SIA 5-year retail bonds

[lzydata]

No change for now to SilkAir B-737 Max 8 order of 31 more planes

https://www.straitstimes.com/singap...o-silkair-b-737-max-8-order-of-31-more-planes

Obviously this is not directly related to the SIA bond issue and not for bondholders to decide, but it literally says in the issue's pricing supplement that the proceeds will be used for "aircraft purchases and aircraft related payments." So we must hope that SIA/SilkAir will rethink this

 

[revhappy]

What is the current subscription status?

 

[hwarzoner]

So Hor if really even only allocated 10k lots , the interest you get is really pathetic. Must really buy many lots.

 

[BBCWatcher]

It’s odd and somewhat concerning that Singapore Airlines didn’t bother to get a ratings agency to sign off on these unsecured bonds. They are unsecured and “unrated,” meaning they don’t have a S&P, Moody’s, or Fitch bond rating. I previously stated they are “investment grade,” but that’s not actually true, so I’d like to correct that now. Their advertised yield suggests they’re investment grade in character (assuming Singapore Airlines gets enough subscribers), but that’s as far as it goes — they’re not investment grade.

So why didn’t Singapore Airlines get a bond rating? The only reason I can think of — and it’s not a good one for prospective bond holders — is that Singapore Airlines’ management does not like the bond rating it would have obtained.

Does this issue hold the dubious honor of being the first unrated retail bond offer in Singapore? I don’t really care too much about accredited investors buying random paper at $250K per increment — although MAS needs to raise the AI threshold since it’s too low right now. But it’s pretty easy to see how unrated retail bond issues could cause lots of future grief for retail investors. MAS ought to take a look at that. (How about a $5K per issuer per retail investor cap for unrated bonds, $20K per issuer per retail investor cap for investment grade rated bonds?)

Over in the United States with its huge retail investor community, retail corporate bonds (rated and unrated) really don’t exist — properly so, in my view. Low cost bond mutual funds and ETFs exist and are popular, and they’re a lot safer since they typically hold bonds from scores or hundreds of issuers. So I’ll put in another endorsement of MBH here, which is the closest thing Singapore has right now to a low cost investment grade corporate bond fund. MBH isn’t perfect, but it’s the best there is at the moment in Singapore dollar denominated bonds.

Anyway, I’m uncomfortable with this one. I think you should pass or, if you insist on participating, keep it down to a very low single digit percentage of your net worth and make sure it’s age/risk appropriate in the circumstances. If you’re saving up for a wedding that happens to be 5.5 years from now — and weddings are slightly frivolous, so if the bond defaults the party will simply be less lavish — then OK, that might make a little sense at 4% or less of net worth. Or if you’re older, in retirement or near retirement, want a fixed income vehicle, and don’t mind investing 2% or less of your net worth in this particular bond, OK, press the button(s). Also, these dollars should be dollars that you have high confidence you will be locking up for 5 years. Yes, there will be a thin secondary market for these bonds, but it won’t be a particularly attractive one since it will be thin. You should fully plan on being on board this bond for the whole 5 year duration.

 

[limster]

Like my analysis for Astrea IV, I just look at comparable bonds. In this case, we have SIASP 3.75% SGD maturing 2024. Its current yield is 3.012%.

If SIA is offering 5 year retail bond at 3.03%, higher than the yield of their current similar bond held by institutions and accredited investors, no wonder all the institutions chiong for the placement tranche of this bond. Its oversubscription level at placement is higher than the oversubscription for the Astrea IV placement tranche.

Then we look at the retail market:
Temasek 2.7% last done $1.035
Astrea IV last done $1.07

After SQ bonds launch, my forecast is minimum price $1.01. Anyone scared of holding till maturity can just collect the first coupon payment and sell for over face value!

I'm going to press for max, please spread more fear so that I can get higher allocation!
Astrea IV they only gave me a tiny $8k

 

[revhappy]

Everybody please press for max on this one, so your money gets locked and I want to buy 100k worth SSB this month and I will then likely get full allocation.

 

[FrostWurm]

The low spread above the 10-year gov suggests a credit rating of A+ to AA. Doesn't feel that way for me.

 

[Mr.Canberra]

Hahaha another junk bond!

 

[BBCWatcher]

The low spread above the 10-year gov suggests a credit rating of A+ to AA. Doesn't feel that way for me.

I agree. It’s pretty obvious Singapore Airlines doesn’t like its bond rating (probably investment grade but not that high) and would prefer to raise capital based on its brand, not on its balance sheet and industry. Fair enough; that’s their management being smart.

 

[FrostWurm]

It is obvious to me that if they sought a credit rating, they will need to pay higher rate for bonds (on top of credit rating costs)!
So, they just can only sell cheap bonds with low coupon rate by playing with your perception (and hope many ignorant ones will bite).

Haha I don't think the investors are ignorant per se, and indeed the chance of default is probably low.

But I want more bang for my buck if I'm gonna buy it.

 

[assiak71]

Good to subscribe and sell on first day to get some kopi money?

 

[peipei1]

What happens if SIA becomes another Smrt, government forced to delist it? Airliner competition is very fierce now, one small misstep can cause huge profit bleed by its capital intensive nature?

 

[limster]

What happens if SIA becomes another Smrt, government forced to delist it? Airliner competition is very fierce now, one small misstep can cause huge profit bleed by its capital intensive nature?

once delisted, company no need to repay their bonds?

Better tell Hyflux the good news

 

[whizzard]

I won't be subscribing to this. The yield is too low for me. Whilst I am comfortable with SIA's credit profile and remain confident that the likelihood of default will remain low, I can't afford more low yielding investments in my portfolio. I need more higher yielding and therefore riskier assets.

Whilst the SIA bond may be unrated, it does not preclude the possibility that SIA, as a company, may have a private credit rating. There are many reasons why a company may opt to keep a private credit rating including using it as a guide for management and the Board to gauge the company's management of its financial soundness (i.e. cover backside) or keeping it private because it is operating in a volatile industry. Even if I know, I cannot say.

If you were to subscribe to the Efficient Market Hypothesis, then you could look at the trading yield of SIA's bonds and estimate its credit rating. Most bulge bracket investment banks have credit rating advisory teams. These teams are usually staffed by people who have worked for S&P or Moody's before or people who are very familiar with their rating methodologies. Based on SIA's trading yields, the market has implicitly estimated that SIA is clearly an investment grade rated company. Remember, institutional investors in SIA's bonds are professionals who typically buy bonds based on their relative value vis-a-vis its credit rating. Based on this approach, I have an estimate where SIA is rated at ..... but even if I know, I cannot say.

SIA should not be assessed solely based on its standalone business as an airline operator. SIA, along with Changi Airport, plays a central role in Singapore's economy and its status as a regional hub and global financial centre. SIA is a strategic asset for Singapore's economy. Whilst the strategic space that SIA operates in may be different from say, SMRT, I would argue that it still plays a vital role in Singapore's place in the global economy. Whilst some may employ the Malaysia-MAS/MH argument and therefore say that Singapore may not need SIA, I don't buy it. Malaysia can afford to commit many blunders and still survive, Singapore is inherently vulnerable even without making any major blunders. Should SIA face any major headwinds, I would think Temasek will step in (Temasek privatised SMRT when it needed internal restructuring). Shareholders may/will lose money but senior debt holders will probably survive.

Lastly, if you were to look at SIA's historical management, it has been mostly managed on a prudent and sound basis, requiring no prior financial bail-out.

I don't work for SIA or Temasek but I do fly quite a bit (average twice a month) with the SIA group. Like any patriotic Singaporean, I cheer for SIA and Singapore's continued success and prosperity even though I won't be subscribing to its bonds which are too low yielding for me as a predominantly buy-and-hold investor.

 

[FrostWurm]

Whilst the SIA bond may be unrated, it does not preclude the possibility that SIA, as a company, may have a private credit rating. There are many reasons why a company may opt to keep a private credit rating including using it as a guide for management and the Board to gauge the company's management of its financial soundness (i.e. cover backside) or keeping it private because it is operating in a volatile industry. Even if I know, I cannot say.

If you were to subscribe to the Efficient Market Hypothesis, then you could look at the trading yield of SIA's bonds and estimate its credit rating. Most bulge bracket investment banks have credit rating advisory teams. These teams are usually staffed by people who have worked for S&P or Moody's before or people who are very familiar with their rating methodologies. Based on SIA's trading yields, the market has implicitly estimated that SIA is clearly an investment grade rated company. Remember, institutional investors in SIA's bonds are professionals who typically buy bonds based on their relative value vis-a-vis its credit rating. Based on this approach, I have an estimate where SIA is rated at ..... but even if I know, I cannot say.

SIA should not be assessed solely based on its standalone business as an airline operator. SIA, along with Changi Airport, plays a central role in Singapore's economy and its status as a regional hub and global financial centre. SIA is a strategic asset for Singapore's economy. Whilst the strategic space that SIA operates in may be different from say, SMRT, I would argue that it still plays a vital role in Singapore's place in the global economy. Whilst some may employ the Malaysia-MAS/MH argument and therefore say that Singapore may not need SIA, I don't buy it. Malaysia can afford to commit many blunders and still survive, Singapore is inherently vulnerable even without making any major blunders. Should SIA face any major headwinds, I would think Temasek will step in (Temasek privatised SMRT when it needed internal restructuring). Shareholders may/will lose money but senior debt holders will probably survive.

ROFL, if you are not going to say anything, then you might as well just maintain your silence. There is no need for you to come here and pretend that you have some secret method (or information) that can divine SIA's credit rating.

Indeed, if you are just comparing similar yields it is not even difficult to find comparable bonds with published credit ratings

And your assessment of SIA vis-a-vis SMRT is quite off-the-mark. SMRT provides transportation for millions of Singaporeans to get to work everyday. And there is no alternative to it. If it goes down, the entire country will be paralyzed. We can't just all be taking buses and taxis. But how about SIA? You mean Singaporeans can only take SIA flights? Of course not. Even if SIA goes down (like NOL), and I hope it doesn't, you can still take one of the many, many airlines that land at changi airport.

Nonethess, the current probability of default by SIA is low by most standards.

 

[Toni90]

ROFL, if you are not going to say anything, then you might as well just maintain your silence. There is no need for you to come here and pretend that you have some secret method (or information) that can divine SIA's credit rating.

Indeed, if you are just comparing similar yields it is not even difficult to find comparable bonds with published credit ratings

And your assessment of SIA vis-a-vis SMRT is quite off-the-mark. SMRT provides transportation for millions of Singaporeans to get to work everyday. And there is no alternative to it. If it goes down, the entire country will be paralyzed. We can't just all be taking buses and taxis. But how about SIA? You mean Singaporeans can only take SIA flights? Of course not. Even if SIA goes down (like NOL), and I hope it doesn't, you can still take one of the many, many airlines that land at changi airport.

Nonethess, the current probability of default by SIA is low by most standards.

NOL go down? Never paid their bond?

 

[audiovideo]

if press $10k get $5k for SIA
or rather go press $10k SSB

 

[BBCWatcher]

NOL go down? Never paid their bond?

Probably meant Noble Group, which defaulted on its bonds.

 

[NewInvestor]

Probably meant Noble Group, which defaulted on its bonds.

I doubt that he meant that. Nobel was not partly owned by the Spore govt. He made an inaccurate comparison between SIA n NOL, both partly govt owned. And Toni merely pointed out the inaccuracy.

 

[FrostWurm]

NOL go down? Never paid their bond?

Hi, I never stated that they defaulted on their obligations.

But as you already know, the shareholders are no longer government-related. The point is, if you are not performing, the government will sell you away nonetheless. And when they do, you cannot count on your implicit government support anymore. Meaning you cannot just stretch out your hand and ask Temasek/GIC for money just because you think you are important to Singapore. At that stage, shouldn't your credit profile need a rethink? I can see the government supporting SMRT in times of distress, but I can't see the same for SIA.

Hope this clarifies