Singapore Post

[freedom]

not necessarily must be share, could be perpetual debt as well. like what Olam is issuing now and what Noble issued before.

[freedom]

one question I do have about cumulative is whether the company will be considered default when failed to pay interest?

[KopiKat]

Those with a lot of spare $250k blocks of cash may want to call their Private Banker (if they'd not already called you) for the 4.25% Senior Perpetual Cumulative Securities (whatever that is).

For me, looking at their balloning debts (for acquisitions), perhaps I should reclassify SingPost as a Growth Stock. But, then again, only Revenue seems to be growing but not EPS (peaked in FY10). For FY12 (Mar), I'm expecting the same pattern ie. Revenue Growth, EPS Declines, at best case, both flat. Hmm... headache..

Extracts of their SGX Annc,


ISSUE OF S$350,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF SENIOR PERPETUAL CUMULATIVE SECURITIES

The Board of Directors of Singapore Post Limited (the “Company”) wishes to announce, further to its announcement on 23 February 2012, that it has today launched and priced S$350,000,000 in aggregate principal amount of 4.25 per cent. senior perpetual cumulative securities (the “Securities”). DBS Bank Ltd. has been appointed sole lead manager and bookrunner for the Securities.

The Securities, which will be issued in the denomination of S$250,000, will be perpetual and will confer a right to receive distribution payments at the rate of 4.25 per cent. per annum, with a distribution rate reset on 2 March 2022, such distribution being payable semi-annually in arrears unless deferred in accordance with the Terms and Conditions of the Securities. The Securities will constitute unsecured obligations of the Company and will rank pari passu and without any preference among themselves. The payment obligations of the Company under the Securities will, save for such exceptions as may be provided by applicable legislation, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations. The Securities may be redeemed at the option of the Company in whole or in part, on 2 March 2022 or any Distribution Payment Date (as defined in the Terms and Conditions of the Securities) thereafter and otherwise upon the occurrence of certain redemption events specified in the Terms and Conditions of the Securities.

The Securities, when issued, are expected to be rated A+ by Standard & Poor’s Rating Services, a division of McGraw-Hill Companies Inc.

Application has been made to the Singapore Exchange Securities Trading Limited (“SGX-ST”) for the listing of, and quotation for, the Securities on the SGX-ST. Admission to the Official List of the SGX-ST and quotation of the Securities on the SGX-ST is not to be taken as an indication of the merits of the Company, its subsidiaries, its associated companies, its joint venture companies (if any) or the Securities.

The Securities are expected to be issued on or around 2 March 2012.

The net proceeds arising from the issue of the Securities (after the deduction of issue expenses) will be used by the Company to finance new investments as part of its growth strategy. The Company will also use the net proceeds to fund its anticipated capital expenditure and working capital requirements.

[RBM]

IMHO the Singapore Post Perpetual has a lousy coupon............. when compared to some other recent offerings. I have, for example, gone in for some Olam 7.0% p.a. S$ Perpetual's earlier this week - I ended up getting a smaller allocation than I wanted actually. Shui On recently had a 8.0% p.a. S$ Bond offering (3 year tenor). I know that Singapore Post has a good credit rating ...... but 4.25% p.a. is simply too low a coupon.

I like the way Kopikat opens his posting above ..........."whatever that is", referring to the use of the word "Securities" -- ----- is the Singapore Post paper a Bond or a Preference share???? .......the former being more secure than the latter.

Not vested in Singapore Post or its S$ 4.25% p.a. perpetual "Security".

[cyclone]

I like the way Kopikat opens his posting above ..........."whatever that is", referring to the use of the word "Securities" -- ----- is the Singapore Post paper a Bond or a Preference share???? .......the former being more secure than the latter.

Based on the wording ".. at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations ...", it should be the bond form.

In the end, what is the meaning of a form ? What matters most, is the content.

[RBM]

Thank you cyclone - I agree with everything you say in your early afternoon posting on this particular thread. My concern with the Singapore Post Fixed Interest "Security" is why do they use clever verbage rather than plain English?? - if it really is a Bond then they should call it that............ in my humble opinion. While I did not like the comparitively low coupon I felt I needed to wade thru pages of legalese to understand the nature of Singapore Post's paper - that did not heighten my confidence.

Not vested

[camelking]

Thank you cyclone - I agree with everything you say in your early afternoon posting on this particular thread. My concern with the Singapore Post Fixed Interest "Security" is why do they use clever verbage rather than plain English?? - if it really is a Bond then they should call it that............ in my humble opinion. While I did not like the comparitively low coupon I felt I needed to wade thru pages of legalese to understand the nature of Singapore Post's paper - that did not heighten my confidence.

Not vested

It is a standard term for such issue. Perpetual security is some form of hybrid between equity and bond.
Perpetual issue usually pay a fixed coupon but unlike bond, the option to redeem lies with the issuer, hence, the word perpetual...
I believe Hyflux and some other companies have done this type of issue before.
As for the coupon, I am sure those bankers have done their job in getting the coupon rate right as any under-subscription, the bankers may need to bear...

[KopiKat]

Still lots of $$ sloshing around in the market!


From Business Times,

Bankers caution against race for high-yield perps
Read fine print and study their risks, they urge investors

There is a new share fever in town, the sale of high yield perpetual shares. Even at $250,000 a pop, they're selling like hot cakes, and some eager investors may forget there are some risks.

Attracted to the higher yields, investors may overlook the fine print such as the right to redeem the securities as early as after five years and coupon deferral, said some bankers.

'Globally there's a massive hunt for yields, (but) people are quite confused about the concept of perps because they're not so widely traded,' said Arjuna Mahendran, the head of investment strategy for Asia at HSBC Private Bank.

'If in the meantime you need money, you're at the mercy of the bank which quotes the spread,' he added.

The sale of Genting Singapore perps which ends today is said to have attracted over $2 billion in orders for a benchmark issue typically believed to be a minimum of $500 million. The perps is guided to pay 5.375 per cent coupon.

Some private bankers have hiked up the cost for Genting to 0.75 per cent from the usual 0.20 per cent due to the strong demand, complained one investor.

Last Friday SingPost perps paying 4.25 per cent received overwhelming subscription, with orders hitting almost $2.5 billion or seven times more than the $350 million issuance.

'That was an absolute blowout,' said Clifford Lee, DBS head of fixed income.

'Out of 10 clients, only one got it,' said one relationship manager who had some pretty upset customers.

SingPost's attraction was because it ticked all the right boxes such as ties to the government. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Limited.
'Deals that have done well in the market tend to have one or more of the following attributes,' said Todd Schubert, head of credit research, Bank of Singapore. 'Strong brand name such as SingPost and Genting, a new issuer that provides portfolio diversification, perceived ties or importance to the Singapore government and bondholder friendly structures,' he said.

Right now there are probably many investors who do not read the fine print. Perhaps they should, especially if they think perps are bonds which they are not.

There are a number of commonalities such as a non-call 5-year structure with a coupon step-up in year 10, said Mr Schubert.

However, there are a number of subtle differences with respect to coupon change, coupon deferrals, call options etc that make each structure unique, he said.

'At Bank of Singapore, our criteria for analysing perpetual securities is even more stringent than that of other bonds, as they rank only ahead of equity in the capital structure,' he said.

But Anurag Mahesh, head of global investment and key client solutions, Asia Pacific, at Deutsche Bank Private Wealth Management, said investors do understand that the higher yield comes at a risk.

And for many non-Singapore investors, the perps are popular because they offer exposure to the Singapore dollar, he added.

[bran]

to freedom, for these perpetual securities, deferral is usually not a default (but you would need to read through the reams of legalese to be certain)

to RBM, the distinction is quite important to determine how much coupon you should be getting from the company. For Olam, GLP and (now) genting, you are ranked subordinated while for Singpost and Hutchison, you rank senior unsecured. Technically, for subordinated bondholders, since you rank below the senior unsecured bondholders, you need to be compensated for that additional risk you are taking.

[KopiKat]

From Business Times,

SingTel's US$700m, 5.5-year notes over 4 times subscribed
Three traded perpetual securities see varied performances

SINGTEL's sale of US$700 million, 5.5-year notes yesterday met with strong demand as the debt market continued to sizzle. The order book for the bonds, which pay a coupon of 2.375 per cent, came to about US$3.25 billion and was more than four times subscribed by investors, said SingTel in a statement.

But those looking for a quick buck trading some of the highly popular perpetual securities are finding that not all perps are the same.

Genting's 5.125 per cent was selling at $100.65 but SingPost's 4.25 per cent was trading higher at $101.5/102.5. Olam which has a coupon of 7 per cent was struggling to stay above water at $100.2/100.8.

All the three perps, which were sold within the past 10 days, were priced at $100 plus a typical commission of 0.25 per cent, so the effective cost would be $100.25.

'One customer complained that Genting is so huge compared to SingPost, so how come Genting is not performing compared to SingPost,' said a broker.

Genting issued $1.8 billion perps after receiving $6 billion orders. SingPost had orders of $2.5 billion or seven times more than the $350 million issuance.

'SingPost is exceptional, like it's small size and it's got everything,' the broker added. SingPost is 26.01 per cent owned by Temasek Holdings (Private) Ltd.

Olam's issuance was $275 million after the order book came to $350 million. One relationship manager said he took orders only from customers who asked for Olam rather than actively market the issue, given its higher risk profile.

Among the three names, SingPost is considered the least risky with an A+ credit rating, said Todd Schubert, Bank of Singapore head of credit research.

Genting has a Baa3/BBB- credit rating while Olam has no credit rating.

'Given that the entire SGD corporate bond market is less than US$100 billion, Genting represented a significant increment to the current outstanding stock of SGD dollar bond,' said Mr Schubert. 'The large size of Genting vis-a-vis Olam and SingPost and relative to the size of the market limits Genting's uniqueness factor,' he said.

Said Hartmut Issel, head of UBS Wealth Management Research Singapore: 'We had very low issuance activity in the second half of last year, accompanied by high accumulation of cash during that time. The real attraction in these perpetual securities lies in the lucrative yield they provide.'

Added Wilson Aw, head of UOB Private Banking: 'Being Singapore dollar denominated, besides appealing to local investors, they also offer an avenue for non-Singapore investors.

'However, investors should bear in mind, for instance, the subordination of the structure and the higher interest rate risk compared to straight bonds.'