Singapore Equity and Bond Market Buzz and Round Up
Bond markets paralysed for the week ending on a jittery note as Swiber and Vallianz announced a suspension of their stocks and bonds on Friday.
Of all the issues, Swiber and Vallianz would appear to be in the list of precarious names with their huge debt load and financial leverage ratios.
Initial rumours were of a rights issue but whispers of a new contract are emerging over the weekend which should sooth investor fears if it materialises and provided the quantum is sufficiently “material”.
The chances are that it shall not make much of a difference in the medium term, whatever good news we shall glean because the fact is that business will be bad going ahead for offshore O&G as we have daily headlines of rigs being retired en masse around the world. http://washpost.bloomberg.com/Story?docId=1376-NGHD156TTDSP01-61SF6RTQED65MV46BGRM5O1DT1
Thus an industry wide repricing of credit cost will continue to plague the highly illiquid markets where bids are largely absent although desperate sellers have not surfaced in a major way, as yet.
Indeed we have Swiber’s 9.75% senior perpetual still priced above its June 2013 lows which is a good sign but definitely not encouraging enough for eager buyers to snap up offers. As a qualifier, I suspect there are not many trades in this paper, if at all, at the market prices.
In the past week, we had only 1 set of bad news out of Liongold, issuing a profit warning for their half year closing. Before that it was mainboard listed Technics Oil & Gas telling investors to expect losses.
Other stocks have it much better with the Falcon Energy’s offer to takeover CH Offshore which sent both their share prices higher but did little for the Falcon Energy 5.5% 09/2017 (callable 09/2016 at 102.75) bond as we should be expecting more fund raising activity if the deal transpires. Falcon Energy shares are still trading 34% lower from 3 months ago.
M&A activity has broken a 4 year highs with 119 deals registered for this quarter. The last time we saw such levels of activity was back in 4Q10. The volume numbers are much smaller in the smaller deal sizes but premiums paid are the highest since 2011.
I noticed that high deal counts often end the subsequent quarter in tears just from my casual observation.
Some counters are still in free fall although the worse was over by Tuesday where I had brokers complaining to me of waves of margin calls which were mostly met without much resistance or duress. The market also enjoying the highest number of company buybacks in the year with 16 companies buying back stock on Monday, with Keppel Corp showing their hand in the later half of the week (for the first time this year).
The buyback was pretty much in vain for SATS which slid to a new low despite their consistent buying on 52 occasions this year , along with Hyflux (last buyback 7 Nov).
Nonetheless, the few number of new lows look promising even though I am sure there will be some nasties in store for us next week given that the US markets closed on a 6 week low last Friday, for all the mostly decent economic data that we have been seeing, on account of just the free falling oil price.
Bond holders can heave a sigh of relief at this because the stock losses have not translated into massive losses in bond prices, that could perhaps be attributed to the temporal loss of liquidity in bids and thus, a deadlocked market.
I prepared a list of stocks which have suffered at least 20% losses in the past 3 months and their latest bonds issued in 2014, leaving out those who had issued before this year.
I would not be expecting bond buybacks anytime soon, if you ask me.
Swiber did get a USD710m contract, announced this morning: http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementLast3Months&F=TD3MXKKL4QCJNH25&H=13dd239d12c2527430df1dbcec92b8663099d6c18d656b9f2e91658eaa9c9202&fileId=Swiber-processing.Facility.West.Africa.pdf
And Vallianz got a consolation prize: 5 year charter worth ard USD90+m: http://infopub.sgx.com/Apps?A=COW_CorpAnnouncement_Content&B=AnnouncementLast3Months&F=HROR75I4F03UVFBE&H=d8920c66593a03b5fa68cc6c02bde59fa6c55f8ea8f7fa375154e8776b92a946&fileId=Vallianz-Middle.East.NOC.Contract-97m.pdf
TH, for educational purposes, can you advise the price of several of the Swiber bonds on Thur / Fri versus today so we get an idea of how prices move? Thanks
No trading and no one is making markets.
The Swiber perp I just managed to get the updated price that is lower than I thought at 88.50/92.50 level but the bid is not firm.
Swiber 6.25% 06/2015 is 94/100 !!!!, discouraging sellers and buyers both.
Famous last words, but the 94 for June 2015 sounds too good to be true leh..
Well, it works the opposite way for companies that are perceived to be in distress. The short ends die first.
Could you elaborate on the rationale for that?
BTW, my bank indicated the leverage they are offering on Swiber has been cut 5%, i.e. 70% for 2015 maturity and 65% for 2016.
It’s good to know that the leverage is still very high.
Rationale is that when bonds trade on recovery value, short end or long end make no difference.
With more contracts comes more funding requirements? More bond issuing coming the way?……,, maybe this time they got contract that give payment upon signing?
1. not sure about profits
2. most likely will be secured debt that they will be issuing which makes senior bondholders subordinated.
They already have quite alot of secured loans on their books.
Something new, again
very hybrid, like a hybrid secured preference share without voting rights.
Not a retail product.
Yes. Cpn plus profit sharing too.