Fraser & Neave Bonds and Other Retail Bonds (SIA, CMA, CMT)

Since the launch of the first ever retail bonds with listing on the Singapore Exchange (SGX) by Singapore Airlines (SIA) in September last year, three more business entities followed suit. CapitaMalls Asia launched theirs in January this year followed closely by CapitaMall Trust in February. The latest is Fraser & Neave (F&N) launching theirs on 16 March 2011.

Fraser & Neave Bonds

F&N is offering to issue S$300 million bonds by way of public offer and placement, comprising two tranches:

a) S$150 million 5-year bonds of 2.48 per cent coupon (interest) rate due on 28 March 2016
b) S$150 million 7-year bonds of 3.15 per cent coupon (interest) rate due on 28 March 2018
The issue price is S$1 per S$1 in principal amount.
The interest will be paid semi-annually on 28 March and 28 September in each year.

The bonds are unsecured and unsubordinated obligations and rank pari passu among themselves and equally with all other unsecured obligations, ie, bond holders ranked lower than secured debt holders when come to liquidation of the organisation. A major risk of these bonds is tied to the financial strengths and performance of F&N. As for the other risks, see my blog written on SIA Bonds.

CPF and SRS funds cannot be used for this application.

Below is a summary of the other retail bonds already issued:

SIA Bonds

S$300 million 5-year bonds
Coupon rate is 2.15 per cent
Interest paid semi-annually, 30 March and 30 September
Maturity and redemption is 30 September 2015

CapitaMalls Asia (CMA) Bonds

S$200 million bonds comprising
(a) S$75 million 1-year bonds of 1.00 per cent interest maturing 21 January 2012
(b) S$125 million 3-year bonds of 2.15 per cent interest maturing 21 January 2014
Interest payment is annually

CapitaMall Trust (CMT) Bonds

S$300 million 2-year bonds
Coupon rate is 2.00 per cent
Interest paid annually
Maturity and redemption is 25 February 2013

One can draw some broad-brush conclusions on how each bond is priced with regard to interest rate payable on the bonds. One, if you have an established names, you can offer lower interest rate and investors will still buy, like SIA. Two, the longer the duration on maturity, the higher the interest rate to offer before investors will buy, like F&N bonds.

Copyright © 2010, the author known as LKT in Singapore.

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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