Important Events
Last Wednesday, the Federal Reserve issued the Federal Open Market Committee statement and kept the target range for the federal funds rate at between 0 to 0.25%. The Committee expects to keep this target range until labor market conditions have reached maximum employment and average inflation has exceeded 2 percent. Purchases of Treasury securities will be maintained at a rate of at least USD80 billion per month while agency mortgage-backed securities will be purchased at USD40 billion per month. In the press conference following the rate decision, Chairman Jerome Powell clarified that the central bank would not be altering the rate of asset purchases anytime soon as the pace of economic recovery has moderated in recent months.
Last week, the Bank of England updated the terms of the Covid Corporate Financing Facility, which will stop purchasing Commercial Paper with effect from 23 Mar 21. Issuers issuing new Commercial Paper into the Facility will be reviewed if the new issues comply with the purpose of the facility, as well as the maximum drawing limit of GBP300m. In addition, issuers have to provide supporting evidence to the central bank proving that its recent credit rating is of investment grade credit quality.
Asian High Yield Bond Index
The performance of the Barclays USD Asia High Yield Bond Index was unchanged during the week ended 29 Jan 21. Chinese high yield real estate bonds reacted mildly to the Fed’s interest rate decision as they remained at recent highs.
Top weekly gainers include the FWDGRP ZERO Perpetual Corp (USD), SHDOIS 6.500% 05Nov2023 Corp (USD) and GZRFPR 5.875% 23’s. Easy Tactic Limited, the issuer of the GZRFPR bonds announced the issuance of USD500m senior notes due 2023 at a coupon rate of 11.75%. The issuer also announced that the maximum acceptance amount for the tender offer for the GZRFPR 7.000% 25Apr2021 Corp (USD) shall be capped at USD450m.
Bonds of China Fortune Land Development Co Ltd (“CFLD”) resided among the worst performers. Indicative prices of the CHFOTN 8.050% 13Jan2025 Corp (USD) fell to 37 from 50 over the week. Fitch Ratings downgraded the issuer’s credit rating from B to CCC. Fitch believes that the increasing uncertainty over CFLD’s access to financing and difficult capital market conditions will expose it to excessive refinancing risks in the near term.
Sunac China issued a new 4-year onshore corporate bond this week. The issue size is CNY1.58 billion, with the coupon rate at 6.8%. The bond is named "21Sunac01", and the proceeds will be used to refinance existing indebtedness and other general corporate purposes.
Zhenro Properties announced this week that they are proposing to redeem the ZHPRHK 9.150% 08Mar2022 Corp (USD). The total outstanding principal amount of the bond was USD310m.
Interest Rates and Currencies
The USD/SGD currency pair ended the week unchanged at 1.3290. Last week, MAS published their discussions for consumer price developments in December 2020. In the joint press release by MAS and the Ministry of Trade and Industry, the central bank said that higher oil prices will likely lift external inflation this year, although the gains will be capped by dampening factors including low wage growth and low commercial rents.
The decrease in foreign employment has placed pressure on accommodation costs but private transport prices may grow underpinned by higher demand. This year, MAS expects core inflation to average less than 1%, while CPI is projected to expand between -0.5% and 0.5%. The two-year SGD Swap Offer Rate (“SOR”) increased by 2 basis points (“bps”) to 0.2875% but the ten-year SOR remained flat at 1.0413%.
Last week, US Treasury yields fell on the back of dovish comments from the Federal Reserve. The two-year Treasury yield lost 1bps while the ten-year Treasury yield decreased 2bps to 0.1093% and 1.0655% respectively.
Corporate Updates and New Issues
Last Monday, PT Ciputra Development Tbk announced that it has priced S$100m of fixed rate bonds at a coupon rate of 6%. The new bonds were issued under the S$400m multicurrency medium term note program dated on 2 Feb 21. Under the terms of the notes, the issuer may redeem the notes in certain taxation events. Additionally, noteholders are also entitled to sell their holdings in a change of control event or when shares have ceased trading, or have been suspended on the exchange.
Ascott Residence Trust (“ART”) announced the completion of its divestment in Guangzhou Hai Yi Real Estate Development Co. Ltd, Ascott Guangzhou on Monday.
On Wednesday, the company announced results for the second half of 2020 (“2H20”) and financial year ended 31 Dec 20. Revenue declined 39% YoY to S$161.4m in 2H20 from S$266.5m in 2H19. Net income before changes in fair value of financial derivatives, investment properties and assets held for sale fell 80% YoY to S$17.5m and the trust recorded a S$379.1m charge due to the fair value changes in investment properties, resulting in a total loss of S$309.6m in 2H20. Revenue per available unit (“REVPAU”) dropped 69% to S$49 from a year ago.
Operating profit before working capital changes decreased to S$60.5m while cash flows from operating activities fell to S$48.9m in 2H20 from S$106.5m in 2H19. Cash and cash equivalents increased to S$454.1m at the end of December, which exceeded its interest bearing liabilities of S$333.1m. There are approximately S$1 billion of cash on-hand and undrawn credit facilities, which is more than adequate to cover 3-years of fixed costs under a zero-income scenario.
Concurrently, ART announced the acquisition of student accommodation in Atlanta at a consideration of USD95m (~S$126.3m). With this acquisition, Ascott Reit’s investment mandate will be expanded to include student accommodation with effect from 27 Feb 21. Part of the divestment proceeds will be redeployed into the acquisition of the 183-unit Signature West Midtown. The property has 525 beds and is the first purpose-built student accommodation asset. The acquisition, which could improve 2020 pro-forma distribution per stapled security by 4.4%, is expected to complete by the end of 1Q21.
Last Monday, Ezion Holdings Limited notified that it is seeking approval to delay the release of its FY2020 financial statements. The company is working on its restructuring plan and discussing plans with potential investors. There are also plans to hold meetings with the secured and unsecured creditors of the company to gather feedback on the firm’s restructuring plan.
On Friday, Ezion announced that it will dispose its liftboat “Teras Conquest 7” to Elite Point Pte Ltd for a cash consideration of USD13.0m. Upon completion, Ezion will use the proceeds to pay down the group’s secured bank loans. Had the transaction been effected on 31 Dec 19, the basic earnings per share of the group will increase from a loss of USD16.51 cents per share to a loss of USD16.49 cents per share.
Keppel REIT uploaded a notice on the Singapore Exchange on Monday, addressing bondholders of the S$200m 1.9% convertible bonds due 2024. In connection with Condition 6.3(a)(iii) and Condition 6.4(o) of the terms of the bond, the company has announced that the conversion price of the convertible notes will be lowered to S$1.3887 per unit from S$1.4278 per unit with effect from 1 Mar 21.
Last Tuesday, LMIRT Management announced the completion of the Lippo Mall Puri acquisition. Consequently, Puri Mall will become the flagship property within the REIT’s portfolio. Puri Mall is the only retail mall in the St. Moritz Jakarta Integrated Development, the biggest mixed-use development in West Jakarta. The REIT now has an enlarged AUM of IDR19,216.1 billion. The net lettable area of the portfolio has grown to 962,769 square meters.
Through an exchange announcement on Wednesday, KrisEnergy Limited informed that the company applied to the Singapore Court to sanction the scheme of arrangement dated 20 Nov 20. In yet another exchange notice, KrisEnergy announced that the company is seeking to amend parts of the preamble to prayer 1 of the 6th Extension Application to extend the orders granted in HC/ORC 6167/2019, HC/ORC 7990/2019, HC/ORC 1492/2020, HC/ORC 3150/2020, HC/ORC 4997/2020 and HC/ORC 6434/2020 to 16 Apr 21.
Olam International Limited announced on Wednesday that it will be issuing a S$100m retap of its existing OLAMSP 4.000% 24Feb2026 Corp (SGD) at an issue price of 100. Issued under the EMTN program dated 6 Jul 12 and updated on 5 May 20, the securities will be consolidated with the OLAMSP 4% ‘26s to form a single series.
In an exchange notification on Wednesday, Frasers Hospitality Asset Management said that Mr Colin Low Hsien Yang has resigned as Chief Executive Officer of the Frasers Hospitality Trust to pursue other professional interests. Mr Low has been CEO since 1 Jul 19. The Board of Managers are looking for a replacement and will make another announcement in due course.
AIMS APAC REIT Management announced the proposed acquisition of 315 Alexandra Road on Wednesday. The REIT will pay an acquisition cost of S$106.6m for the property, which has a gross floor area (“GFA”) of 16,647 square meters and remaining land tenure of 34.2 years. The property is sold on a partial leaseback arrangement where Sime Darby Property Singapore Limited will lease back 70% of the building’s GFA for a minimum period of 10 years. Upon completion, the weighted average lease expiry will expand to 7.8 years. To illustrate the financial effects of the acquisition, had the acquisition been completed on 31 Mar 20, the aggregate leverage of the REIT will increase to 39.0% post transaction from 34.8%.
Through an exchange filing on Wednesday, Cathay Pacific Airways Limited announced the proposed issue of HKD6.74 billion of 2.75% convertible bonds due 2026. Bondholders may convert their holdings at an initial conversion price of HKD8.57 per share on or after 18 Mar 21. The notes are guaranteed by the airline with Cathay Pacific Finance III Limited as the bond issuer.
On Thursday, Genting New York LLC (“GENNY”), a wholly-owned subsidiary of Genting Malaysia issued a USD525m 5-year bullet bond priced at 295bps above US Treasuries. The bond was rated BBB- by S&P and Fitch, reflecting the parent’s credit profile as the company’s strategic importance and linkage to the overall group. The outlook of the group is carried by the long-term exclusive gaming license in Malaysia which derives a steady revenue from the mass-market, although this is moderated by the rising COVID-19 cases in the country as Malaysia currently undergoes a second Movement Control Order which prevents interstate travels and closure of all gaming and gambling outlets.
Keppel Corporation Limited (“Keppel Corp”) published its FY2020 results and uploaded a media release on 28 Jan 21, stating that it will restructure its offshore and marine business into three parts – a Rig Co, a Development Co and an Operating Co. The Rig Co and Development Co will hold S$2.9 billion of rig assets, which will both require S$500m of funding from Keppel Corp to complete the unfinished rigs. The Operating Co will be an asset-light company focusing on design, engineering and procurement. Subsequently, the Operating Co will exit the offshore rig building sector and grow its presence in the renewables infrastructure such as the offshore wind farms and tidal energy solutions.
At the same time, the conglomerate informed that it has formed a second framework deed with Borr Drilling Limited to extend the scheduled deliveries of the five jackup rigs to 2023, with the first delivery of rigs in May 2023. Keppel Corp may sell the uncompleted rigs to a third party at any time prior to delivery. The framework deed also amends certain terms in the credit agreement such as the deferment of accrued interest and amendment of the final maturity date.
Paideia Capital UK Trust, the student accommodation fund of Metro Holding Limited has acquired a property in Bristol for a purchase consideration of GBP30.1m (~S$54.8m). The property has 181 beds covering 1,025 square feet that was completed in August 2020. Metro’s 30% equity commitment for the purchase is approximately GBP4.0m (~S$7.2m).
Last Friday, the manager of ESR-REIT disclosed that its trustee had signed a commitment letter for a S$320.0m new unsecured loan facility with HSBC, Maybank, RHB Bank and UOB. The facilities consist of a S$160.0m five-year loan facility and a S$160.0m four-year revolving credit facility. Any drawn down capital will be used for the REIT’s working capital and the repayment of the S$31.0m and S$160.0m loans due in June 2021 and October 2021 respectively.
On Saturday, Singapore Press Holdings Limited (“SPH”) announced that its wholly-owned UK subsidiary, Student Castle Holdco Limited has issued nearly GBP145.8m of bonds to Straits Ten Pte. Ltd. The issuer will pay an interest rate of 3.22% per annum every quarter and the bond is repayable on demand. Straits Ten Pte. Ltd. is a wholly-owned indirect subsidiary of SPH.
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