SGD NEW ISSUE: CWT Limited SGD 5YR 4.8%
ISSUER: CWT Limited
RATINGS: Not Rated
STATUS: Senior, Unsecured, Fixed Rate Notes
ISSUE SIZE: TBD
FORMAT/DOCS: Reg S, S274 & 275 of SFA, issuance off Multicurrency Debt Issuance Programme
INITIAL PRICE GUIDANCE: 4.8% area
TENOR: 5 Years
INTEREST PAYMENT: Semi-annual, actual/365 (fixed)
DENOMINATION: SGD250K
GOVERNING LAW: Singapore Law
LISTING: SGX-ST
CLEARING: CDP
SELLING RESTRICTIONS: As per Information Memorandum dated 1 April 2013, including the Singapore selling restrictions under Sections 274/275 of the Singapore Securities and Futures Act, Chapter 289, Reg S only.
JOINT LEAD MANAGERS/BOOKRUNNERS: DBS and OCBC
B&D: OCBC
TIMING: As early as today
– New SGD 5Yr transaction for CWT Limited announced at initial guidance of 4.8% area.
– Deal is announced on the back of a number of significant IOIs from institutional and private banking accounts.
Comparable Bonds :
CWTSP 4 03/13/17 100.50/3.74%
CWTSP 3.9 04/18/19 98.50/4.30%
Paying up in the higher interest rate environment.
The last CWT 6 year issue done in 2013 was at a credit premium of 2% because the 6 year interest rates were just 0.83% then (vs bond coupon of 3.9%).
Today, the 5 year interest rate is at 2.16% which gives us a 2.64% spread, much tighter than even their 3 year issue from last year done at the widest spread they ever paid of 3.15% (for 3 years). https://tradehaven.net/market/new-sgd-issue-review-cwt-3y/
Therefore, not that value for money in relative value terms.
I think the absolute yield looks good although the industry outlook is starting to dim a little and I would expect consolidation to take place in the logistics space given the spate of new market entrants through large corporations wanting to conquer a share of the pie.
And CWT is looking pretty geared these days (higher than Olam), since they ventured into the commodity business. Debt/Equity stands last at 187%.
Quarterly financial leverage ratios for past 10 years.
I also note that their receivables have exploded last year, slightly worrying although the increase in long term borrowings should be comforting.
Banking on their household name and their former government affiliation, I would suppose this issue would be decently received just based on the higher absolute coupon rate.
My comments last year were that this is a bond to include in the 30 million dollar portfolio given how fashionable it was last year drop names over lunch. I would not expect the same sort of admiration this year if you bragged about buying the latest CWT issue to friends. You would be much better off saying you got the latest Delhi Airport paper, 😉
This is one of the rare issue with OCBC as one of the bookrunners. But OCBC PB don’t offer leverage for bonds right?
KH, I hear that they do offer leverage, but perhaps not as high as their friendly co-bookrunner on this deal (70%). Last update is that order books are in excess of S$100mm and growing strongly. With a 35 cent rebate being dangled in front of RMs who have been starved of new SGD bond issues since the start of the year, I think the deal will garner enough interest for issuer to tighten pricing to perhaps the 4.6-4.7% area.
Issue size is looking like $100 mio with $ 150 mio in orders.
Price guidance remains 4.8%.
70% is rather high, I think.
hahaha, when i saw EDZ’s reply, I reconfirmed that I am just a kachang putek
This issue needed higher yields for 5Y.
This issue needed high LTV allowance.
This issue needed higher PB rebate (anchor-IOIs activities began since last week).
Sounds to me like it confirms nothing much except that you probably got a good allocation.
CWT’s leverage is largely due to short-term working capital loans to fund the sourcing of commodities which are then resold based on off-take agreements i.e. back to back sales and purchase agreements (see below for more details on their commodities business).
The risks according to dated reports from CIMB:
Management says MRI makes money by taking small, stable spreads between trades. Its earnings are more stable than those of Noble and Olam for the following reasons:
i) MRI does not take price positions on its trades.
ii) MRI leaves price hedging to the banks providing trade financing as CWT does not have an internal treasury like Noble and Olam. This suggests less room for “unauthorised” proprietary trading.
iii) MRI is only exposed to the fluctuations of Treatment Charges and Refining Charges (TCRC) – costs required to treat and refine metal concentrates into pure metals and excluded in the calculations of metal concentrate contracts. While there no instruments available to hedge TCRC fluctuations, TCRCs are typically fixed on an annual basis and should be more stable than volatile metal prices, in our opinion.
Other Risks
1. Supply disruptions.
Margins are thin for base-metal trading. Therefore, traders require large trading volumes to make meaningful profits. A disruption in supply could have an
adverse impact on traded base-metal volumes. To minimise the impact, MRI has been active in securing metal off-take contracts from miners.
2. Economic uncertainties leading to decline in demand.
Major uses of base metals are in construction and the production of capital goods. As a result, base-metal demand is cyclical, as it is directly related to economic up and down cycles. Trading volumes could shrink in the event of a global economic downturn.
3. Escalating metals prices could limit trading volumes.
We believe MRI’s trading volume is inversely related to metal prices. Intensive working-capital requirements for base-metal trading means that traders would need ample short-term financing capital lines, which in turn calls for minimum equity levels. High metal prices could limit MRI’s ability to take on additional contracts, due to limited credit lines available. However, we
expect MRI to leverage its parent’s strong financial position to increase available credit lines for working capital, which should provide some support to MRI’s volume take-up during periods of high metal prices.
I guess many of us still associate them with PSA.
CWT Gets SGD150m Orders for SGD100m Bond, Private Banks Buy 91%
Around S$150m of orders from 38 accounts
By investor type
Private banks 91%
Others 9%
By geography
Singapore 100%
CWT 4.8% 03/2020 OPENING 99.90/100.00
Q&M’s subscription rate might be better.
Bookrunners: UOB, HSBC, DBS
Bond of the week 🙂