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USD500M of SIA 3.0% bonds, US$2.85B demand is real or fake news?

bic_cherry

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USD500M of SIA 3.0% bonds.

I want to enquire if the acclaimed US$2.85B demand is just fake news, since dunno if have a minimum bid for the bonds (e.g. what if most of the bids were too ridiculously/ meaninglessly low, like 10-20¢ only?).

Obviously SIA overestimated the demand for its bonds, that is why they priced the interest rate unattractive low, resulting in lack luster response in terms of price bid (e.g. the cut off threshold to own the bond came in at below $1, which means that investors value the SIA bond at below the value that SIA priced them).

If the interest rate were sufficient, then successful people would have all bid more than $1 for the $1 par value bond (just like mkt is today paying $1.06 for the Temasek 2.7% 231025XB bond now). As it is, now the USD SIA bond will end up beginning trading BELOW par value (IPO at 99.573¢ (or 99.573% of par value according to BT report)) , which is a negative publicity for the airline concerned.

And I just wonder if people are allowed to say bid 10 or maybe 50¢ for this bond, since adding such very very low ball bids and then saying that the auction was oversubscribed is just pure nonsense, since I too can easily place a humongous sized bid at say fractions of 1¢ a piece, just with some spare change in my pocket.

TLDR: There was actually lackluster demand for SIA USD denominated $500M worth of SIA bonds as evidenced by fact that they were issued below par value.

Correct?

https://www.businesstimes.com.sg/co...us500m-in-oversubscribed-us-dollar-debt-debut
 
Where does the truth lie?

drain (HWZ) said:
Ahh cherry is back, i love reading your commentary to sleep, cos it makes a good bedtime story.

You seem to think corporate bond issuance works like buying a handbag on Carousell. Whats more you use a retail bond like Temasek 2.7% to compare against a corporate bond issuance.

Why not instead of retail bonds, which are different, we look at temasek's bond issue from last year 2020 to institutional investors.

https://www.businesstimes.com.sg/banking-finance/temaseks-us275b-bonds-oversubscribed

"The 10-year paper was priced at a 47.5 bps spread over the 10-year benchmark US Treasures, and issued at 98.821 per cent to give a yield to maturity of 1.125 per cent per annum."

Please use your cherry logic to explain why temasek bonds also oversubscribed, compare to sia's latest issue? if 99.573 is "bid peanuts", then 98.821 is..."bid potato chips??" Going by your logic, since temasek bonds all below par, its bad? :s31: I thought you say they're quite good based on their retail issue? How come their institutional bond issuance more "cui". Issit also lowball :eek:

You're like a mad scientist, take a retail bond, compare to a corporate bond, then extrapolate any negative info. Actually, you're not too bad of a spin doctor yourself :s13::s13:



Considering that you're not that brilliant yourself, this is quite a rude way to talk to another forum member. 发哨子2020 probably got more breath in knowledge than you cos he doesn't obsess over one stock.
Hi Good Durian,
Many thanks for acknowledging my contribution to your restful nights sleep, a feat not many activities can lay claim.

Thanks for bring up the Temasek usd$2.75B bonds https://www.businesstimes.com.sg/banking-finance/temaseks-us275b-bonds-oversubscribed this only opens a bigger can of worms, but that's okay because enjoy learning.

And no, I have distinguished the Temasek retail from corporate bonds, at least insofar that I recognise the more complex book building process whereby investors submit their in principle agreements about what the yield/discount margin/coupon ought to look like and the book builders coordinate the expectations and arrive at a mutually acceptable loan (bond) agreement to borrow money at so and so rate with yield/discount margin/coupon being the main parameters of the deal.

In case of retail bonds, probably due to government laws etc, the coupon is fixed and the price is fixed to avoid confusing retail customers but all these can be negotiated with professional institutional investors like pension funds and insurance brokers, since bond portfolio management is their daily ricebowl.

The news reports for Temasek and SIA USD bonds do NOT explain the bookbuilding process but an educated guess suggests that bidders bid a discount margin or price of the bond with the issuer having preset the coupon before the bidding process starts (thus the easy to remember Temasek USD bond coupon rt of 1, 2.25, 2.5%) but the odd 98.821% which suggests a final valuation based on an open market bidding process.

BT_20201001_FLTEMASEK_4264780-page-001.jpg


So the fact that the final bid for both Temasek and SIA USD bonds came in at below par bond value, both suggests that investors were less enthusiastic about the issuer original offered coupon rates, or else there were just insufficient interest/ advertising etc, so the cut off bid for the cohort of successful bidders, came in below the par value (I.e. demanding a higher yield than what the coupon interest rate would pay them). If there were indeed a great desire to own the SIA bond (e.g. Due to a sudden fall in the US treasury bond yield for whatever reason), these same investors might have offered 104% of the par value rather than something beneath, since their expectations of yield, as informed by us treasuries yield would have fallen.

This all points to the fact that these bond sales issuer company reports tend to be spun in ways which make a bad situation look great.

That Temasek or SIA received less than overwhelming response in terms of qualifying bids might not necessarily imply a company with a decreasing outlook/credit rating, since us treasury yields could have risen overnight, increasing yield expectations and thus dragged the bid prices for SIA USD bonds on the day of bid submission down.

Likewise, the number of bids submitted for say us$2.85B par value of SIA bonds might not be that sunny an outlook if in fact, the majority of bids were at a high discount margin to the par value of USD SIA bonds being offered for sale.

Thanks Durian for your input. SIA is a very good study about Singapore corporate management integrity (the lack of) and why Hyflux saga could happen in Singapore to begin with etc.

You input has enhanced my learning journey and thus made my nights more restful and refreshing when I awake.

:D
 
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