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Having looked at markets since 2003, I can't remember another time when there is this much capital raising in the form of bond issue to retail investors, preference shares to retail investors.
Its pretty interesting because most of the time capitamall would just do a rights issue or placement.
Why all of the sudden you see them placing out bonds to investors, hyfluc doing preference shares.
Is it because these businessmen seem to think that the trend for interest rates will go up from here and that is why they quickly tap the markets to finance first?
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That's part of the equation - greater interest rate tightening in Europe and Asia due to inflation.
Swiss commodities giant Glencore is planning to list on London and Hong Kong. Add that with the recent Hutchitson port trust IPO, and the examples you mentioned, I am speculating 2 scenarios:
1) The companies are bullish, and are building their war chest to fund future M&As.
2) They are beefing up their balance sheets to prepare against near term uncertainties - for eg, US 10 year treasuries getting downgraded with resulting bursting of the US bond bubble....... Today's liquidity from banks can easily dry up like in 2008/2009. Diversifying to alternative sourcing of finance now that market sentiment is still optimistic.
Just google singapore man of leisure
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Expansion is cheaper and/or ROI higher than the cost of borrowing.
One thing need to be careful is the rising singapore dollar translating the profit returning back.
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i believe many are anticipating govt bond yields to increase significantly. hence this action to lock in the low yields
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The key things abt HYFLUX.
They are perpetual , callable , cumulative.
1) Cumulative - If they don't pay the dividends , it would accumulate until the next payment. Worst case scenario, they never pay dividends at all, which is possible, but so far they have been paying their dividends, so its just a risk you have to take like when buying shares.
2) Perpetual - No end date if they decide not to redeem as stated for 2018, and if they decide not to redeem, the interest rate goes up to 8%.
3) Callable - At their own discretion, they can choose to call it off whenever they like.
To someone who is not able to achieve 6% this seems attractive, but then have to take note if the PF might be illiquid and risk of not been able to sell if there is a need too.
The terms are beneficial to the company as it helps protect their interests, and thus the higher interest rate.
In the end, its a calculation of pros and cons.
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15-04-2011, 07:10 AM
(This post was last modified: 15-04-2011, 07:15 AM by freedom.)
Hyflux can only call the pref share off on or after 2018. otherwise, there is nothing good for investors.
although it is stated as perpetual, I don't think hyflux will let it run for ever unless the borrow cost will never be low before hyflux bankrupts.
and now definitely is not such bad time that companies need to beg investors for money, why would companies issue security not benefitting themselves the most.
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(15-04-2011, 06:08 AM)d.o.g. Wrote: The companies have realized they can screw the retail investors, offering just 2-3% in coupons, instead of paying the banks 4-6%.
just got annual report for aspial. it's paying 2-3% for bank loans.
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