SIA 5-year retail bonds

[churnmaster]

Recent payout just announced. Next one is in Sep.

The question I am asking myself now: Where do you see SIA in 6 months' time? Right question to think? What are your views?

SIA is a world class airline. I can think of only Emirates and Qatar Airlines in its league. Before SIA goes down, whole lot of other airlines will go bust. So the possible last men standing would be these 3 airlines.

Further, aviation is a truly international business and you thrive is this business either by offering good quality service or low price. SIA is known for its service and so are the other two airlines. Off course, there is this issue of over hedged fuel due to this downturn resulting from COVID-19, but once the situation stabilizes SIA will be one of the first ones off the block.

I don’t think this airline is going bust and the bonds will also get redeemed. Remember, if they default it would be difficult for them to raise debt in future.

 

[Newbyib]

SIA is a world class airline. I can think of only Emirates and Qatar Airlines in its league. Before SIA goes down, whole lot of other airlines will go bust. So the possible last men standing would be these 3 airlines.

Further, aviation is a truly international business and you thrive is this business either by offering good quality service or low price. SIA is known for its service and so are the other two airlines. Off course, there is this issue of over hedged fuel due to this downturn resulting from COVID-19, but once the situation stabilizes SIA will be one of the first ones off the block.

I don’t think this airline is going bust and the bonds will also get redeemed. Remember, if they default it would be difficult for them to raise debt in future.

If I am not wrong the debt to asset is less than 30% and debt to capital about 40 plus %. Capital is around 20 plus billion. It boils down to how they can control cost for the period of crisis and it seems that there are some margin of safety. Cannot project on their cost structure but their cost of revenue for whole year is about 13 billion which I Guess will reduce with operations scale down. But do a check and analysis yourself, don’t trust my word for it as I am more into stocks than bonds and I look at only gross ratios.

 

[shallow]

They have locked in most of their future fuel prices at around $60-70 per barrel by buying futures contract in the market.

It will be an excellent strategy if oil price went up. But now at $20+, they effectively overpaid $30-$40 per barrel.

I see, thanks

 

[Pocoyoz]

Singapore Airlines hedged nearly three-quarters of its fuel for the financial year that begins in April, with 51% hedged on jet fuel at $71 a barrel and 22% on Brent at $58. Cathay Pacific hedged around 35% of its 2020 fuel at between $61.37 and $65.41 per barrel of Brent.

Brent now @ $27
think jet fuel < Brent now

 

[arcan3]

HO SEY LIAO

those 5 year bond

The bond unlikely to default until left nothing... Most likely SIA will call for a right issue and get money from all shareholder to help it pull though. If they cannot pay back the bond, i think it is possible if the term of the bond can be changed. For example, lower coupon payment or longer due date or a combination of both. They can also do a haircut for the bond.

But the shareholder will get hit first and lose the most before the bondholder.

 

[fatangel]

SIA is a world class airline. I can think of only Emirates and Qatar Airlines in its league. Before SIA goes down, whole lot of other airlines will go bust. So the possible last men standing would be these 3 airlines.

Further, aviation is a truly international business and you thrive is this business either by offering good quality service or low price. SIA is known for its service and so are the other two airlines. Off course, there is this issue of over hedged fuel due to this downturn resulting from COVID-19, but once the situation stabilizes SIA will be one of the first ones off the block.

I don’t think this airline is going bust and the bonds will also get redeemed. Remember, if they default it would be difficult for them to raise debt in future.

I think likewise.
Imagine world no. 1 or 2 airline busted.
What will even happen to the other airlines?

 

[superman]

I think likewise.
Imagine world no. 1 or 2 airline busted.
What will even happen to the other airlines?

SIA will not go bust, I think Temasek will bail it out and paying each shareholder $1 and laugh to the bank when economy recovers.

 

[Pocoyoz]

They have a $500millions bond to redeem in jul.

Sent from Amazon using GAGT

 

[BBCWatcher]

major difference from the Hyflux sagat is that Temasek is still vested in SIA, and heavily.

I don't see how that makes a material difference. If Temasek is doing its job -- and I fully expect it does and will -- then it will do everything possible and legal to protect its financial interests, which are those of the public at large since Temasek is one of Singapore's sovereign wealth funds. In other words, Temasek is extra motivated to make sure it is paid first and in full insofar as possible. Individuals who took private investment risks are properly not Temasek's concern.

Temasek also invested in Hyflux, by the way. However, Temasek exited its positions well before Hyflux collapsed.

This'll be really, really interesting because the situation is so massive and fluid. Singapore Airlines faces lots of rivals with deeper pockets, notably Emirates (which I'm guessing will pull in Etihad), Qatar, and to some extent the mainland Chinese airlines. Also, Singapore Airlines is especially heavily dependent on premium cabin tickets, and that'll be slow to recover. However, I guess one good thing you could say is that there are many airlines in much worse condition, and somebody has to do some flying eventually.

 

[Perisher]

major difference from the Hyflux sagat is that Temasek is still vested in SIA, and heavily.

I don't see how that makes a material difference. If Temasek is doing its job -- and I fully expect it does and will -- then it will do everything possible and legal to protect its financial interests, which are those of the public at large since Temasek is one of Singapore's sovereign wealth funds. In other words, Temasek is extra motivated to make sure it is paid first and in full insofar as possible. Individuals who took private investment risks are properly not Temasek's concern.

Temasek also invested in Hyflux, by the way. However, Temasek exited its positions well before Hyflux collapsed.

This'll be really, really interesting because the situation is so massive and fluid. Singapore Airlines faces lots of rivals with deeper pockets, notably Emirates (which I'm guessing will pull in Etihad), Qatar, and to some extent the mainland Chinese airlines. Also, Singapore Airlines is especially heavily dependent on premium cabin tickets, and that'll be slow to recover. However, I guess one good thing you could say is that there are many airlines in much worse condition, and somebody has to do some flying eventually.

You are repeating what he is saying here...

But yeah, really interesting to see what Sg gov would do, rather than just what Temasek would do.

 

[Newbyib]

They have a $500millions bond to redeem in jul.

Sent from Amazon using GAGT

Any haircut needed will be tested in this set of bonds since July should be when things either improve slightly or worsen till very bad.

 

[Pocoyoz]

Any haircut needed will be tested in this set of bonds since July should be when things either improve slightly or worsen till very bad.

why will they accept haircut?
can ask for liquidation

 

[eAtNeAt]

Probably more will be reveals this Thurs when heng delivers another package.

 

[BBCWatcher]

But yeah, really interesting to see what Sg gov would do, rather than just what Temasek would do.

That's an interesting question, but I would point out that the government has granted Hyflux at least two big discretionary favors. The first one is that PUB had a further claim in the Tuaspring contract that it could have pursued against Hyflux, as a creditor -- and probably a super senior one. PUB voluntarily declined to assert its contractual right to extract a penalty from Hyflux. The second big favor is that Singapore's bankruptcy court has been extremely, even absurdly patient with Hyflux and its alleged suitors. At this rate "BBCWatcher Enterprises" will make a notional offer to acquire Hyflux which won't actually be real but which may result in a free dinner or two, and that'll extend the bankruptcy process by another 6 months.

One would think given this recent history that the government will return a couple phone calls from the management of Singapore Airlines, but I don't think the government will attempt to save an airline if it cannot be saved.

 

[Perisher]

That's an interesting question, but I would point out that the government has granted Hyflux at least two big discretionary favors. The first one is that PUB had a further claim in the Tuaspring contract that it could have pursued against Hyflux, as a creditor -- and probably a super senior one. PUB voluntarily declined to assert its contractual right to extract a penalty from Hyflux. The second big favor is that Singapore's bankruptcy court has been extremely, even absurdly patient with Hyflux and its alleged suitors. At this rate "BBCWatcher Enterprises" will make a notional offer to acquire Hyflux which won't actually be real but which may result in a free dinner or two, and that'll extend the bankruptcy process by another 6 months.

That’s why it’s interesting.

Obviously gov is gonna get involved where such big corporations that has many implications is concerned.

Just like the merger of posb and dbs and the Smrt and sbs issue etc. As long as it’s gonna influence Sg. Letting them go gg is really last resort.

 

[HeiHeiHei]

Best air line best airport still downward trending...

Anyway your money your choice.

 

[superman]

SIA spent many years building up its brand, Govt Spent billions building Airport to become a main Air Hub. I have no doubt that Govt will take over SIA if it fails but that does not mean it will bailout the retail shareholders.

 

[Newbyib]

why will they accept haircut?
can ask for liquidation

Based on its capital amount, if it is liquidation, I expect all bond holders to escape unharmed. But shareholders will be wiped out - I don’t think Temasek will go for that, but they may contort their way out with some terms for hair cut etc. But whatever happens will be a good indicator of what happens to the remaining tranches.

 

[BBCWatcher]

I have no doubt that Govt will take over SIA if it fails but that does not mean it will bailout the retail shareholders.

It won't.

Based on its capital amount, if it is liquidation, I expect all bond holders to escape unharmed.

Relatively. Singapore Airlines has some pretty good assets available for liquidation, although they're worth a lot less at this instant than they were even a few weeks ago.

But shareholders will be wiped out - I don’t think Temasek will go for that, but they may contort their way out with some terms for hair cut etc. But whatever happens will be a good indicator of what happens to the remaining tranches.

Yes, shareholders would be wiped out in that event. I believe Temasek is a senior SQ creditor as well as a shareholder, which means it isn't really going to go to bat for shareholders because it'd just be trading some of its own debt claims for shareholder bailouts. "No thanks."

It's interesting to me that SQ's share price has "only" fallen by roughly 45%. For comparison, Delta Airlines is (eyeballing it) somewhere around 60% off. Yahoo! Finance thinks SQ's dividend yield is 5.60% at the current share price, but surely SQ isn't going to pay forward dividends for quite a while, right?

 

[arcan3]

Temasek owed 55% of SIA. For the bondholder to take hit, mean Temasek 55% stake going to be wiped out first. Do you think Temasek will let the 55% stake in SIA be wiped out? SIA is a viable business. It is only unlucky that this rare event happened. I believe bondholder will be spared but i am not very sure about SIA shareholder. Shareholder will be the one taking alot of the hit instead of the bondholder...