Singapore Airlines *Official* (SGX:C6L)

[yiron]

The rights MCB is more interesting than the rights share.

If SIA redeems it within 10 years, there is compound interest of 4% to 6% payable. If not redeemed, it will be converted into shares at $4.84 at end of 10th year. It's like a warrant, but with built-in interest.

It's not like a traditional warrant where u have the option to buy the shares at a predetermined price.

Instead, it's as good as you sold SIA a European put option with a strike price of $4.84. Logically, SIA would redeem the MCB only if its share prices are trading above the strike price. Basically you are exposed to equity downside risk while compensated with fixed income returns. Honestly, I don't like the terms.

 

[reddevil0728]

It's not like a traditional warrant where u have the option to buy the shares at a predetermined price.

Instead, it's as good as you sold SIA a European put option with a strike price of $4.84. Logically, SIA would redeem the MCB only if its share prices are trading above the strike price. Basically you are exposed to equity downside risk while compensated with fixed income returns. Honestly, I don't like the terms.

Actually there is no loss to SIA as a company if they were to not redeem it and just convert it into shares right. They can save the cash and just dilute future shareholders.

 

[fatangel]

As the MCB is tradable, will the price go up each year according to the redemption table?

 

[sfugel]

If I have some SIA shares, when can I excercise to buy the rights issue?

 

[henrylbh]

It's not like a traditional warrant where u have the option to buy the shares at a predetermined price.

Instead, it's as good as you sold SIA a European put option with a strike price of $4.84. Logically, SIA would redeem the MCB only if its share prices are trading above the strike price. Basically you are exposed to equity downside risk while compensated with fixed income returns. Honestly, I don't like the terms.

It's like a warrant and a bond with fixed interest in the same breath, but not a traditional warrant or a bond. This one grows with fixed interest and automatic conversion only at end of 10th year at fixed price of $4.84. Of course, holders face equity downside only if price of mother share goes down around time of conversion. But in 10 years it's unlikely to be stale. Otherwise, for long term holders, the current rights share would be a failure and it's better to sell off CR and invest elsewhere.

Logically SIA should redeem the MCB if the share price is above conversion price. But that would spook holders and so far in market practice, it's unlikely and TH would be the biggest beneficiary. It will let holders ride the benefit at no cost to the issuer, unless it has billions lying idle.

Vested.

 

[reddevil0728]

Would it make sense to not buy any Mother share or rights share. but just buy rights MCB and bet that they either convert to shares or u get "interest" if they redeem it early

 

[cherry6]

The conversion price of $4.84 at end of 10 years is guaranteed even if SIA rise to say $10. If down, then suck thump. So up to individual to think whether price of SIA will remain low in 10 years' time. If SIA decides to redeem earlier, holders are assured of the compounded interest which is fairly attractive as a bond ... 4% per annum (first 4 years), and the subsequent 3 years is 5% per annum and the subsequent 3 years is 6% per annum. If the view that is SIA price would remain low as long as 10 years, then there is no reason to subscribe for the rights Share. Dispose CR and invest elsewhere.

I won't comment on your last sentence cos I only want to discuss MCB technicalities in this post.

Think u r mistaken to think SIA board will allow u to convert to SIA share at $4.84 if share price is $10 because they can redeem the MCB at 4-6% compound, accumulated interest prior to maturity.

Shareholder (especially those not holding significant MCB) will demand that to safeguard their share value.

So these MCB, head u lose, tails u lose also.

And if SIA share price is $10, then they probably are very cash rich and will not hesitate to redeem the bonds at whatever the accumulated interest and principal is at that point in time, maybe paid for by issuing new bonds at lower interest of say 2% coupon.

So I think that the bonds are a 'con job' (unfair T&C) because the buyer gets the shorter end of the stick.

 

[cherry6]

It is not mandatory for MCB to be redeemed even when SIA is delisted. It depends on the entity taking over SIA. Temasek will not take over SIA because if SIA need to raise cash again, Temasek will use minority shareholder to share the load rather than taking it private and shouldering the burden alone.

But have clause that after 10 years (if not redeemed prior), the MCB bonds based on accumulated principal and interest worth ~$1.81 each is converted to share at $4.84 a piece.

So if SIA is delisted, then there is no longer any share price guidance and eventually zero ownership of shares (since no longer listed on SGX).

So any attempt to delist SIA will have to answer to the outcome of the bonds, which will probably have to be redeemed or some other fair and just solution provided to its status.

This is not rocket science and whomsoever designed these unfairly designed MCB ought to have considered the SIA delisting scenario since that is a very important and possible outcome in the next 10 years of the intended lifetime of the bond.

 

[cherry6]

Priority is given for rounding up, follow by major share holders, then remaining for minority

What propriety for major holders.

Bully minority again ah?

But IPO, usually give small investors more proportionately for ATM applications.

E.g. All applications for 1000 shares is granted but those who apply for 100,000 shares maybe only get alloted 10,000 shares.

Should be like dis, more gracious towards minority investors.

SIA and Temasek should not behave like gangsters/ big bullies.

 

[cherry6]

As the MCB is tradable, will the price go up each year according to the redemption table?

Theoretically will, based on accumulated interest. But market decides always.

But I wonder, if at year 9, SIA share price is $2. 42, means MCB price is what?

Convert at $4.84 but sell @ market for probably below $2.42 (dilutional).

So theoretically, for near 10years old MBC although dollar face value is almost $1.81, market value per MCB is 90¢ to account for value loss when converted to shares.

Keep 10 years and still lose $$$.

 

[cherry6]

It's like a warrant and a bond with fixed interest in the same breath, but not a traditional warrant or a bond. This one grows with fixed interest and automatic conversion only at end of 10th year at fixed price of $4.84. Of course, holders face equity downside only if price of mother share goes down around time of conversion. But in 10 years it's unlikely to be stale. Otherwise, for long term holders, the current rights share would be a failure and it's better to sell off CR and invest elsewhere.

Logically SIA should redeem the MCB if the share price is above conversion price. But that would spook holders and so far in market practice, it's unlikely and TH would be the biggest beneficiary. It will let holders ride the benefit at no cost to the issuer, unless it has billions lying idle.

Vested.

If don't have billions idle, also can borrow money from bank at 2% and prematurely redeem bonds at the 4% interest stage (before predetermined MCB interest climbs further).

Why continue to pay high interest if money costs less to obtain.

U must not wear your rose tinted glasses.

 

[cherry6]

Would it make sense to not buy any Mother share or rights share. but just buy rights MCB and bet that they either convert to shares or u get "interest" if they redeem it early

Your $, u decide.

But SIA can decide to early redeem.

Or if share price is $2.42,let u lugi $2.42 when u convert your MCB to share at predetermined price of $4.84.

 

[NewInvestor]

It's like a warrant and a bond with fixed interest in the same breath, but not a traditional warrant or a bond. This one grows with fixed interest and automatic conversion only at end of 10th year at fixed price of $4.84. Of course, holders face equity downside only if price of mother share goes down around time of conversion. But in 10 years it's unlikely to be stale. Otherwise, for long term holders, the current rights share would be a failure and it's better to sell off CR and invest elsewhere.

Logically SIA should redeem the MCB if the share price is above conversion price. But that would spook holders and so far in market practice, it's unlikely and TH would be the biggest beneficiary. It will let holders ride the benefit at no cost to the issuer, unless it has billions lying idle.

Vested.

So this bond will automatically convert to shares at the end of 10 years? If so, u r taking stock risk. It is not a bond and warrant.

 

[henrylbh]

So this bond will automatically convert to shares at the end of 10 years? If so, u r taking stock risk. It is not a bond and warrant.

Same as holding the mother shares.

 

[henrylbh]

Shareholder (especially those not holding significant MCB) will demand that to safeguard their share value.

You know what you saying?

 

[chopra]

most ppl wouldn't know what they are saying in this rights, bonds exercise.

never mind about the peanut u can arbitrage from excess. enough of that in 2008.



hence i siam. good luck to all vested ppl (sarcastically).

SIA is not even in es3 iirc? not vested either. iwda for long term n shake leg.

 

[kuang89]

Price is market adjusted upon x-rights share trading day.

No gahmen authority can 'adjust' the price except by throwing SG reserves at the problem like:

And maybe give SIA interest free loans or even special privileges like FOC parking, use of airport, special gahmen funding and transfers, tax exemptions, gifts etc etc.

SIA is airline. Airport is airport.

 

[NewInvestor]

most ppl wouldn't know what they are saying in this rights, bonds exercise.

never mind about the peanut u can arbitrage from excess. enough of that in 2008.



hence i siam. good luck to all vested ppl (sarcastically).

SIA is not even in es3 iirc? not vested either. iwda for long term n shake leg.

Airlines is now a very tough business. No airlines for me.

 

[kuang89]

post covid revenue also depends on the number of airlines going out of business. If 3/4 of all airlines collapsed and closed down for good, that’ll bode well for SIA’s revenue.

Airlines that collapsing are non-national carriers or budget airlines. And these airlines are now competing in a different market than SIA.

SIA competes on another level where the competitors are national carriers, but unlike SIA, have domestic flights.

Even companies like Malaysian Air also won't collapse so don't hope Emirates collapse.

Now, what will Scoot do?

 

[reddevil0728]

Airlines that collapsing are non-national carriers or budget airlines. And these airlines are now competing in a different market than SIA.

SIA competes on another level where the competitors are national carriers, but unlike SIA, have domestic flights.

Even companies like Malaysian Air also won't collapse so don't hope Emirates collapse.

Now, what will Scoot do?

Scoot is just a puzzle piece of SIA?