Tan Chu Ren Published on 31 May 2021

Important Events

·         On Tuesday, the Reserve Bank of New Zealand (“RBNZ”) kept its official cash rate unchanged but projected a rate hike by September next year. The bank continues to maintain its stance on keeping an accommodative monetary policy until its inflation and employment targets are met.

·         On Thursday, the People’s Bank of China (“PBOC”) raised the cross-border financial leverage ratio at certain commercial banks with a capital base of less than RMB 100b to allow lenders to borrow more from overseas. This move will mainly help the local branches of foreign banks who are facing a shortage of foreign-currency capital, which have resulted in smaller loan portfolios.

·         On Friday, Robert Kaplan, Dallas Federal Reserve President, indicated that he is ready to discuss with his colleagues about reducing the Fed’s purchases of mortgage bonds. Robert Kaplan is worried that the central bank’s mortgage purchases will lead to further overheating of the US housing sector.

Interest Rates and Currencies

·         The US dollar depreciated strongly against the SGD, declining by 0.7% by the end of last week as sentiment seemed to improve. The two-year SGD Swap Offer Rate (“SOR”) decreased by 3 basis points (“bps”) to 0.400% while the ten-year SOR declined by 2bps to 1.545%.

·         The yield of 2-year US Treasuries (“UST”) declined by 1.3bps to 0.141% while the 10-year UST yield also decreased by 2.7bps to 1.594% in what seems to be a range bound and quiet week.

Asian High Yield Bond Index

·         The Barclays USD Asia High Yield Bond Index gained 0.48% for the week ending 28 May 2021.

·         On Friday, CAR Inc, has been upgraded to B3 from Caa1 with a stable outlook by Moody’s based on its operational efficiency and access to funding.

·         Last week, bonds issued by Yuzhou Group posted gains while the 4.45% Saka Energi Indonesia bond due 2024 rose by 7.94% to 90.15, possibly on improved earnings.

·         Bonds of China Evergrande fell after Caixin reported that regulators were looking into the company’s dealings with a banking unit that owns its bonds, which could affect its financing. The EVERRE 12.000% 22Jan2024 Corp (USD) registered large losses, declining by about 3.93% for the full week.

Corporate Updates and New Issues

·         On Monday, Frasers Logistics & Commercial Trust (“FLCT”) announced that it has agreed to acquire the equity interests in four property holding companies from Frasers Property Investments (Europe) B.V. (“FPIE”) and FPE Investments RE11 B.V. (“FPE11”) which hold interests in four freehold logistics and industrial properties located in Germany and the Netherlands (the “New EU Properties”, and the “EU Acquisition”).

The sub-trusts of FLCT have also agreed to acquire a freehold business park and a freehold logistics and industrial property located in the United Kingdom, being BVP and Connexion respectively (the “New UK Properties”, and together with the New EU Properties, the “New Properties”).

The New Properties are freehold and have a total lettable area of approximately 123,328 square metres (“sqm”). The New EU Properties are located within the key logistics hubs of Frankfurt and Mannheim in southwest Germany and in east of the Netherlands while the New UK Properties are strategically located in West Midlands, and within close proximity to Birmingham. Collectively, the New Properties have a blended occupancy rate of 97.4% with a long-weighted average lease to break (“WALB”) of 7.6 years.

The aggregate appraised value of the New Properties is SGD 562.4m with the New EU Properties and the New UK Properties being valued at EUR 147.5m (~SGD 237.7m) and GBP 173.3m (~SGD 324.7m) respectively. The agreed property purchase price for the New Properties is about SGD 548.7m with the New EU Properties and New UK Properties priced at about EUR 142.7m and EUR 170.16m respectively. FLCT will acquire the equity interests of the New EU Properties at about EUR 93.6m (~SGD 150.9m). Thus, the total purchase consideration is about SGD 469.7m. The estimated total cost of the Proposed Acquisition is about SGD 501.1m after fees and expenses.

The acquisition fee for the EU Acquisition will be in the form of FLCT units which shall not be sold within one year from the date of issuance. The remaining amount (~SGD 496.8m) will be financed through debt financing and an equity fund raising.

Based on 1HFY2021 ending 31 Mar 2021 results, the proforma effects of the proposed acquisition are as stated:

a)    Net property income to increase from SGD 179.8m to SGD 191.6m;

b)    Total assets to increase from SGD 6.73b to SGD 7.31b;

c)    Total debt to increase from SGD 2.32b to SGD 2.59b;

d)    Gearing ratio (total debt/total assets) to increase from 35.5% to 36.2%.

Simultaneously, FLCT also announced the launch of a private placement of 220m new units in FLCT at an issue price of between SGD 1.363 and SGD 1.399 to raise gross proceeds of minimally SGD 299.8m, subject to an upsize option to issue up to 20m additional new units. The Manager has appointed DBS Bank Ltd., J.P. Morgan (S.E.A.) Limited and Oversea-Chinese Banking Corporation Limited, as the joint lead managers and underwriters in relation to the private placement.

·         Aviva Singlife announced on Monday the appointment of Pearlyn Phua as Executive Director and Group Chief Executive Officer (“CEO”) which will be effective on 18 Aug 2021. Pearlyn has held various senior leadership roles within DBS Group, both in Singapore and Hong Kong. Ms. Phua is currently the Group Head of Consumer Products, Marketing and Ecosystem Partnerships at DBS with oversight across the product lines in the region. Following her appointment in August, present CEO of Aviva Singapore, Nishit Majmudar, will step down from his roles and become a senior adviser to the board. Walter de Oude, who has acted as Group CEO prior to Pearlyn’s appointment, will continue on the board as Deputy Chairman, Aviva Singlife Holdings.

·         On Monday, Swiber Holdings Limited (Judicial Managers Appointed) announced that the Group and Vallianz Holdings Limited have mutually agreed to in writing to extend the long stop date to 28 Jun 2021 or other agreed dates. Due to more time required to fulfil the long stop date conditions, the relevant parties may extend the date to 29 Dec 2021.

·         On Tuesday, Tuan Sing Holdings informed its shareholders that One South Bay Group Company Limited has requested to novate the SPA and deed of undertaking to its wholly owned subsidiary, Viva Ventures Pte. Ltd. Following the entry into the novation deeds, at completion, Tuan Sing Holdings will be transferring 100% of the issued shares in the capital of 39 Robinson Road Pte. Ltd. to Viva Ventures. The completion of the transaction is expected to take place on 7 Jun 2021.

·         OUE Commercial REIT Management Pte. Ltd, manager of OUE Commercial Real Estate Investment Trust (“OUE C-REIT”), announced on Wednesday that OUE CT Treasury Pte. Ltd. has priced SGD 150m of the OUECT 3.950% 02Jun2026 Corp (SGD). These notes are expected to be issued on 2 Jun 2021 and listed on SGX-ST on 3 Jun 2021. The notes will mature on 2 Jun 2026. Net proceeds from the issue of the Notes will be used for the purpose of refinancing existing borrowings and working capital requirements of OUE C-REIT and its subsidiaries

·         On Thursday, Sembcorp Industries Ltd (“Sembcorp”) presented a strategic plan to transform its portfolio from “brown” to “green”. Sembcorp aims to grow profit contribution from its sustainable solutions portfolio from a current 40% to 70% by 2025. By 2025, its renewable energy portfolio is targeted to achieve a compounded annual growth rate (CAGR) of 30% and a 10% CAGR for its integrated urban solutions portfolio.

Sembcorp aims to halve greenhouse gas (GHG) emissions by 2030 and deliver net-zero emissions by 2050. By 2025, Sembcorp also aims to triple its urban business’ land sales to 500 hectares.

·         ESR Funds Management (S) Limited announced on Thursday that 9 Tai Seng Avenue has secured over 63.0% committed occupancy ahead of obtaining its expected temporary occupation permit. With over 64,800 sqft committed and another approximately 26.0% under advanced lease negotiations, the property manager is on track to achieve over 90% committed occupancy for the building, ahead of the expected completion of its asset enhancement initiatives (“AEI”) in 3Q2021.

Energy-saving retrofitting works such as water-efficient fixtures, recycling facilities, energy-efficient air-conditioning system and an intelligent motion sensor lighting control system will be installed as part of its effort to be more environmentally sustainable as the manager will be applying for Green Mark Gold certification of the property upon completion.

·         Keppel Infrastructure Trust notified the exchange that Basslink Pty Ltd has issued a media statement on Thursday announcing a 3-month extension of the maturity date of its financing arrangements. The extension is not expected to have any material financial impact on the distribution per unit of the trust for the current financial year.

·         Last Friday, Hatten Land Limited announced that the Malaysian Courts have granted an order restraining any proceedings by Scheme creditors against MDSA Reserouces Sdn Bhd pending the resolution of its appeal to the Courts on 22 Feb 2021.  

·         Keppel Corporation Limited announced on Sunday that VN Prosperity Pte. Ltd., a wholly-owned subsidiary of Keppel Land Limited, is acquiring 60% of the total shares in Phuoc Kien Construction Investment Joint Stock Company for VND 367.5b (approximately SGD 21.6m). The companies will be developing a plot of land at Nha Be District, Ho Chi Minh City for landed housing. However, the transactions are not expected to have any material impact on the Keppel Corp’s earnings and net tangible assets.

·         This morning, Capitaland Limited announced that The Ascott Limited is the first hospitality company in the world to offer its guests global access to a comprehensive suite of telehealth, tele-counselling and travel security advisory services. In a global partnership with leading health and security services company International SOS, Ascott will provide these complimentary services as part of its enhanced ‘Ascott Cares’ commitment to improve the overall wellness and safety of its guests starting 1 Jun 2021.Our podcast series, Yield Hunters, is available on Spotify ,iTunes Podcasts and Google Podcasts. We share our thoughts on new bond issues and hold discussions on the fixed income space. Listen to our latest episode below and follow us!    

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