S'pore investors turn to riskier bonds

[YFS]

Bond investors dump the junk - just 59mins ago CNBC
http://www.cnbc.com/id/101867122

[CY09]

http://www.businesstimes.com.sg/premium/...s-20140724

HOCK LOCK SIEW
Seek high-yield blue chips, not bonds
BYCAI HAOXIANG
haoxiang@sph.com.sg @HaoxiangCaiBT

THE rush for yield in Singapore reaches new heights every day, and at first glance, retail investors are losing out.
On Monday, rubber producer Halcyon Agri received orders of over S$2 billion for just S$125 million of its 6.5 per cent 2019 bonds.
On Tuesday, fish supplier Pacific Andes was said to have also received orders of over S$2 billion for just S$200 million of its 8.5 per cent 2017 bonds.
Mid-cap or even small-cap companies can now borrow cheaply from wealthy private bank clients hungry to get a return on their cash piles.

One can look beyond blue chips and at Mid-Small Caps. Some of them pay dividends (4-5%) and are sustainable based on their current operation's cash flow

[YFS]

http://www.businesstimes.com.sg/premium/...s-20140724

HOCK LOCK SIEW
Seek high-yield blue chips, not bonds
BYCAI HAOXIANG
haoxiang@sph.com.sg @HaoxiangCaiBT

THE rush for yield in Singapore reaches new heights every day, and at first glance, retail investors are losing out.
On Monday, rubber producer Halcyon Agri received orders of over S$2 billion for just S$125 million of its 6.5 per cent 2019 bonds.
On Tuesday, fish supplier Pacific Andes was said to have also received orders of over S$2 billion for just S$200 million of its 8.5 per cent 2017 bonds.
Mid-cap or even small-cap companies can now borrow cheaply from wealthy private bank clients hungry to get a return on their cash piles.

One can look beyond blue chips and at Mid-Small Caps. Some of them pay dividends (4-5%) and are sustainable based on their current operation's cash flow

What are some of these names you would recommend?

[CY09]

Hi,

I will stick my neck out to recommend names but these are just purely suggestions and everyone should do their own due diligence. In addition, please note companies are not obligated to give a fixed amt like bonds and therefore the dividends amount mentioned are my suggestions and guess.

1) KSH: My estimated Div for this stock is around 2.75-3 Cents over the next few FY due to the completion of TOPs and the company's tendency to pay 30% of its FY profits to shareholders. This too is supported by its cash flow and the nature of cash collection for its Sg projects. Current price 55 cents

2) CM pacific: Coy has a dividend policy payout of 50% or more. This too is supported by its strong cash flow business. Given the current circumstance, the company is able to likely give 5.5 cents div annually. Current price 94.5 cents

3) St******

There are other stocks too like YZJ, Fischer. Though these stocks are more cyclical and have less of a consistent dividend record.

<vested in YZJ, KSH, Fischer but not CM pacific, St******>

[greengiraffe]

http://www.straitstimes.com/news/busines...3-20140725

Corporate debt issuances rise 38 per cent in 2013
Published on Jul 25, 2014 5:11 PM


The Monetary Authority of Singapore stands in Singapore on Wednesday, April 29, 2009. Companies took advantage of continued low interest rates last year to issue more debt, the Monetary Authority of Singapore said yesterday. -- PHOTO: BLOOMBERG

By Yasmine Yahya

SINGAPORE - Companies took advantage of continued low interest rates last year to issue more debt, the Monetary Authority of Singapore said yesterday.

The outstanding volume of Singapore corporate debt expanded 18 per cent to reach $272.4 billion at the end of last year.

New debt issuance increased by 38 per cent to $185.5 billion, driven mainly by an 82 per cent increase in short-term debt issuances - those with tenors of less than a year.

Long-term debt issuances, with tenors of over a year, declined 15 per cent, as many issuers in Singapore had already front-loaded their long-term funding needs in 2012 to lock in low borrowing costs, the MAS said.

[Antifragility]

I highly suggest investors start unloading their perpetual bonds ASAP. Short dated ones depend on the issuer and cash flow, price to cash flow, debt to equity and overall financial leverage of the company.

Why? Gut feeling that we will see an earlier than expected rate hike starting in December 2014 from the Federal Reserve.

[brattzz]

hot money = over-valued pricing = hungry for high yield = riskier investments...

ie,

free equity = anyhow price = greed = higher risk!

sounds like BIG trouble brewing!!

[greengiraffe]

http://www.businesstimes.com.sg/banking-...-in-favour

Perpetual bonds back in favour
By
Siow Li Senlisen@sph.com.sg@SiowLiSenBT
ezion12.jpg PERPETUAL bonds are enjoying a massive revival as investors turn to them for their higher yields, ignoring the broader market anxiety over rising interest rates. PHOTO: EZION HOLDINGS
14 Nov5:50 AM
Singapore

PERPETUAL bonds are enjoying a massive revival as investors turn to them for their higher yields, ignoring the broader market anxiety over rising interest rates.

On Wednesday, Ezion Holdings sold S$150 million perpetual bonds offering a 7 per cent coupon, the eighth such

[greengiraffe]

Game of musical chairs... however retailers yet to be allowed into the party leh...

Alarm for Singapore bonds as private bank bid falters

SINGAPORE (Reuters) - Signs that wealthy private banking clients are reining in their appetite for Singapore dollar bonds could spell trouble for the small and medium-sized companies that are streaming to the city's capital markets.

Local high-yield bonds came in for a battering this week as private banks started to dump some credits. Several bonds fell two to three points, but the worst hit were Swiber Holdings' notes, which fell 10-15 points across the curve over the last week and a half.

"Investors are running for the door but they can't find bids, so there is now no exit," said one banker.

Private banking clients have dominated the Singapore dollar market over the last two to three years, supporting many corporate perpetuals and an increasing number of high-yield or unrated bonds from small-cap borrowers.

The sudden slump underlines the risks attached to illiquid placements that rely heavily on private bank demand, highlighting the refinancing risk for borrowers should markets turn volatile. Swiber's 9.75 per cent senior perpetual with a call in 2016 were indicated at a yield as high as 21 per cent to the call last week. It would be impossible for the company to sell any bonds at the moment.

Credit analysts said PBs were increasingly selective of the assets they would buy, but stressed that demand remained strong for credit in general.

"PB demand has tapered off a bit," said a credit analyst."But it is very deal-specific and in the long-term their appetite for bonds is still very strong given yields are extremely low in terms of interest rates."

"The volatility in the secondary market goes to show that investors have to do their credit work and study each issuer's fundamentals and financials," said Vishal Goenka, Deutsche Bank's head of local currency credit, Asia.

The bearish sentiment spilled over into the primary market, where Aspial Corp received a muted response to its third issue of the year. The $100 million four-year deal attracted a book of just over $100 million, leaving little upside for the bonds in the secondary markets despite a higher yield and a 50 cent rebate to private banks.

The bonds paid a yield of 5.500 per cent, far higher than the 5.306 per cent it had paid just five months ago for a longer tenor of five years.

The Aspial deal came only weeks after small-cap Loyz Energy was forced to abort a bond issue after offering a rich 9 per cent yield for a 2.5-year tenor and a 75-cent rebate.

A couple of PB clients failed to deliver at the last minute, scared off by a deteriorating global credit market. Loyz's recent history did not help either; in September, it had a dispute over a US$4 million loan given by Advance Capital Partners. The company's market capitalisation was $82.4 million when it emerged for a deal in late October. This had dropped to around $64 million last week.

A major consideration for investors was also Loyz's core business in the oil and gas sector. Crude oil prices slumped to below US$75 a barrel last Wednesday, and market expectations are for a slowdown in oil exploration and production activities. Investors are betting that this will have a future impact on the oil and gas borrowers that were out in force this year to raise funds in Singapore.

In the light of this, Swiber Holdings' latest financial results came at the worst possible time. The Singapore-based marine oil services company announced on November 12 a 60.9 per cent year-on-year fall in revenue and a 97.8 per cent fall in gross profits for the third quarter of the year. Net gearing rose to 1.7x from 1x a year ago.

The company has won orders amounting to only US$315 million this year to date, compared with last year's US$588 million. Swiber's stock fell 5 per cent on November 13, hitting a three-year low.

One investor said there appeared to be an upside for Swiber as it was bidding for a few contracts that could come in by year-end.

Not all high-yield oil and gas-related bonds have been burned. Ezion Holdings, which is in the offshore rig business, sold a $150 million 7 per cent perpetual non-call four deal in mid-November that drew a decent book of $300 million. The bonds were holding up around par last Thursday, unscathed by price action elsewhere.

Ezion turned in strong third-quarter financial results with a 28.9 per cent increase in net profit, and sits on a healthy cashpile expected to reach around US$398 million by year-end.

[gzbkel]

Singapore alert to risks as cracks emerge for junk bonds
http://www.theedgemarkets.com/sg/article...junk-bonds

By Bloomberg / Bloomberg | January 6, 2015 : 9:35 AM MYT
SINGAPORE (Jan 6): Demand for higher returns in Singapore bonds from the city’s swelling private banking industry has brought with it greater risks.

Three out of every 10 notes sold last year are yielding more than 6 percent.

Halcyon Agri Corp ( Financial Dashboard) went to debt holders last month asking them to waive interest cover requirements before it’s even had to stump up a coupon payment.

Bloomberg’s default model shows that VTB Capital SA has an almost 50 percent chance of reneging on its debt.

“The recent swings have been a good wake-up call,” said Vishal Goenka, the Singapore-based head of local currency trading in Asia for Deutsche Bank.

“Investors need to analyze the credit quality of issuers more thoroughly.”

Junk-rated companies in Singapore must find funds to repay US$2.1 billion of debt this year, up from US$1.7 billion in 2014 and US$1.1 billion in 2013, according to data compiled by Bloomberg.

That accounts for 35 percent of all bonds maturing in Singapore in 2015.

Wealthy clients of the island’s private banks snapped up 86 percent of the highest-yielding local bonds last year, the data show.

Historically considered one of Asia’s safest bond markets, risks are escalating as international issuers increase, local economic expansion slows and the city adjusts to weaker demand from a slowing Chinese economy.

Singapore-dollar junk note returns lagged investment-grade debentures last quarter for the first time since September 2013, Markit indexes show, and volatility is the highest since 2011, according to Deutsche Bank.

MAS measures
Companies in Singapore sold 72 bonds with a coupon of more than 4 percent last year, a level considered high-yield by Deutsche Bank, and almost six times what two-year government notes pay.

The securities had an average life of 3.7 years.

The US Federal Reserve is signalling it will start raising rates this year, driving up global borrowing costs just as the Monetary Authority of Singapore considers making it easier for individuals to buy company bonds.

A draft of the new MAS rules states that notes meeting certain requirements can be re-denominated into amounts smaller than the standard S$200,000 and sold to retail investors.

The regulator has requested feedback by Jan 23.

“You know that stocks could fall significantly but when the common man on the street invests in bonds he doesn’t expect that kind of volatility,” said Hong Kong-based Dilip Parameswaran, who heads advisory firm Asia Credit Advisors.

“Some bonds of smaller companies have dropped dramatically.”

Halcyon Agri
Halcyon Agri, which makes rubber for car tires, raised S$125 million in July selling 6.5 percent notes due 2019.

Last month it sought the consent of bondholders to not comply with one of its interest-coverage ratios until the third quarter of 2015.

Investors holding 82.8 percent indicated they’ll allow it, according to a Dec 30 stock exchange filing.

The debentures were trading at 94.5 percent of par value on Jan 1 to yield 8.77 percent, up from 7.40 percent on Dec 1, DBS Bank ( Financial Dashboard) prices show.

Private banking clients bought 90 percent of the bonds and private banks were offered a S$0.75 rebate apiece to place the notes.

Bonds of Swiber Holdings, an oil services company, are among the worst performing over the past month.

Its S$130 million of 5.125 percent 2016 notes sold in May are trading at 91 percent of par from as high as 100.35 percent after issue.

More protection
Some volatility could be mitigated if sales were focused more on institutional investors, according to Paul Au, the Hong Kong-based head of debt syndicate at UBS Group.

“The market can offer a great diversification avenue for issuers but it needs to get more institutional investors,” he said.

“Issuers have to start offering more protections to investors in the form of stronger covenants.”

Investor protections are weaker in part for Singapore dollar-denominated bonds because the market is heavily supported by high net worth individuals, Au said.

The new measures being proposed by the MAS may help protect individual investors, according to Clifford Lee, the Singapore-based head of debt capital markets for DBS.

Companies wanting to sell to retail investors must have a credit score at least one level above the lowest investment grade, be cash-flow positive and have had no net losses on average for the past three years or have sold more than S$500 million of notes over the past five years.

Bonds must be listed on an exchange and can’t be convertible into stock.

“The proposed regulations shield retail investors,” Lee said by phone on Jan 2.

“Besides, individuals are already allowed to buy stocks and you can argue they’re much riskier.”

VTB bonds

VTB Bank, the only Russian company with Singapore dollar bonds outstanding, would probably have made the cut when it sold its notes in 2012, when it had a foreign long-term bank deposit rating of Baa1 from Moody’s Investors Service, according to Asia Credit Advisors’ Parameswaran.

Five-year credit-default swaps insuring the debt of unit VTB Capital against non-payment were 925 basis points on Jan 2, HSBC prices indicate, signalling a 47.8 percent chance the subsidiary won’t be able to meet its obligations.

The S$400 million of 4 percent notes due July 2015 are yielding 25.96 percent, prices from Oversea-Chinese Banking Corp ( Financial Dashboard) show.

VTB’s US dollar notes due September 2015 yield 15.47 percent.

VTB said in a Dec 30 e-mailed response to questions from Bloomberg News that it is fully committed to servicing all its outstanding bonds and plans to repay its Singapore dollar notes in a timely manner.

“The market in Singapore has grown,” Deutsche Bank’s Goenka said.

“It now follows international markets more closely but few banks provide enough liquidity, so moves can be steeper.”