SGD New Issue Review : Ascott Residence Trust Perp NC5 5%
May price today.
- Issuer: DBS Trustee Ltd., in its capacity as trustee of Ascott Residence Trust
- Issue: SGD Subordinated Perpetual Securities
- Issuer rating: Baa3/–/–
- Unrated, Reg S
- Call option: 2020 & on every distribution payment date thereafter at par
- Distribution: Reset at the end of year 5 & every 5 years thereafter based on prevailing SGD 5Y SOR plus the fixed spread
- Distribution step-up: None
- Distribution payment: Fixed. Semi-annually in arrear, actual/365
- Distribution deferral: At issuer’s discretion. Any deferred Distributions are non-cumulative
- Dividend stopper: Yes
- Other redemption: At par under taxation reasons, ratings event, regulatory event accounting reasons, and minimal outstanding amount
- Bookrunner: OCBC
- Information from person familiar with this offering, who is not authorized to speak publicly and asked not to be identified
OCBC will be offering trading switches to existing holders of the ARTSP 5 10/29/49, ARTSP 3.8 12/16/15 and ARTSP 4.3 11/30/18 for their concurrent participation in the new transaction.
5Y swaps at 2.18% today which gives us a premium of 2.82% for this perpetual which looks a tad thin compared to what they paid last October for their 5% SGD perpetual when 5Y rates were at 1.6%.
That 4.5 year callable ART perpetual issued last year is yielding about 4.61% to call today.
If we get that 5% coupon, this would look half decent compared to the other 2 unrated perps issued this year, namely the FCL Treasury and the Sembcorp one as well as the other FCL perp issued late last year, for its Baa3 rating.
Dividend yield of Ascott Residence Trust is 6.6%.
I say we cannot really complain.
Leaving with the list of SGD Perps and their indic yields (Sorry I left out the call dates).
Hi Tradehaven. I dont think its a good idea to enter a perp now right? Esp when Singapore Savings Bond is approaching. Many offshore perps like Ezion 7% cannot even be sold now.
One question on this Ascott bond though. If the issuer is DBS trustee, does it mean that this DBS subsidary is the issuer or will it still be Ascott reit?
Not comfortable with Ascott’s high net debt…
Hey,
Not sure why you would link the Savings bonds to perpetuals. I would not.
DBS Trustee is the trustee to the reit and since reits cannot issue themselves, they have to do it via their trustee.
Reits have a covenant of not more than 60% loan/asset. For ART, it is under 40%.
Ascott Residence Trust Gets >S$1b Orders for S$250m Perp NC5
(Bloomberg) — Co. sells Perp NC5 at 4.68%, IPT 5% area.
Orderbook >S$1b from 57 accounts
By region
Singapore 96%
Others 4%
By investor type
Private banks 85%
Fund managers 15%
ART 4.68% PERP opening 100.25/100.50
Downside risks outweigh …
100.05/100.20
99.95/100.10
Perspective : If we had 5% as the coupon, bond price would be approx. 101.50 right now.
Upon default, is DBS trustee responsible for the liquidation repayment? I am still not comfortable with buying a perp now. Even if I would, Cheung Kong 5.125% or Genting perp 5.125% will be much better option for me in my view.
Simple fact that upon a rate hike, perps prices will be the first to tank. If it trades for a long time below par, there is not really an exit strategy for the bondholders unless they are willing to wait for 20 years to recoup their initial principal.
That is a rule of thumb about the rate hikes and perp prices that I think has become quite unreliable these days. There are several other considerations for the investor as well, though it would be just as difficult for one to analyse the impact of a rate hike on a stock price.