SGD NEW ISSUE REVIEW : Hotel Properties Limited 5Y 3.88%

** NEW ISSUE: HOTEL PROPERTIES LIMITED SGD 5Y-FINAL GUIDANCE 3.88%  **

ISSUER:  Hotel Properties Limited
ISSUER / ISSUE RATING:  Unrated
STATUS:   Direct, unconditional, unsubordinated and unsecured Notes
FORMAT/DOCS: Bearer / Issuer’s SGD800 million Multicurrency   Medium Term Note Programme
TENOR:  5 Years
FINAL PRICE GUIDANCE: 3.88% (the number)
ISSUE SIZE:  TBD
INTEREST PAYMENT: Semi-annual, actual/365 (fixed)
DENOMINATION: SGD250K
GOVERNING LAW:  Singapore Law
CLEARING:   CDP
SELLING RESTRICTIONS: As per Information Memorandum dated 28 June 2011, including the Singapore selling   restrictions under Sections 274/275 of the  Singapore Securities and Futures Act, Chapter 289, Reg S only.
TIMING: Today’s business

– New SGD 5YR announced for Hotel Properties Limited at Final Guidance of 3.88% (the number) and is on the back of significant institutional investor interest.

– Issue Size: Expect S$50 million

– Timing: Today’s Business

COMPS
HPLSP 3.95 09/13/19   101.625 / 3.55%
HPLSP 3.9 04/23/20    100.650 / 3.76%

We last saw them back in 2013.

They have SGD 90 mio due this year but we should not really bother about that because they are much less leveraged than CDL and way, way less leveraged than their similar sized comparable, Guocoland.

I started liking HPL when I realised how they have turned their books around, reducing leverage and focusing on their core competencies. There were buyout talks last year where owners, Ong Beng Seng and Wheelock Properties, bought up to 56.48% of the company but that is all they managed, it seems.

I have always attributed an additional intrinsic value to the fact that they own and control that entire stretch of Orchard, minus that one stubborn house.

Back to the price of 3.88% for 5 years which is a credit premium of 1.8% over today’s 5 year rates. Ascendas Hospitality Reit priced at 3.3% yesterday and CDL came at 3% last week, thus I think this issue has a good chance of being oversubscribed if they only intend to raise SGD 50 mio.

Risks are that they tend to issue such small sizes which makes the bond illiquid to trade and of course, the risk of company privatisation somewhere down the road.

Good luck !