Tuesday, 26 April 2016

Perennial Real Estate Holdings Limited - 4.55% 4 years



Perennial Real Estate Holdings Limited ("Perennial") is offering up to S$200m bonds at 4.55% due 2020 with $75m from placement and the balance from public offering. If the demand is overwhelming, the Issuer may issue an additional S$100m bonds. The closing date is 12pm on 27 April 2016. The main purpose of the bonds issuance is to repay debt.

The previous retail bond was sold in October last year with a 3 year tenure and an interest rate of 4.65% and the write up is here. I have recently received my first payout from that bond. Usually a longer dated bond will have a higher interest rate than a shorter tenured bond but it is clearly not evident here. What this effectively means was that the previous "3 year bond" gave better value than the current 4 year bond. 

The key terms are as follows:

Amount:  Up to S$200m with option for another S$100m.

Interest rate: 4.55% fixed

Interest Payment date:  Twice a year on 29 April and 29 October

Maturity date:  29 April 2020

Manager:  DBS Bank and UOB

Ratings:  Not rated

CPF application: Not allowed

SRS application: Not allowed for initial application but may purchase post listing

Minimum application: S$2,000 for public tranche and $100,000 for placement tranche.

Key Financial Information

The key information is provided below and it looks fine (18M period). The net assets of $3.88b is more than adequate to support the debt being issued.



Structure Chart

 

Comparable bonds


The previous retail bonds issued is holding up well above par. Including the AI tranche, the bonds are currently trading at yields to maturity of between 3.55% to 3.97%, which probably explains why the current bonds issuance can be competitively priced at 4.55%. It is definitely more "worth it" to subscribe to the new bonds than to "buy" them in the secondary market.

Research Report

CIMB issued a research report in Feb 2016 with an Add rating. The link is here for your ease of reference.


News flow

There had been some negative news flow in recent months where it is widely reported that Perennial and Pontiac is in a deadlock over Capitol. 


Conclusion

Basically i am not going to do much work here, my view is that the credit of Perennial is fine and will repay the debt when it falls due. 

Whether you buy or not will depend on your exposure to Perennial. Since i am already vested in the 4.65% tranche previously and my personal preference for a shorter dated tenure, i will give the current bond a miss. However, if you have not participated previously, you may want to consider adding a small exposure to your portfolio if you believe the "Pontiac Land" will not be an issue.

Happy bonding and i hope to see "non property related" retail bonds soon!

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