Primary Credit Watch
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Recap of yesterday’s deals:
- Central China Real Estate sells $300m long 5NC3 bonds at 8.75%, IPT 9.125% area, 1st HY bond in 1 mo.
- Formosa Plastics sells $1b 10Y bonds at +157bp, IPT +180 area, its debut USD bond
- Haitong Securities sells $670m 5Y bonds at +220, IPT +245 area, its 2nd USD bond this year
- China Communications Construction sells $1.1b perp NC5 at 3.5%, IPT 3.8% area, its debut USD issuance
Today’s/Upcoming deals:
Malaysia to Sell $Bench 10Y, 30Y USD Sukuk
Issuer: Malaysia Sovereign Sukuk Berhad
10Y IPT +135bp area, 30Y +185bp area
Obligor: The Government of Malaysia
Obligor ratings: A3/A-/–
Exp. issue ratings: A3/A-/–
USD Trust Certificates, Sukuk Wakala
144A/Reg S
UOP: For govt of Malaysia’s general purposes, including for the redemption of $1.25b trust certificates due 2015
JBRs: CIMB, HSBC, StanChart
**Interesting to see the reception to this after the 1MDB mess. With the Sukuk format, I feel that the deal should still have a decent take-up rate given the captive investor base.
INDUS GAS SGD 3YR – PX GUIDANCE AT LOW 8s
Issuer: Indus Gas Limited
Guarantor: iServices Investments Limited and Newbury Oil Company Limited
Issue: Senior Unsecured
Ratings: Unrated
Format: Regulation S only and S274/275 of SFA, SG; Issuance off US$ 300 million Multicurrency Medium Term Note Programme
Issue Size: TBD
Initial Price Guidance: Low 8s
Tenor: 3-Years
Coupon: Semi-annually in arrear, actual/365 (fixed)
Financial Covenants: 1. Consolidated Total Debt to Consolidated Equity shall not: (a) at any time up to and including 31 March 2017 be more than 2.5; and (b) at any time after 31 March 2017 be more than 2.0;
2. Consolidated EBITDAX to Consolidated Interest Expense shall not: (a) at any time up to and including 31 March 2017 be less than 2.0; and (b) at any time after 31 March 2017 be less than 3.0;
3. Consolidated Tangible Net Worth shall not: (a) at any time up to and including 31 March 2017 be less than US$200 million; and (b) at any time after 31 March 2017 be less than US$400 million; and
4. Its ratio of Consolidated Secured Debt to Consolidated Total Assets shall not at any time be more than 0.50.
Interest Service Reserve Account: None
Change of Control: Change of Control put at 101%, Gynia Holdings Limited and Focusoil Inc. Limited are together the beneficial owner of less than 51% of the total voting power of the Issuer, and other specified criteria in the offering circular of the Issuer
Listing: SGX-ST
Details: SGD250K / Multicurrency Medium Term Note Programme / English Law
Clearing: Euroclear / Clearstream / CDP
Joint Bookrunners: DBS Bank Ltd.(B&D) and Standard Chartered Bank
Timing: This week’s business, as early as today
– New Indus Gas 3yr SG$ announced and deal is anchored
– Initial Price Guidance: Low 8s
– Issue Size: TBD
– Timing: As early as today
– Comps:
KRISSP6.25 06/17: 99.00, 6.50%
KRISSP5.75 08/18: 97.5, 6.59%
**Wow, an oil & gas name is actually back in the market! This will be a true test of how much conviction investors have in the recovery of oil prices. This is likely to be another ‘trade by appointment’ bond in the secondary market. Having said that, an 8% coupon for 3 years might be too difficult to resist for some.
hey yo TH ! another great update. Seems like too good to be true on CHCOMU 3.5% perp to have a rest UST 5Y + 2.192% + 5% every 5 yrs ya ? what do you think about this bond ? just another marketing gimmicks to add on to the bond i guess they will have prepared to call this back ?
Tom, CHCOMU perp is currently trading in the low-mid 3% to the 2020 call date. With the huge coupon step-up, this bond can effectively be treated like a straight 5yr bond, as issuer will very likely call back. I think at this level, the bond has limited upside. I would see the low 101s (3.2% yield to call) as a floor on on the yield of the bond. This is where the closest comparable, China Railway Corp 3.95% Perp Callable Aug 2019 is trading.
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Hi TH,
What do you mean by ‘trade by appointment’ bond? 8% looks very appealing. How stable is Indus Gas? Thks!
Mrs Lim,
“Trade by Appointment” is an industry term used to refer to bonds that are illiquid and for which there are no readily available firm 2-way market prices from dealers., which has been the case for most oil & gas SGD bonds since oil prices collapsed. So, typically the way to execute these bonds would be on an order-only basis. As for Indus Gas, we put out a separate piece on it subsequently. Essentially, its a small company with oil and gas exploration activities in India. The yield at 8% looks tight, with one of the comps, United Energy Group SGD 6.85% 10/2016 (18 months left) offered at 10.18% today vs the bid of nearly 13%. The company also looks quite highly geared with a debt/equity ration of 142%. Hope this helps.
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Hi EDZ,
Thanks for your advise. Your reply helps a lot in my consideration.
Thankyou!
All the Best!
Hi TH,
How well subscribed is the Central China issue? Understand that Capitaland is a part owner. Thanks
Hi Peter, the Central China issue final order book was > USD3.5b, i.e. more than 10x oversubscribed for a USD300mm issue size. Yes, Capitaland owns about 27% of the company. That has been the main selling point of the credit to investors as it is actually not a large company, and would probably be rated a high single-B credit were it not for Capitaland’s ownership. The bond is currently quoted 100.25/100.375 (8.65% on the offer)
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