Olam International

[arthur]

hi people, is the currently listed bonds and preference shares of olam only eligible to institutional investors?

I have tried searching for them on my iocbc platform, cant find them

You have to prove you have certain amount of assets in any banks and approach the bankers/RMs for the list of bonds available in the market.

Its not available in nomal platforms as each lot is $250k each though I understand there are $150k and $350k tranches available too.

Please do remember that the RMs/bankers that serve you could be incompetent at times when you needed them most for advise. So take their recommendations with several bowlful of salts.

Hope this helps.
Cheers

[money]

hi people, is the currently listed bonds and preference shares of olam only eligible to institutional investors?

I have tried searching for them on my iocbc platform, cant find them

You have to prove you have certain amount of assets in any banks and approach the bankers/RMs for the list of bonds available in the market.

Its not available in nomal platforms as each lot is $250k each though I understand there are $150k and $350k tranches available too.

Please do remember that the RMs/bankers that serve you could be incompetent at times when you needed them most for advise. So take their recommendations with several bowlful of salts.

Hope this helps.
Cheers

thanks, you have been very helpful. i think the RM will just roll eyes at me, haha, my assets wont generate enough fees for the RM/bankers

[pianist]

gst gg to increase soon?
i think precious cash gg to be burnt
i saw one of the mudded flooded big farm owned in africa in mw report, i was thinking hard, isthere value in such a farm?

[RBM]

I can confirm that you'll need to be a so-called "Accredited Investor" in order to take a punt on Olam's Bonds.

To give some idea of the recent performance of Olam's S$ 7% p.a. Perpetual Bonds (and they are Bonds, not preference shares, so they and other bond holders have first call on the assets should Olam go belly-up - be darn careful to distinguish between bonds and preference shares)..........

- In the weeks before MW issued its Olam report, the Perpetuals were trading rather monotonously in the S$ 98-99 range.
- Following the issue of MW's report, the Perpetuals plummeted, reaching a low in the S$ 71-73 range, towards the end of last week.
- They have since recovered a bit. Last quoted price I have seen is a tad under S$ 77. Clearly there is some upward momentum since the Temasek backed announcement of yesterday evening.

Unfortunately I'm vested - I bought in when the S$ Perpetuals were issued last year, at S$ 100.25. I recall at the time that only a proportion of applicants were "successful" - I was rather pleased with myself that I had been able to get some units (at par value), and I was pleased with the yield. So now I'm sitting on quite a paper loss. My advice: don't do what I did!

Should you wish to go in to Olam's Perpetuals now, you'll need a minimum of ~ S$ 193,000. They have non-perpetuals as well but I don't have the price movements of those to hand.

Hope this helps,
RBM

hi people, is the currently listed bonds and preference shares of olam only eligible to institutional investors?

I have tried searching for them on my iocbc platform, cant find them

You have to prove you have certain amount of assets in any banks and approach the bankers/RMs for the list of bonds available in the market.

Its not available in nomal platforms as each lot is $250k each though I understand there are $150k and $350k tranches available too.

Please do remember that the RMs/bankers that serve you could be incompetent at times when you needed them most for advise. So take their recommendations with several bowlful of salts.

Hope this helps.
Cheers

thanks, you have been very helpful. i think the RM will just roll eyes at me, haha, my assets wont generate enough fees for the RM/bankers

[money]

This saga is getting more interesting.

Think about it, any future debt issues (in the near term) will likely cost 10% interest. If the company buys a farm that returns 12% on equity, it will only make $2 for every $100 borrowed.

If you are a shareholder, are you comfortable with earning just $2 for every $100 borrowed?

I am assuming the farm can return 12% on equity, i think i am being very generous.
If the weather turns a little bad, the harvest may still return 10% on equity, so the company essentially breaks even, as 10% profits on equity is neutralised by 10% interest payment. The company borrows money to break even, isnt that stupid?
If the weather turns worse, the harvest is bad, the farm produces just enough crops to pay for fertilisers and labour, so for every $100 borrowed, the company loses 10% (due to interest), isnt that scary? There is no margin of safety in such a business.

You may argue that the harvest can be bountiful, but as investors, you should always be prepared for the bad days. And during bad times, you need cash to tide you over.

Simple math, simple common sense, this is the business model they have. How good is this business model?

[Musicwhiz]

To me as a layman to Olam's business, all I see is year after year of capital raising, refinancing of debt, taking on more debt and negative FCF. My conclusion would be that this business is super low margin and sucks cash worse than a black hole!

It could be that Olam has this stated policy of "string of pearls" acquisitions - where they acquire small mills/farms which add on to their portfolio of assets and commodities. This would mean buying mostly disused or inefficient assets and then "turning them around". Lead time and funds required is anyone's guess. Plus you would need to integrate it and synergize the place. Not easy forone acquisition, so imagine you are doing ten of these in a year.

I never believed in companies which had to consistently acquire to grow. Even for a companies which acquires, you'd need time to digest the food before eating some more, right? Doesn't make sense to keep acquiring just for the sake of growth. Actually, it's "growth" in inverted commas.

[arthur]

I can confirm that you'll need to be a so-called "Accredited Investor" in order to take a punt on Olam's Bonds.

To give some idea of the recent performance of Olam's S$ 7% p.a. Perpetual Bonds (and they are Bonds, not preference shares, so they and other bond holders have first call on the assets should Olam go belly-up - be darn careful to distinguish between bonds and preference shares)..........

- In the weeks before MW issued its Olam report, the Perpetuals were trading rather monotonously in the S$ 98-99 range.
- Following the issue of MW's report, the Perpetuals plummeted, reaching a low in the S$ 71-73 range, towards the end of last week.
- They have since recovered a bit. Last quoted price I have seen is a tad under S$ 77. Clearly there is some upward momentum since the Temasek backed announcement of yesterday evening.

Unfortunately I'm vested - I bought in when the S$ Perpetuals were issued last year, at S$ 100.25. I recall at the time that only a proportion of applicants were "successful" - I was rather pleased with myself that I had been able to get some units (at par value), and I was pleased with the yield. So now I'm sitting on quite a paper loss. My advice: don't do what I did!

Should you wish to go in to Olam's Perpetuals now, you'll need a minimum of ~ S$ 193,000. They have non-perpetuals as well but I don't have the price movements of those to hand.

Hope this helps,
RBM

Hi RBM

Sorry to hear about your holdings.
Must have been a harrowing two weeks for you where every 1% change is $2500 per lot. That's not a retail investor can normally pictured.

Have you consider selling it or are the bankers advising you to hold on?
I understand from my RM that they are still advising their clients to hold onto Olam bonds.

I think main issue for bondholders like us is the credibility of the issuing companies.
We just want some yield and things erupted all the sudden.

Heard alot of rich retirees bought Olam bonds and got trapped now.

If I may share an observation, (was actively monitoring Olam bonds for past 2 wks for curiosity), last week surge in stock price was not companied by bond price increase.

Perhaps MW allegation of Olam banks withdrawing liquidity may not be too far from truth.

I think Temasek is aware about the numbers of retirees holding onto to Olam bonds and do not wish another Hong Lim park uprising like Lehman Mini-bonds again.

Anyway, I do sincerely hope everything would turns out fine.

Cheers.

[money]

If i am rich, i would most likely have invested in the perpetual bonds, 7% yield is too hard to resist.

Sorry to hear that some forumners here are vested. I will stop my commenting on this company, I realise that i have been quite insensitive in my criticisms of this company, i sincerely apologize. Hopefully my criticisms are all groundless.

[propertyinvestor]

In AIG's case, the operating assets of the subsidiaries aren't really as liquid and readily marketable as the commodities that Olam has? Furthermore, subsidiaries of AIG are generally regulated and hence the assets can't be easily transferred or liquidated. While I would agree that the mismatch in the entities holding the assets vs the entities needed the cash may be an issue for Olam, I won't necessarily paint them in the same brush as AIG during GFC.

The intention of the analogy was to draw attention to the asset-liability mismatch.

Of course, the AIG operating subsidiaries differed in important ways from Olam's subsidiaries:

1. The AIG subsidiaries were independently operated, heavily regulated, well capitalized and profitable; and

2. They were desirable assets for others to own, as shown by the sale of American Life Insurance to Metlife and the successful IPO of AIA

Olam's operating subsidiaries have essentially no value outside of Olam. It's like trying to use a car's parts separately - the engine, wheels, body etc have no functional use on their own, they have to be combined to be useful. The standalone operations (farms, processing factories) do have an independent value, though Muddy Waters' work suggests the value assigned to them by Olam is also inflated.

For Olam's commodities, most of the time they are sitting in a warehouse or silo in Africa, or on a ship enroute to a customer. These commodities are readily marketable only when you actually deliver at the time and place specified. It takes time and money to move commodities, and along the way spoilage and theft will take their toll.

The only way you can expect to sell a commodity futures contract and deliver against it with no loss is if you already own the commodity at the location specified in the contract e.g. you trade copper futures in London, and you already have a pile of copper sitting in a LME warehouse. This isn't to say that hedging with futures is useless, just that it is not a perfect hedge because of logistics costs.

In any case, for many of Olam's products, no futures markets exist. Coffee and cotton, sure. Cashews and almonds? Dream on. Sure, it can execute fixed-price contracts, but it has already suffered defaults by both suppliers and customers alike, so clearly Olam is taking a lot of counterparty risk. It is fundamentally a high-risk, low-return business, which raises the question of how any intelligent investor could possibly be interested, except at a very low price.

So why is Temasek Holdings buying loads of it?

[Temperament]

I think Temasek is aware about the numbers of retirees holding onto to Olam bonds and do not wish another Hong Lim park uprising like Lehman Mini-bonds again.

Ha! Ha!
i have not come across even once, the Papys really worry about us.
Since When? - "Cheng Hu Boh Chap Sze Gin Tie Chee" &
Caveat Emptor is always their motto even when GLCs are involved. But
to a certain degrees, Papys are right.