Aspial offers second retail bond

Australia 108, a residential and commercial skyscraper in Melbourne, is owned by Aspial Corporation, whose businesses include jewellery retail, property development and financial services.
Australia 108, a residential and commercial skyscraper in Melbourne, is owned by Aspial Corporation, whose businesses include jewellery retail, property development and financial services.PHOTO: ASPIAL CORPORATION

Coupon rate is 5.3% - one of the highest returns in the bond market currently

Aspial Corporation has launched its second retail bond in less than a year.

The four-year, $75 million issuance pays annual interest of 5.3 per cent, one of the highest returns in the bond market now.

The offer comes as interest rate uncertainties have eased but there have been signs that the local bond market is feeling some strain.

Aspial's latest issuance will set aside $50 million for public offer, with a minimum investment of $2,000 per application. A $25 million placement tranche for institutional investors will require at least $100,000 per application.

The bond's offer opens at 9am today and closes at noon on March 30. Aspial can expand the issue size to a maximum of $200 million if the offer is oversubscribed.

RIGHT TIMING

For a company to hit the retail bond market now makes sense, given that the interest rate uncertainties have dropped after the Federal Reserve said only two rate hikes are on the cards this year.

MS MARGARET YANG, CMC Markets analyst.

The 5.3 per cent annual payout, or coupon rate, is even better than Aspial's first issuance in August last year, when the jeweller and property firm rolled out a five-year, $150 million issuance with a 5.25 per cent coupon rate.

Both coupon rates sit at the very top of the current crop of Singdollar retail corporate bonds.

"The return is certainly very attractive, as is usual with non-investment-grade offerings," CMC Markets analyst Margaret Yang said, referring to the fact that Aspial is not credit-rated. "Individual investors will have to decide based on their risk appetite.

"But for a company to hit the retail bond market now makes sense, given that the interest rate uncertainties have dropped after the Federal Reserve said only two rate hikes are on the cards this year."

Meanwhile, signs of credit stress are emerging in the bond market. Trikomsel Oke missed its coupon payments in November last year, the first default here since 2009.

CIMB Private Banking economist Song Seng Wun said these concerns will persist in 2016 among bond issuers with weak balance sheets. "The credit market stress will be there as economic growth remains slow, and the secondary market may be pressured because of these concerns," he noted.

But there is little sign of any headwinds as far as Aspial is concerned, with its 5.25 per cent bond expiring in August 2020 closing yesterday at 0.995, just below par.

"The growth is slow but it's still there and the interest rate outlook has stabilised," Mr Song explained. "This is not an environment where you will see drastic change in conditions. So while investors should be mindful, I don't think default risks will become systemic this year."

A version of this article appeared in the print edition of The Straits Times on March 23, 2016, with the headline 'Aspial offers second retail bond'. Print Edition | Subscribe