Important Events
Last Thursday, Bank Indonesia kept the 7-day Reverse Repo Rate, Deposit Rate and the Deposit Facility Rate at 3.50%, 2.75% and 4.25% respectively. It is the bank’s view that economic recovery is continuing at a solid pace although they are uncertain if tighter global monetary policy would restrict capital flows and intensify currency pressure in Indonesia.
The Indonesian economy grew by 3.5% YoY in the third quarter, which is much slower than the 7.07% YoY growth in the second quarter. Bank Indonesia is expecting a healthy growth pickup in the fourth quarter as retail sales and manufacturing PMI in November has strengthened on the back of the reopening of economic sectors. The central bank is maintaining its accommodative monetary policy stance as it is purchasing government securities to fund the 2021 State Revenue and Expenditure Budget. These purchases are projected to last until 31 December 2021.
Combined with the need to address the urgent issue of climate change, the IFRS Foundation Trustee has announced three developments to provide financial market participants more transparency on climate and sustainability issues. First, a new International Sustainability Standards Board will be formed. Second, the Climate Disclosure Standards Board and the Value Reporting Foundation will be consolidated by June 2022. Lastly, the IFRS has published a list of prototype climate and general disclosure requirements in preparation for the new International Sustainability Standards Board.
At the same time, the Basel Committee is also preparing a group of potential measures to address climate-related financial risks to the banking system. The Committee is gathering feedback and aims to create a set of principles for the effective supervision of climate-related financial risks for banks.
Asian High Yield Bond Index
The Bloomberg Barclays USD Asian High Yield (“HY”) Index gained 1.3% last week, as most Chinese real estate bonds rallied.
Bonds of Kaisa Group rebounded after the company reportedly sold a residential government land in Castle Peak Road to Francis Choi that is worth RMB 3.8b. The group’s securities unit also suspended services for Mainland China clients in an attempt to avert operational risks and protect its reputation. KAISAG 11.700% 11Nov2025 Corp (USD) increased from 29.96 cents to 39.58 cents.
On Friday, Fitch Ratings downgraded China Aoyuan Group Limited’s long-term foreign currency issuer default rating to ‘B-‘ from ‘B+’, citing the group’s decreasing access to funding in capital markets. The rating agency said that the company’s asset disposal on Robinson Road is small relative to its maturities in 2022, and may not be in time to sell its other assets. Fitch is concerned about the group’s execution risks. CAPG 8.500% 23Jan2022 Corp (USD) fell from 45.55 to 40.31 last week.
On Wednesday, Agile Group reported that it has agreed to issue a convertible bond in an aggregate principal amount of around HKD 2.42b at a 7% coupon rate. The bonds could be exchanged into around 87m shares of A-Living, representing around 6.2% of its existing issued shares, based on the initial exchange price of HKD 27.48 per A-Living share.
Agile Group Holdings also announced that it would be repaying its HKD 3,344,659,000 loan and USD 60m loan due today. The borrowings were drawn from its May 2018 term loan facility. Perpetual securities of the Agile group posted gains. The AGILE 7.750% Perpetual Corp (USD) increased from 58.02 on 12 November 2021 to 65.09 to 19 November 2021.
On Wednesday, Evergrande Group reported that the Group has disposed all its HengTen Network shares of around HKD 1.66b (18% of HengTen shares), at a purchase price of HKD 1.28 per share. The total transaction amount is around HKD 2.1b.
On Wednesday, Sunac China reported that it raised about HKD 10.8b by completing a top-up placing of 335m shares of the Group at HKD 15.18 per share, selling 158m shares of Sunac Services at HKD 14.75 per share and an interest-free loan from Sun Hongbin’s own capital of around HKD 3.5b.
Interest Rates and Currencies
The USD/SGD currency pair continued increasing and ended Friday at 1.3613, up from 1.3526 a week ago. The US dollar had been rising against a basket of currencies. Support for a stronger dollar was apparent after ECB President Christine Lagarde told attendees at the Frankfurt European Banking Congress that “conditions to raise rates are very unlikely to be satisfied next year”. The 2-year Swap Offer Rate (“SOR”) increased 2 basis points (“bps”) to 0.8975% and the 10-year SOR was flat at 1.8465%. There was also little movement in the 5-year tenors. The 5-year SOR and 5-year SORA-OIS both rose 3bps to 1.5775% and 1.3625bps respectively.
US Treasury yields were unchanged over the past week. The 2-year US Treasury yield stayed at 0.5067% and the 10-year yield dropped 2bps to 1.5462%. President Biden is expected to announce his nomination for the US Federal Reserve Chairman this week. Jerome Powell, who was nominated in 2017 by then-president Donald Trump, will finish serving his term in February next year and may be replaced by Lael Brainard, who is a Democrat.
Corporate Updates and New Issues
On Monday, Singapore Press Holdings (“SPH”) announced the resignation of its Deputy Chief Executive Officer, Mr Anthony Tan, who will be joining MOH Holdings as its Managing Director.
Last Wednesday, SPH informed that it will withdraw its consent solicitation exercise for the SPHSP 3.200% 22Jan2030 Corp (SGD). No consents delivered by noteholders will therefore be accepted. This is in view of the proposed Cuscaden acquisition and will notify if a new consent solicitation exercise is required.
On Thursday, the group uploaded a list of frequently asked questions to the exchange. On the timeline moving forward, SPH answered that shareholders would have to vote down the Keppel Scheme before the Cuscaden Scheme meeting can be convened. Once the Court Sanction for the Cuscaden Scheme has been given, shareholders can then decide on the two offers from Cuscaden Peak. Depending on the proportion of shareholders who elect to receive an all-cash offer, a chain offer for SPH REIT may be triggered.
Chip Eng Seng announced on Monday that its managing director of its precast division has resigned to pursue other career opportunities. Mr Yoong Shaw Leong, who was appointed managing director in April 2018, has left the company with effect from 15 November 2021.
Chip Eng Seng also launched an exchange offer for the SGD 100.00m CHIPEN 6.000% 15Mar2022 Corp (SGD) and SGD 25.25m CHIPEN 4.900% 19May2022 Corp (SGD). The group is asking bondholders to exchange their holdings for new notes. Bondholders who accept the offer will receive new notes that will be issued around 7 December 2021. The new notes will pay an interest of 6.50% annually and mature around 7 December 2024. In addition, those who tender their bonds will be entitled to an exchange fee of 0.25% of their principal amounts and accrued interest, provided they submit their exchange instructions by 29 November 2021, 10am.
The group guided that it will incur a loss for the financial year ending 31 December 2021. However, compared to the prior financial year 2020, the net loss after net-controlling interest for the coming financial year ending 31 December 2021 is projected to be much smaller.
In an earlier announcement, the group said that it has taken active measures to conserve cashflow in the pandemic and would be optimising financing costs. Barring unforeseen circumstances, it announced that it would be able to meet all financial obligations for FY2021 and FY2022. The group has an order book for SGD 1.49b for its construction business segment and has seen encouraging sales at its development projects in Singapore. The Parc Colonial was 100% sold, while Parc Komo was 80.1% sold as at 8 November 2021. The Kopar at Newton had sold 58.2% of its project units, up from 51.9% as at 3 August 2021.
On Thursday, the group notified that it will invest SGD 1m in Admon Consulting Pte Ltd, a 42.73% associate company of the group. The investment comes in the form of a 3-year 10% convertible note with a conversion price that is dependent on amount of cash or investment in Admon Consulting. Chip Eng Seng does not expect the investment to have a big impact on its net tangible assets or earnings as the investment amount is relatively small.
Temasek Financial (IV) Private Limited launched the TEMASE 1.800% 24Nov2026 QSov (SGD) – Retail at an initial price guidance of 1.86% on Monday. Temasek raised SGD 350m, of which SGD 100m was made available to retail investors. Moody’s and S&P have assigned ‘Aaa’ and ‘AAA’ to the bonds. Retail investors have up to today to subscribe to the bonds. Temasek may increase the offering size by up to SGD 500m.
Last Monday, Ascendas REIT informed that it had formed a joint venture with CapitaLand Limited to redevelop 1 Science Park Drive. A Special Purpose Trust will be established, which will be 34% owned by Ascendas REIT and 66% owned by CapitaLand Development based on the companies’ Gross Floor Area contributions. A premium life-science and innovation campus will eventually be built at a total development cost of SGD 883.0m. The development will be completed in 2Q 2025. According to their contributions, Ascendas REIT will invest SGD 132.7m in the joint venture.
Olam International Limited announced that it had secured a USD 1,250m debt facility on Monday. The facility is made up of a USD 1,025m revolving credit facility and a USD 225m 3-year term loan facility. Net proceeds from the facility will be used to refinance Olam’s existing borrowings.
Separately on Tuesday, the group launched a re-tap of the OLAMSP 5.375% Perpetual Corp (SGD), which was increased from SGD 400m to SGD 525m. The issue price was 100.25 cents.
On Monday, Keppel Corporation Limited announced that it will sell its 51% stake in Keppel Smit Towage Private Limited and Maju Maritime Pte Ltd to Rimorchaitori Mediterranei Spa for SGD 133m. Upon its expected completion in the first half of 2022, Keppel Corp will recognize a divestment gain of SGD 72m. Had the transaction complete on 31 December 2020, the group’s net tangible asset per share would have increased from SGD 5.02 per share to SGD 5.06 per share.
Azalea Investment Management informed that S&P Global Ratings has upgraded ratings for the Class A-1 bonds issued by Astrea IV Pte. Ltd. from ‘A (sf)’ to ‘A+ (sf)’. Astrea IV’s existing reserve accounts have exceeded the scheduled amounts by nearly 41% to USD 338m. Moving forward, the funds received from the underlying private equity funds will be shared with the sponsor, Azalea Investment Management.
The manager of Lippo Malls Indonesia Retail Trust (“LMIRT”) announced that it has sold 268,186,070 units in LMIRT to a wholly owned subsidiary of PT Lippo Karawaci Tbk. After the sale, the manager of LMIRT will hold 0.32% of the total issued units while Lippo Karawaci will hold an interest of 58.37% in the trust.
The manager of Cromwell European Real Estate Investment Trust priced the SGD 100m CERTSP 5.000% Perpetual Corp (SGD) at an initial price guidance of 5.125% on Wednesday. Concurrently, two 5-year cross currency swaps were entered to convert the proceeds from the note offering into Euro and the SGD coupon into a fixed rate of EUR 3.55%. The EUR coupon could fall if the REIT manages to meet certain ESG initiatives. For information on this perpetual note offering, please refer to our earlier article “Cromwell European REIT announces SGD NC5 perpetual at 5.125% IPG”. The final price guidance for the notes was 5.00% with the first reset date on 24 November 2026.
Last week, ARA Asset Management Limited announced the results of its consent solicitation exercise. 81.11% of bondholders have voted in favour of the Extraordinary Resolution to make amendment to the ARASP 5.650% Perpetual Corp (SGD). At the same time, 83.07% have voted in favour to change the said terms for the ARASP 5.600% Perpetual Corp (SGD).
Singapore Telecommunications Limited informed on Thursday that its indirect wholly owned subsidiary Optus Finance priced AUD 300m of 7-year fixed rate Sustainability-linked bonds at 2.60%. Following the terms of the offering, the coupon rate of the bonds will step up by 0.25% if Optus does not reduce its greenhouse gas emissions by 25% by 2025.
Liquidators of Hyflux Limited have uploaded a list of FAQs in relation to its recently held online meeting. Responding to the question on expected recovery, the liquidators replied that bondholders are unlikely to receive more than SGD 100m from the sale of the company’s remaining assets. An informal committee representing the perpetual securities and preference shares of the group has been formed. The informal committee may be contacted at hyfluxretailpnp@gmail.com. Otherwise, any other questions or requests for information may be forwarded to hyfluxholders@kroll.com.
The managers of Keppel DC REIT announced on Friday that it had obtained a RMB 400m 5-year credit facility. Under the terms of the loan facility, a mandatory prepayment is required if Keppel DC REIT Management is no longer the manager of the REIT, or if the manager’s percentage of units owned is less than 50 percent.
