Bond Market Buzz

Big day today, right after FOMC minutes less than 6 hours ago.

8 Jan 2015

Coupon Payments

We have 2 distressed bonds due for their coupon payments – Kaisa 10.25% 01/2020 USD 500 mio and Berau Coal 12.5% 07/2015 USD 450 mio (callable 14 Jan at 103.13 – forget it !).

Kaisa is trading at 30 cts to the dollar now and Berau is somewhat better, at about 47-50 cts.

(Bloomberg) — Kaisa Group Holdings has an about 80% chance it will miss the coupon payment on its 10.25% 2020 bonds tomorrow, CreditSights said in an e-mailed report today.

  • Payment is due by 11:59pm, Asia time, Jan. 8: CreditSights
  • “Given that Kaisa was unable to repay the HK$400m HSBC loan, we think there is a high probability that the company will miss its coupon payment tomorrow,” analyst Cheong Yin Chin wrote
  • Should Kaisa miss its coupon payment, it will be the first China property issuer to default on its USD bonds: CreditSights
  • “Our last investor relations contact in Kaisa left the company yesterday,” Cheong wrote. “Sad to say, we have no other contacts at Kaisa and believe that most other market participants have no contacts either.”

(Bloomberg) — Berau Coal’s$450m 12.5% 2015 dropped 1.08 to 49.975 as of 9:28am HK time, according to Bloomberg prices, after Asia Resource Minerals warned of a default.

  • NOTE: ARMs warned that if former Chairman Samin Tan is successful in his attempt to grab control of the board, it “would add significant uncertainty to the Berau 2015 notes maturity-extension process”: statement
    • “The failure of that process would lead to default on the Berau 2015 notes and possible suspension of trading in ARMs shares and the loss of ARM’s premium listing”

Contagion seen in junk bond markets as the JPM High Yield Corporate Index rose to 8%, the highest since Sep 2013.

It is a polarised world now as 5 year JGB yields approach negative territory and 10Y US treasuries are holding comfortable under 2%.

Singapore

Singapore corporate bonds crippled by the rising SIBOR which has since stabilised and rumours of MAS intervention in the USDSGD and short term liquidity  make their rounds.

We have Del  Monte arranging for meetings this week in SG, HK and LDN. A USD deal seems more likely.

Malaysia

And Malaysia cannot avoid the scandals as 1MDB had to postpone their debt payment again after failing to settle last Nov.  http://www.themalaysianinsider.com/malaysia/article/umno-leaders-police-report-against-1mdb-proves-fund-in-trouble-says-dap

1MDB FAILED TO REPAY 2B RINGGIT LOAN DUE DEC. 2014, EDGE SAYS

The firm has since hired a new President and executive director, former Deutsche big wig. http://mobile.reuters.com/article/idUSL3N0UK1P820150105?irpc=932

Best part is that PM Najib did warn about this last year. http://www.malaysia-today.net/its-hands-off-if-1mdbs-debts-collapse-says-najib/

(Bernama) – The government will not be liable to 1Malaysia Development Bhd’s (1MDB) debts if the company goes bankrupt, Najib Tun Razak said.

The prime minister said only loans amounting to RM5.8 billion taken by 1MDB had an explicit guarantee from the government while other loans did not.

“Like other companies governed by the Companies Act, 1MDB has limited liability, and apart from loans or bonds that had government guarantees, 1MDB’s financial matters are not included in the government’s contingent liabilities.

So it does not matter if the chap partied with Paris Hilton that the champagne is finished. http://www.asiasentinel.com/politics/malaysia-investment-fund-disaster/?fb_action_ids=10204585474051356&fb_action_types=og.likes

1MDB takes up about 3.8% of total Malaysian banking system loans that is concentrated in the hands of a few banks. Their IPO has been postponed due to lack of interest sometime last month.

Their USD 3 bio bond 1MDB Global Investments 4.4% 03/2023 is in the JPM Asian Bond Index. It has a letter of support signed by PM Najib which does not apparently constitute a proper guarantee. Tricky business.

Good luck !