Bond Market Monitor: mm2 Asia receives interest from a private equity investor

Important Events

·       The Reserve Bank of Australia (“RBA”) kept its cash rate unchanged at 0.10% on Tuesday. It has also decided to purchase an additional AUD100 billion of issued sovereign debt as a form of monetary support. Meanwhile, the bank observed that an economic recovery is underway as there were improvements in employment and retail spending. However, inflated remained muted and the bank expects the recovery path to be uneven. “The current monetary policy settings are continuing to help the economy by lowering financing costs for borrowers, contributing to a lower exchange rate than otherwise, supporting the supply of credit needed for the recovery and supporting household and business balance sheets,” says RBA in its monetary policy statement.

·       The Bank of England maintained the bank rate unchanged at 0.1% on Thursday. Policymakers see the possibility of a negative interest rate scenario, although have broadly refrained from putting any certainty to that implementation. The bank however expects the UK GDP to recover quickly towards pre-Covid levels over 2021 supported by the roll outs of vaccinations. That said, the bank stayed on the conservative side saying that “if the outlook for inflation weakens, the Committee stands ready to take whatever additional action is necessary to achieve its remit.”

Asian High Yield Bond Index

·        The performance of the Barclays USD Asia High Yield Bond Index increased by 0.3% over the past week. With China’s central bank reiterating that it will remain neutral on monetary policies, the interbank lending rate (Overnight Shibor) dropped from a high, signalling that the concern for a tight cash environment has faded. Overall, the liquidity risk in the money market system continued to ease.

·        Bonds of China Fortune Land Development Co Ltd (“CHFOTN”) dropped across the curve as the company announced to halt all debt payment starting from Wednesday. But later on Friday, the firm clarified that the news is not true, and the bond prices rebounded a little as a result. Overall Chinese real estate HY bonds are not significantly affected by this news and remained resilient over the week.

·        Sunac China announced a positive profit alert, it is expected that the profit attributable to owners of the company in 2020 will increase by over 35% YoY. It is also expected that the net gearing ratio of the group will be below 100%, its non-restricted cash to current borrowings ratio will exceed 1.0x and its assets to liabilities ratio after excluding receipts in advance will be below 80%.

·        Country Garden Holdings announced that the group achieved attributable contracted sales of approximately RMB 40.32 billion for the month of January 2021, up 22.5% YoY. The attributable contracted sales GFA was approximately 4.56 million square meters, up 20.3% YoY.

Interest Rates and Currencies

·       The greenback strengthened against the Singapore dollar as investor confidence regained on vaccine roll-outs and discussions on US fiscal pandemic support packages. Overall, the USD/SGD pair rose 0.4% to close at 1.3346 for the week ended 5 Feb 21. The two-year SGD Swap Offer Rate (“SOR”) fell 1bp to 0.28% while the ten-year SOR gained 11bps to 1.15%.

·       US Treasuries fell on strong equity market gains. Positive jobs data supported investor hopes for a sustainable economic recovery. In the US, nonfarm payrolls increased by 49,000 jobs.  Overall, the two-year US treasuries yield (“UST”) was fell 1bps to 0.10% while the ten-year UST gained 10bps to 1.16%.

Corporate Updates and New Issues

·       Singapore Press Holdings (“SPH”) on Monday announced that it has entered into an investor subscription agreement with a Temasek Holdings subsidiary to merge their respective meetings, incentives, conventions and exhibitions subsidiaries to form SingEx-Sphere Holdings Pte Ltd. Pursuant to the agreements, Temasek will own 60% in SingEx-Sphere while SPH will own the remaining 40%. The aggregate subscription price payable by SPH to SingEx-Sphere is equivalent to S$24.4m.

·       Ascott Residence Trust on Monday disclosed certain conditions of borrowings under a facility agreement dated 1 Feb 21 between the trust and United Overseas Bank Limited. Pursuant to the conditions of the facilities, it will be a mandatory prepayment event if Ascott Residence Trust Management Ltd ceases to be the manager of the trust or a wholly owned subsidiary of CapitaLand Financial Ltd.

·       Chip Eng Seng Corporation Ltd announced on Monday that it has utilized S$4.7m of net proceeds raised from its rights issue to pay down interest on bank borrowings and notes. It has also spent S$9.4m in other working capital expenditure such as payment of salaries and bonuses.

·       Lippo Malls Indonesia Retail Trust on Tuesday launched a 5 year senior unsecured bond. The USD200m LMRTSP 7.500% 09Feb2026 Corp (USD) carries a coupon rate of 7.5%, tightened from the initial price guidance of 8.125%.

·       Surbana Jurong Pte Ltd launched a 10 year senior unsecured bond on Wednesday. The S$250m SRBJNG 2.480% 10Feb2031 Corp (SGD) carries a coupon rate of 2.48%, tightened from the initial price guidance of 2.75%.

·       Olam International Ltd on Wednesday announced that it will issue additional S$100m of the existing S$400m OLAMSP 4.000% 24Feb2026 Corp (SGD) to be consolidated into a single series. The notes were admitted to the official list of the SGX-ST with effect from 9am on 4 Feb 21.

·       Keppel Corporation Ltd (“KCL”) on Wednesday announced that it has launched a China logistics property fund to invest in developing high-quality logistics assets in key logistics hubs in China. This is Keppel Capital’s inaugural China-focused logistics property fund, which has an initial total equity commitment of about RMB1.4 billion. Keppel Capital’s wholly-owned subsidiary Keppel Capital China (SG) Pte Ltd will serve as the fund’s investment manager.

In an separate announcement, KCL announced that it has acquired a remaining 25% of the charter capital of Riviera Point Ltd Liability Company (“RP”) incorporated in Vietnam. In respect of the plot of land of approximately 89,727 square metres located in district 7, Ho Chi Minh City, RP has completed the first two phases of the residential and commercial development known as Riviera Point. The aggregate consideration for the stakes is VND535 billion (~S$31.67m) and will be paid in cash over two tranches.

·       On 3 Feb 21, Century Sunshine Group Holdings informed the Singapore exchange that it has emailed an update to creditors on the possible debt restructuring of the company. Noteholders who want to receive the 30 Jan 21 update may request for a soft copy by sending an email to Amanda-CS.tan@hk.ey.com and Daphne.cheung@hk.ey.com.

·       Last Wednesday, mm2 Asia Ltd proposed to undertake a renounceable underwritten rights issue of up to 1.2 billion new ordinary shares in the capital of the company at an issue price of S$0.047 for each rights share on the basis of one rights share for every one existing ordinary share in the capital of the Company. The issue price represents a 60.83% discount to the closing price of S$0.12 per share on 1 Feb 21. The estimated gross proceeds from the transaction are expected to be about S$54.65m, and it intends to utilize the net proceeds to repay the S$50m MMASIA 7.000% 27Apr2021 Corp (SGD). The proposed rights issue is subjected to approval of the shareholders at an extraordinary general meeting to be convened by the company.

Thereafter on Sunday, MM2 announced that it has received a non-binding term sheet that from a Singapore private equity investor expressing interest in a potential acquisition involving taking a minority stake in one of the group’s core businesses. The term sheet has not been entered into.

·       Sembcorp Industries (“Sembcorp”) on Friday announced the appointment of a new Group Chief Financial Officer (“CFO”) Eugene Cheng who will join the company on 8 Mar 21. Mr Cheng is currently the Chief Corporate Officer of SATS Ltd, overseeing its business development, strategic investments and mergers and acquisitions and corporate strategy among others. At Sembcorp, he will manage the group’s finance, strategy, portfolio and commercial teams. He will take over from Sembcorp’s current Group CFO, Mr Graham Cockroft, who has decided to leave the company to relocate back to New Zealand.