Thursday, October 29, 2015

Oxley Retail bonds 5% pa 4 years...in the wake of Trikomsel

Occupying my thoughts of late is whether to invest some money into Oxley Retail bonds..yes im yield hungry and a whore.

Lest you weren't aware. Trikomsel is an Indonesian company which is in the business of selling cellular phones in Indonesia. They issued SGD corporate bonds to mainly PB (mainly accredited investors a.k.a quite rich people) but now they are very likely to default on their SGD bonds. What sucks about this is they would rather default than to issue rights to raise funds. It seems they are going to give their Indonesian creditors priority over PB folks in Singapore. It's all still unclear at this stage but some lessons are to be learnt here.
  1. Buying bonds from a foreign corporation is risky as they may not follow local laws and MAS can't do much. Besides, nearly all of Trikomsel's business is conducted in Indonesia, so it makes sense that they don't piss people in Indonesia.
  2. Having powerful shareholders may not be a sign that buying the bonds are safe. Trikomsel has Softbank (Big boy) as its substantial shareholder and i guess by this token, many would have been led to believe that investing in their bonds are safe but it seems that Trikomsel is "protecting" the shareholders to the detriment of bondholders.
  3. Being an accredited investor ain't a good thing as you get thrown junk by banks since you are believed to be savvy, so you are less protected by MAS, so to speak. Fortunately, one can opt-out of this "accredited" status now in Singapore.
  4. Given the worst case scenario, how much can you liquidate by selling their inventory of handphones?
Now, about Oxley retail bonds. This is a Singaporean company, not like Trikomsel, so Oxley follows the laws of Singapore. It develops ,sells and invests in properties, not like Trikomsel . Properties keeps much better value than handsets.Sounds good, but the problem is i'm an ultra conservative,risk averse chicken who prefers to walk up stairs and take a ship, just in case the lift drops from the 28th storey or the plane crashes.

Financial Convenants
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Balance Sheet



Part of the financial convenants (a.k.a terms) is that Oxley's consolidated total borrowings to consolidated total assets from 1 July 2016 onwards must be 0.70:1. Breaching any of the financial convenants, bondholders ( if more than 25% agree) can take action to demand return of capital and accrued interest.
Done by a risk-averse chicken
0.65 VS 0.70
This is too close for comfort for this chicken here, given that mark to market value of the assets could change rapidly especially when Oxley have lots of property development overseas, exposing itself to currency risk ( which i guess the fall in rupiah against SGD is a factor in Trikomsel's woes).

Goodbye Oxley.



2 comments:

  1. Hi SG Dividends, this is a good spot. Thanks a lot.

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    Replies
    1. Thanks for dropping by Kyith :)

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