Hearing that the company is offering to buy back S$350mm notional of the bonds at 103 plus accrued interest for tender instructions submitted before 21 December. That is a huge premium to the secondary market for the bonds which was wrapped around the par level prior to this. The YTM (from the settlement date of 12 Jan 2016) at 103 is about 2.91%, a whopping 134bps tighter than the pre-announcement price. In fact the lifetime high of the bond was only 101 earlier this year.
TML Holdings 4.25% 2018 SGD Bond (Source: Bloomberg)
This does appear to be a windfall for bond investors, partially lifting the gloom and doom bought about by the likes of Trikomsel and Pacific Andes. Having said that, if a bond holder thinks that earning 2.91% YTM till May 2018 (the maturity of the bond) is good enough, then he/she may still decide to hold onto the bonds, though the liquidity in this issue could dry up significantly if the majority of bond holders accept the tender.
So why would the company pay an extra S$10.5m (assuming all tender early) to redeem the bonds. This does seem unusual in the absence of any M&A or other corporate activity. What this certainly does is create goodwill among its bond investors which it could leverage on if/when they come back to the market down the road. And investor goodwill in the SGD corporate bond market is definitely not in abundance these days.