CapitaMalls Asia Callable Bonds

[Pocoyoz]

The Bonds will have a term of ten years from their date of issue and will mature on 12 January 2022.
The Bonds are callable yearly at par by the Issuer, in whole or in part, on 12 January 2017, 12 January 2018, 12 January 2019, 12 January 2020 and 12 January 2021, or if such date falls on a day which is not a Singapore business day, the immediately following Singapore business day.
For the first 5 years (starting from 12 January 2012), the Bonds will bear interest at the rate of 3.8 per cent. per annum.
For the next 5 years (starting from 12 January 2017), in the event that the Bonds are not redeemed or purchased and cancelled, the Bonds will bear interest at the rate of 4.5 per cent. per annum.
Interest will be payable semi-annually in arrear.
The Bonds will be issued in denominations of S$1,000 each.

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_662863EFDBE3EA2448257979007B4884/$file/eAnnc_LaunchAndAIP_20120103.pdf?openelement

 

[heng_alvin]

wah,not bad huh for risk averse investors? so the interests is confirm payable or that type in which they can keep oweing u? sorry,dun know what's the term for it...

 

[iCuteCube]

ahh, forgot all my managerial finance stuff. But didn't read anything like it will accumulate the bonds if it did not issue the coupons that year.

callable yearly - in whole or in part, on 12 January 2017, 12
January 2018, 12 January 2019, 12 January 2020 and 12 January 2021

I only know this means that they can buy back the bond, in whole or partial.

"Interest will be payable semi-annually in arrear." , i guess this statement pretty sums out everything.

Not sure if i am correct, knowledge getting rusty

 

[Jarlaxle]

can apply with ATM and still ask for placement ?

 

[Pocoyoz]

Interest of 3.8% per annum for Year 1 to 5; 4.5% per annum for Year 6 to 10 if bonds are not redeemed

Minimum investment sum of S$2,000

Public offer period: 9 a.m. 4 January 2012 to 2 p.m. 9 January 2012

Caters to investors looking for fixed income returns and capital protection

OFFER INFORMATION STATEMENT

 

[Pocoyoz]

can apply with ATM and still ask for placement ?

placement min $50k

 

[Jarlaxle]

but even placement gotta ballot for allocation right ?

 

[Pocoyoz]

 Other than for portfolio diversification, we do not find this issue particularly appealing.
 Note CMA shares have remained very weak, hitting a new low of $1.13 on Friday.
 Assuming unchanged dividend of 2 cents for 2011 as in 2010, yield on the ordinary shares would be 1.8%. (CMA paid 1.5 cents interim in July ’11.)
 Discount to NTA of $1.50 continues to widen, to 25% currently.
 We have been negative towards the stock, and are in no hurry to change the stance.

LIM & TAN SECURITIES PTE LTD

 

[Shiny Things]

wah,not bad huh for risk averse investors? so the interests is confirm payable or that type in which they can keep oweing u? sorry,dun know what's the term for it...

It's a bond, not a preference share, so any failure to pay interest on these puppies counts as a default (which means you can have a crack at winding the company up).

This doesn't look particularly great to me, not least because 3.8% is not really a lot of yield. But also, think about what you're getting: if you're bullish on real estate, you'd rather own CMA's shares; and if you're bearish on real estate, you wouldn't want exposure to CMA in the first place.

The real kicker is the embedded call option. 3.8% on a 5yr bond is not a bad yield at all, but the catch is that if interest rates go up, CMA will extend the maturity of the debt, and you'll be stuck with a relatively low-interest-rate bond in a high-interest-rate environment. Conversely, if rates stay low, then at the end of 5 years you won't get that fat 4.5% kicker coupon, and you'll have to find somewhere else to invest the money, likely at a lower rate (so-called "reinvestment risk").

And the embedded call option feels like it's being given away a bit too cheap. I'd wildly guess that 5yr yields would only have to back up by about 100bps for CMA to elect not to call the bond; that could easily happen over the space of five years, especially from current levels.

The cynical part of my brain looks at the massive size of the retail tranche and thinks they're relying on naive retail investors getting blinded by the absolute yield and mispricing the call option.

Are there any corporate bond gurus out there who can have a crack at pricing the embedded option and see how it stacks up?

 

[Majestic12]

I received notification about this today. Am not recommending it to my clients.

 

[TempUser]

3.8% so low. can't even fight current inflation rate over 5%.

With property risk next five years, not recommended.

 

[Jarlaxle]

is there a bond that can besides greek ?

 

[Carnage]

I remember there was a recent bond issue by a real estate company as well. Coupon rate also about the same. Anyone knows which company was it?

 

[Jarlaxle]

F&N ? capitamall ?

 

[tennisguy]

Capital Mall is a 10 years bond...Meaning we can only withdraw after 10years?
Or after 5 years can draw liao?

 

[codling]

but if you are holding on till maturity, the yield will remain constant at 3.8%/4.5%?
so if you are conservative and just want to leave it alone, it would give a minimal guaranteed 3.8% or if it gets call back, you will also get back at prevailing coupon, no?
i am not too sure about this, can someone enlighten?

 

[Shiny Things]

Capital Mall is a 10 years bond...Meaning we can only withdraw after 10years?
Or after 5 years can draw liao?

It's a ten-year bond, but at the five-year mark - and every year thereafter - CMA can "call" the bond back, by redeeming it at par. (That's why it's called a "callable" bond.)

The catch is, CMA will only redeem the bond if they can get cheaper financing elsewhere. So if interest rates go up, they'll let the bond keep going, and you'll be getting an unfavourable interest rate on it.

(It's kind of like a dual-currency deposit - you get a slightly better yield, but you always get the worst outcome.)

but if you are holding on till maturity, the yield will remain constant at 3.8%/4.5%?
so if you are conservative and just want to leave it alone, it would give a minimal guaranteed 3.8%

That's exactly right. If you hold it to maturity, you get 3.8% for the first five years, and then CMA can decide whether to buy the bond back from you or let the interest rate jump to 4.5%.

 

[neanea]

is this capital guaranteed?

 

[chopra]

Capitamalls Asia Ltd (CMA) has doubled the size of its retail bond offering to $400 million following strong interest from institutional investors. The original bond size was $200 million - $100 million for the placement tranche and $100 million for the public tranche. Following the exercise of the upsize option, CMA, a unit of property giant CapitaLand, said it will now allocate $180 million to the placement tranche and raise the public offer size to $220 million. The placement offer, which was launched on Jan 3, closed after just three days. CMA said the initial tranche was more than two times subscribed. The public offer, which was launched on Jan 4, closes at 2pm on Monday. (BT).

 

[chopra]

is this capital guaranteed?

There's a risk to it. But it's lower than preference shares and ordinary shares.