Following Up On Ezra Perps
Who says the SGD market is boring ?
1 June 2015
Ezra to Raise Up to $300m for Balance Sheet, More Flexibility
(Bloomberg) — Co. reports proposed renounceable underwritten rights issue and issue of convertible bonds to raise proceeds of up to $300m.
- Proceeds will be used to repay S$225m fixed rate notes and S$150m perpetual securities
- Repayment of above-mentioned securities will reduce Ezra’s net gearing thereby strengthening its balance sheet and putting co. “in good stead to tap future growth opportunities,” according to statement from Ezra
- Credit Suisse named sole financial adviser, sole global coordinator and lead manager of rights offer, and sole bookrunner of convertible bonds issue
22 Jun 2015
Credit Suisse Cuts Stake in Ezra to 4.7% From 5.6%, Co. Says
(Bloomberg) — Ezra gives details of change in filing to stock exchange in Singapore on Monday.
24 Jun 2015
Ezra Says Rights-Issue Plan, Bond Proposal Passed at EGM
(Bloomberg) — Co. issues results of EGM votes in statement on Tuesday.
Ezra 8.75% Perpetual callable 09/2015 seeing some decent buying at the 96-97 cts level which works out to be a yield of 27%/22.22% to call date which is 18 Sep 2015.
At such prices nobody would bother with the senior.
Yet, the risk is if the convertible bonds fail to sell which is perhaps why we can still get paper under 100.
Wow i think it actually offers a very good risk to reward return! Is there a reset if the perps are not called?
let me answer my own question.. 3% step up if not called.
Five years ago there were times Ezra’s share price topped S$ 1.80; three years ago there were some peaks above S$ 1.25. Today Ezra’s equity closed at S$ 0.26 per share – something like an 84% drop in the last 5 years. If – and please note that I say if rather than when! – the perpetual is called, and having paid out an 8.75% p.a. coupon – I’m wondering if this would be one of the more glittering bond performance vs. equity performance examples in Singapore’s debt-paper history, of companies that are still going that is? I am not going to count my chickens until 18th September.
Indeed my understanding is that both the Ezion and Ezra perpetuals have a 3% coupon step-up if they are not called in September.
Cheers, JC8888
Read an article saying there’s some correlation between a company running into trouble and going into default. Apparently the consensus is 12 months. Well Ezra started having problems with financing in Dec 14
“Proceeds will be used to repay S$225m fixed rate notes and S$150m perpetual securities”
3 month horizon and adios ? Better get a legal opinion if bond holders can sue based on company statement….. who bought the most yesterday ???
Swiber has just done their rights too, prior to Ezra. No investment is risk free, but between the shares and bonds of these companies, I would rather be the bondholders than shareholders.
Hmmmm. So let’s see. If they don’t call, the coupon steps up to 1.74 (using today’s 3 yr irs) + 8.045 (spread) + 3 (step-up) for a grand total of 12.785 percent from 18 September… Can they not call and defer the coupon? Certainly. But equity value will tank more.
I think that was what everyone was thinking late last year before the perp price plunged to mid 80 cts.
Isn’t there a remaining risk that Ezra can’t put away their convertible paper? In which case………. they wouldn’t have sufficient funds to call the 8.75% perpetuals?
Not unrelated: Some of the other, perhaps more robust, Offshore Oil & Gas players now have what looks like more appropriately sub-par priced S$ paper, of the non-perpetual variety. For example, Nam Cheong’s 5.05% maturing in August 2019 and ASL’s 4.75% due in March 2017 (Ezion’s 4.875% callable in June 2018?). The market still seems to sense that Otto and Swiber are an order-of-magnitude riskier.
If oil prices steady around the current US$ 60/bbl mark and regional offshore O&G activity remains subdued, it will be interesting to see how this all shakes out. If recent offshore Australia activity levels are anything to go by, there is a paucity of work to gun for within the Asia Pacific region – insufficient to go around.
Best, JC8888
I would suppose it is a hostage situation but it is certainly encouraging that the major shareholders are throwing themselves behind it.
In such times, credit analysis is quite impossible and it good to have some dry gun powder to pick up some bargains.