SGD New Issue Review : Fraser Centrepoint Ltd Perp NC 5
FRASERS CENTREPOINT LIMITED SGD SUBORDINATED PERP NC 5
– New Frasers Centrepoint Limited (FCL) SGD Perp announced
– Deal is significantly anchored, potentially giving substantial holding to related parties
– Initial price guidance: Low 5%
– Issue Size: Benchmark
– Structure: Perp NC 5, reset in year 5, step up 100bp in year 10, dividend
pusher & stopper, deferred distributions are cumulative and compounding
Issuer: FCL Treasury Pte.
• Guarantor: Frasers Centrepoint
• Unrated
• Reg S benchmark
• Call option: 2019 & at every distribution date after at par
• Distribution: Fixed. Reset in Year 5 based on prevailing SGD 5Y SOR plus the initial spread & every 5 years thereafter
• Step-up: 100bps in year 10
• Distribution Deferral: At issuer’s discretion. Any deferred distributions are cumulative and on a compounding basis
• Dividend pusher: Yes, with 6 month look back period
• Dividend stopper: Yes
Straightforward deal unless you were one of the angry FNN bondholders.
Market cap SGD 4.84 bio. Total debt SGD 4.2 bio after the leveraged buy out last year.
Fraser Centrepoint is a 41.23% majority owner of the Fraser Centrepoint Trust (Baa1/BBB+), a Reit paying close to 6% dividend, but a small part of their business empire.
They are likely to be borrowing ALOT more after increasing their $1 bio medium term borrowing programme to S$3 bio just last week following their acquisition of Australand, a former subsidiary of Capitaland fully divested in Mar this year, down in Australia where they are on a building spree. http://www.bloomberg.com/news/2014-07-02/australand-advances-on-a-2-6-billion-frasers-offer-sydney-mover.html
Note their new secured loan for SGD 1.8 bio last month that will mature in 2019.
This will make them a very, very big company with Australand at A$2.6 bio and Australian revenues become a key component of their total (if we take Australand’s revenues of 1 bio vs their Singapore revenues of $1.5 bio).
There is nothing much to critique about the company if we like aggressive expansion and leverage.
Low 5% coupon for 5 year with a strong call option as a back up and dividend stoppers, the public should feel safe enough.
And this is backed by Thailand’s richest man.
A short list of some of the perps we have to choose from out there.
Please ignore Temasek senior bond in the list. I neglected to omit it.
I would compare this with Genting 5.125% callable 09/2017 rated Baa3, BBB which is trading at 98.625/98.925 5.34/5.29%.
Both are subordinated with Genting looking like a tad better risk, in my opinion, possessing an earlier call in 09/2017 even if their coupon refix terms are not as desirable.
If FCL delivers a coupon above Genting’s current yield, it should be worth a look.
I am not sure if I would compare Olam against them too but FCL is head and shoulders above Hyflux, Guoco etc for about the same yield.
Then again, since when were perpetuals back in fashion ?
Good luck !
FRASERS CENTREPOINT LIMITED SGD SUBORDINATED PERP NC 5
Order Books in excess of SGD 1.3 bio.
Books at 3 bio now.
FCL SGD SUBORDINATED PERP NC 5
– Books are in excess of S$3.5bln
– Final price guidance at 4.88% (the number)
– Issue size: S$500mm with some room to grow
– Deal is significantly anchored, potentially giving substantial holding to related parties
– Books subject, today’s business
Hearing grey market 99.85/100.05 for the perp.
Hi Good Afternoon Tradehaven, may I ask do you happen to have any idea how much is the FCL perpetual now? Thank you so much. Have a good day ahead.
99.95/100.00
Many many thanks again.
Hi tradehaven, many thanks for the quote on FCL perpetual again. There is one thing which puzzled me all along recently. For instance, this FCL issue, books are in excess of 3.5b and the issue size is just 500mm. So the ‘subscription’ is about 7X meaning there are ppl who wanted to get another 3b but didnt get it.
In that case, the very next day, I was thinking the bid price should be at least a bit higher than 100 since there are so many ppl who wanted to get it at 100 yesterday but never got it? I am wondering is the main reason for this ‘anormality’ due to the fact that the final coupon is 4.88 instead of the low 5s which people have expected? Or there are actually more important reasons involved?
Many many thanks again.
I am guessing that many people bumped up their bid amounts in order to secure an allocation. It is the usual practice if you want 250k but because the books are 7 times, you have to bid 2.25 mio before you get an allocation etc.
They cut down the coupon to 4.88% to shave off the book size for allocation because some orders are coupon limit orders of say, 5%.
Hi tradehaven, much thanks for your very kind explanation. Just to clarify, when I apply for new issues, if the indicative coupon is say indicated to be low 5%, I can tell my broker that if the coupon is eg less than 4.9% i dont want to get? So far I havent tried that b4.
May I also ask, if an issue is expected to be very “hot” and i apply for more than 250k , eg i apply for 1million. And say the bond is ‘oversubscibed’ by about 4X, chances are that I will be allocated 250K? or anything is possible? Is it likely they give me the full 1 million or none at all? I am really not sure how it works. Many many thanks. have a good weekend.
Yes. You can specify any condition you can think of and they can choose if they want to accommodate your request or not.
Coupon is a common one.
If you bump up your order, there is of course a chance you can get full allocation but you would probably tell your banker how much you actually want etc. It is all very subjective, allocation is not guaranteed and is at the prerogative of the bank to whoever they want to allocate to.
Hi tradehaven, so much thanks for your explanation again. Really appreciated it! Have a great Sunday ahead! 🙂
Hi TH,
The price quoted by my remiser is 100.60, today.
Is this price different between different remiser?
Is it convenient for you to share the source of your quote?
Btw: always enjoy your articles.
End prices to consumers will always carry mark ups for the offers and mark downs on the bids.
Knowing the market price is useful so you can bargain for a smaller mark up.
Thanks for your support.
Reference is made to the statement “I would compare this with Genting 5.125% callable 09/2017 rated Baa3, BBB which is trading at 98.625/98.925 5.34/5.29%.”
However I could not find the Genting 5.125% price info in the Indicative Price List of 19 Sept 2014 at Price Guide of Corporate Bonds of your website.
Can you please list Genting 5.125% in the list again?
Aha. Yes, I have been informed that I have left out the perp prices last week. Apologies for that. I was playing around with the spreadsheet and forgot the reinstate them for the directory. Will do so for this week’s updates.
The Genting 5.125% callable 09/2017 is trading at 98.50/98.90 5.68/5.53%.
Hi Tradehaven
I read with interests on your statement “End prices to consumers will always carry mark ups for the offers and mark downs on the bids”.
Kindly advise what is the usual Mark Ups / downs range in the market.
Hi SC,
There is no set range. I have seen as much as 2-3 cts ie. 100 to 103 and as little as 0.15-0.2 cts ie. 100 to 100.15.
Hi Tradehaven
My relationship Manager of a bank quoted 2 cts mark up and my broker from a securities firm quoted 0.5 cts mark up for the same corporate bonds.
If getting corporate bonds from securities firm get a better deal for retail customers?
Mark up from where ? It is whatever they tell you the price is.
No difference unless you are counting on financing for the bonds.
Then you have to shop around to find the cheapest place – usually where you put the bulk of your fortune.