It is not crazy but it is true. Out of the over 200 global defaults this year, Singapore has a pretty big share of debt restructurings this year for the “safe haven” status of her marketplace.
So far, there has been little by way of help for the bond holders for the spate of new initiatives to prevent this episode from happening again with the MAS announcing scrutiny of private banking bonuses for selling risky bonds that is hardly comforting, really, for a cynical investor because the group is co-chaired by non other than DBS’s head of consumer banking and wealth management (which includes the private bank). http://www.straitstimes.com/business/banking/singapore-private-banks-under-scrutiny-for-earning-bonuses-by-selling-risky-debt
Thus, markets still mired in doubt, disbelief and a huge amount of distress, without much guidance from the banks or authorities.
It has become fertile hunting ground for the distress debt buyer, with plenty of fodder under the circumstances of hazy valuations and frantic sellers and few middle-men.
After an accidental meeting with some affected bond investors, we have decided to do a little update of hear-says and announcements that will hopefully be of some use to folks, to know that they are not alone and for potential buyers to take stock of the situation as such opportunities are hard to come by, knowing that the damage done to the local market will probably guarantee there will not be good deals coming for a long, long time.
Count to date.
- PT Trikomsel defaults on SGD 215 mio – Oct 2015. Bond holders rejected company’s restructuring proposal and Indonesian courts have upheld the temporary suspension of debt repayments which is up to 270 days. The emergence of “domestic secured creditor” in the form of an affiliate company has been recognised by the local judiciary.
Jurisdiction : Indonesia
Involved parties : Mostly Singapore bond investors. - Pacific Andes defaults on SGD 200 mio due 07/2017 on 1 July 2016. No commitment to bondholders as yet. Debt moratorium extended to Sep 13 2016.
Jurisdiction : Singapore ,Hong Kong and US
Involved parties : Singapore bond investors, BofA, Stanchart, Maybank, Rabobank - Swiber defaults on SGD 460 mio and CNH 450 mio on 28 July 2016 after redeeming 2 consecutive bond issues of SGD 75 mio and SGD 130 mio on 6 July and 6 June, respectively. Company changed application for voluntary liquidation into judicial management. Latest proposal for creditors to forego over $140 mio of debt.
Jurisdiction : Singapore
Involved parties : 13 banks and local bond investors. - Rickmers Maritime SGD 100 mio due 15 May 2017. Announced a bondholder meeting on 15 Sep with a proposal for debt exchange/restructuring as a condition for a loan facility of $ 260.2 mio from HSH Bank and DBS along with a new syndicate. Loan facility would be used to refinance present outstanding largely secured debt from syndicate involving HSH, BNP, Nova Scotia Bank, HSBC and Sumitomo Mitsui Trust.
Slides from the meeting : http://infopub.sgx.com/FileOpen/RM_Informal%20Meeting%20of%20Noteholders.ashx?App=Announcement&FileID=421374
Meeting result : Bond holders asked for new offer. http://www.straitstimes.com/business/note-holders-slam-rickmers-proposal Comments from a investor and published with permission.“The bondholders meeting yesterday.. Lots of angst, bond holders felt equity holders should take a bigger hit. Though not many there knew that Rickmers Maritime is 34% owned by main Hamburg company. A fact duly brought up.
Mix of people, more professionals than I thought, one to two aunties/uncles which were tempted to vote ‘yes’.
However majority are likely to turn it down, some WhatsApp group where a straits time reporter was brought in, probably not such a good idea.
Steering committee to stay small, but lots registered at the end to support a better deal and not to accept the proposal by the company.
Financial advisor to be appointed soon. Rickmers did not want to pay for bond holders.”
Debt Extension
- Otto Marine SGD 70 mio due 1 Aug 2016. Loan from RHB Bank to redeem notes 6 months from maturity in Jan 2017 or earlier subject to successful delisting exercise.
- Ausgroup SGD 110 mio due 20 Oct 2016. Partial mini redemption of at least $4 mio in Dece and debt extension for 2+1 years with coupon step up of 0.5% for 1st year and an additional 0.5% in Oct 2017. http://infopub.sgx.com/FileOpen/AusGroup%20-%20Notice%20of%20Meeting%20for%20Noteholders.ashx?App=Announcement&FileID=421041
- Perisai Petroleum SGD 125 mio due 3 Oct 2016. Company started consent solicitation on 10 Sept to seek approval from bondholders for a debt extension to 3 Feb 2017. http://infopub.sgx.com/FileOpen/Perisai%20Capital%20-%20Consent%20Solicitation.ashx?App=Announcement&FileID=420936
- Marco Polo Marine SGD 50 mio due 18 Oct 2016. Announced an informal meeting with noteholders for 16 Sept 2016 giving it very little time ahead of bond maturity to avert a default. Rumours afloat of a debt extension proposal to roll the maturity of the bond for up to 3 years with an upward adjustment of the coupon which would need a quorum of at least 75%.
Distressed Times
- Kris Energy SGD 130 mio due Jun 2017 and 200 mio due Aug 2018. Bond prices adversely affected by company warning that debt covenants may come under stress after suffering a loss in 2Q16. Investors noted the near 40% ownership by Keppel Corp only works out to a worst case SGD 54 mio write-off for the ship building giant which has no experience in running oil wells.
- Nam Cheong SGD 365 mio due between 2017 – 2019. No news from the company but suffered contagion from Marco Polo with whom they have a joint venture. Bonds offered well under market prices in crippled trading.
- Pacific Radiance SGD 100 mio due 29 Aug 2018. Company suffered bad press in its trade exposure of US 10 mio to Swiber and chairman’s disposal of SGD 470k worth of Swiber shares shortly before Swiber’s default.
- Swissco Holdings SGD 100 mio due 16 Apr 2018. No news from the company but hearing debt being offered well under screen prices.
- International Healthway Corp SGD 50 mio due Apr 2017 and SGD 50 mio due Feb 2018. Company has been suffering severely bad press after delaying the coupon on one of their notes in early Aug which was a false alarm and yet with its recent application application for an EOGM to remove a large part of its board and news that it has reneged on bank borrowings in Australia with properties seized by Westpac and NAB, the risk remains high for bond holders of a non O&G related company.
SGX announcement of subsidiaries in receivership http://infopub.sgx.com/FileOpen/Update.ashx?App=Announcement&FileID=421535. - Hyflux Ltd with SGD 1.465 bio due between 2017 -2020. Company saw bad press in form of SGX query regarding the price action on its 6% retail perpetual which fell quite abruptly in thin trading. Prices have not recovered back up with cash equivalent as of end June at SGD 500 mio.
Good News
- Mencast SGD 50 mio due 12 Sep 2016, saved in time on 22 Aug with banking facility secured with UOB.
- Dyna-mac SGD 50 mio due Aug 2017. Company announces on 8 Sep a tender exercise for existing notes at 100.00.
There are plenty of rumours of potential tender exercises from the issuers who value their reputation, fearing the contagion from the current state of affairs that would affect their future funding needs even as the S&P warns of that smaller property developers may be next hit and face funding squeeze if banks abandon them in their hour of need.
We still have a bunch of maturities coming up in the weeks ahead, the likes of China Coal Solution, United Energy Finance, TA Corp, Vallianz Holdings (22 Nov 16), Midas Holdings, Oxley, Miclyn Express etc.
It is all to easy to sing along with situation and yap the default dirge like the press are all rushing to do. The harder hand to play would be to take stock and look for value buys amongst the offerings out there with a bit of homework (and possibly without the help of your squawking banker) as some investors have informed me they are doing and buying up papers, that I cannot name, cheaply because they feel that such opportunities will not happen again.
I shall leave with a note written by a Rickmers bond holder who has asked that it be viewed unbiasedly that it shall not constitute financial advice.
Rickmers bondholders who are keen to get in touch with the bond investor committee can drop us an email and we will try our best to help.
Bond investors unite and take stock, all is not lost yet.