
And none of them are too concerned as far as 2015 is concerned because there are not that many maturities for the local corporate issuers, for the first half of the year at least.
*Sorry for the duplicates in some of the issues.
In 2015, we will have 3 perpetuals with call options – Swiber 9.75% to call SGD 80 mio, Ezra 8.75% for SGD 150 mio and Ezion 7.8% for SGD 125 mio, both in September.
I reckon September 2015 would be the month of reckoning with chunky maturities out of Oxley, Ezra, Swiber and Ezion and I have a bad feeling that the new bond trading platform will not be ready by then.
I shall leave with the list of best performing bonds for 2013 and 2014, bonds that have appreciated 3% or more, noting with glee that Semcorp perpetual is there ! (If you guys are reading this, referring to friends who had spoken to me last year, you know you owe me lunch !)
Qualifier : Prices are based off our gauge of market levels and are prone to error especially under the currently strained market conditions.
Thanks for the article… nice to have in a single table the 2015 maturities so I can try to look for under-12-month investments
Haha. Make sure you trade 4 decimal places.
Love your assessment on the Spore corporate bond market! Is there a website I can subscribe to in order to keep track of the Spore bond market pricing?
Not sure, Vincent.
SGX is working on something though – a bond trading platform that will be rolled out next year. http://www.channelnewsasia.com/news/business/singapore/sgx-to-launch-trading/1495106.html
Hello TH,
Great post. Banyan Tree also has a call option on their 6.25% p.a. paper in May – interesting too see if they will call (done prices hovering a tad above the call price at the moment).
I note that Swiber is the “underperformer of the underperformers” – I am a tad perplexed as to why Swiber isn’t currently buying back some of its non-perpetual near-maturity sub-par debt – e.g. the 6.25% paper due to mature next June, now trading below S$ 98-. Swiber are sat on proceeds from sale of their share in the Kreuz sub-sea business, more than sufficient to cover the US$ 95 million due.
2015 will be an interesting “maturity and calls year”. I’m wondering how many of the O&G service companies will need to raise funds in order to meet maturity pay-out obligations (Swiber?, Nam Cheong), or to avoid very high/punitive coupon levels for their non-called perpetuals (Ezra, Ezion, Swiber). And if these companies order books start to see rescissions – e.g. as per ASL’s announcement of yesterday – it will focus minds even more.
Take care, JC8888
Hi JC,
Swiber stock price -58.8% since high on 2 Jan.
Swiber bond prices all <10% lower.
Swiber is smart not to do anything because they have US 309 mio secured debt to be repaid in the next 12 months and another US 72 mio unsecured (bonds) to repay, according to latest financial statements filed with the SGX.
Companies that rely on rolling debt to repay debt like Swiber and gang will run into difficulties when the market freezes up but we will only know after 1H15.
Their cash balance has fallen to US 111 mio (2013 US 162 mio) and receivables are higher.
Swiber has become a holding company these days i.e. a shell with no assets which makes it a big sitting duck because their subsidiaries have the assets and more debt too !
What they need to do is to get their middle east associates to inject that bit of confidence with a capital injection perhaps ? and then they can go back to their borrowing spree again.