SGD New Issue Review : Sembcorp Industries SGD Perp NC 5 % (Updated)

• Issuer: Sembcorp Industries
• Unrated, subordinated
• Distribution: Fixed. Reset in yr 10 based on prevailing SGD 10Y SOR plus initial spreads and every 10Y after
• Step-up: 100bps in yr 10
• Distribution deferral: At issuer’s discretion, subject to dividend stopper and dividend pusher. Deferred distributions are cumulative and compounding

NEW ISSUE : SEMBCORP INDUSTRIES LTD SGD SUBORDINATED PERPNC5 IPG 5% AREA **

ISSUER :  Sembcorp Industries Ltd
STATUS    :  Direct, unconditional, unsecured and subordinated Perpetual Securities, off Issuer’s SGD2 billion Multicurrency Debt Issuance Programme, with the latest information memorandum dated 17 May 2013 as supplemented and amended by the documents  incorporated by reference
ISSUER / ISSUE RATING     : Unrated
ISSUE SIZE  :  SGD Benchmark
FORMAT  :  Registered / Reg S, Sections 274/275 of Singapore SFA
INITIAL PRICE GUIDANCE    :  5% area
TENOR :  Perpetual NC5
DISTRIBUTION PAYMENT      :  Semi-annually in arrear, actual/365 (fixed)
SETTLEMENT DATE   :  [●] May 2015
CALL OPTION    :  [●] May 2020 & at every distribution date thereafter at par
DISTRIBUTION    :  Fixed. Reset in Year 10 based on prevailing SGD 10Y SOR plus the Initial Spread & every 10 years  thereafter
STEP UP   :  100bps in Year 10
REDEMPTION PRICE  :  At principal amount plus accrued distribution and arrears of distributions and any additional distribution amount
DISTRIBUTION DEFERRAL     :  At issuer’s discretion, subject to dividend  stopper and dividend pusher (with a look back  period of 6 months). Any deferred distributions  are cumulative & compounding
RESTRICTIONS ON DEFERRAL  :  All payments on junior or (except on a pro rata     basis) parity obligations must be stopped while  any distribution remains unpaid
DEFERRED DISTRIBUTION     :  Any deferred distribution accumulates and bears  interest at the distribution rate on a compounding  basis, subject to dividend stopper and dividend  pusher (with a look back period of 6 months)
OTHER REDEMPTION   :  At par under taxation reasons, accounting    reasons, tax deductibility and minimal outstanding amount
DENOMINATION  :  SGD250K
GOVERNING LAW  :  Singapore Law
LISTING   :  SGX-ST
CLEARING    :  CDP
JOINT BOOKRUNNERS  :  CS, DBS, OCBC, SCB

Looking at the 5 year equity price graph of Sembcorp Industries, we know they have seen better days.

With their dividends indicating 5.25%, it makes me wonder if we should take a punt on the equity instead ?

Then again, assuming if we had to buy the bond and nothing else, I say 5% is as good as any FCL Treasury perps that are yielding well under 5% !

Having said that, I have been informed not to expect a coupon anywhere near 5% and think more realistically for a 4.75% coupon.

Good luck then !