Property firm Oxley Holdings is the latest in a growing line of firms offering retail bonds.
Oxley announced yesterday that it is offering up to $150 million in four-year bonds with a coupon rate - or annual return - of 5.15 per cent. The offer comprises $125 million in the public offer and $25 million for institutional investors.
If the bonds are oversubscribed, Oxley may increase the total issue size to a maximum of $300 million.
The offer opens today at 9am and closes at noon on May 16. The issue price is $1 per unit, and public investors must apply for a minimum amount of $2,000 and then in multiples of $1,000.
This is Oxley's second offer in less than a year, and the third retail bond announced in 2016.
Last month, Perennial Real Estate Holdings rolled out a $200 million, four-year offer with a 4.55 per cent coupon rate. In March, Aspial Corporation announced its four-year, 5.3 per cent bonds. Both offers were oversubscribed, leading to increased issue size.
“Judging from the past issuances, the market demand for a bond with a 5-plus per cent return is still very strong,” said IG market analyst Bernard Aw
While overall demand for retail bonds has fallen from last year, the persistently volatile stock markets may sustain the appetite for fixed- income products such as bonds, iFast's assistant director for bonds and portfolio Terence Lin said.
"Investors are looking for safer instruments while interest in the volatile equity market has cooled off. And despite the gradually rising interest rate environment, the maturity of these retail bonds is still fairly short, at around three to four years, so the risk on this front is limited," Mr Lin said. "What investors need to be worried about is whether these companies will still be around after these three, four years."
Oxley's latest offer comes amid warnings from market watchers about the potential risks of investing in high-yield bonds.
Mr Aw said: "I think the majority of retail investors are still not savvy enough to look beyond the coupon rate. They don't necessarily research into, for instance, an issuer's debt ratio."
Oxley has a net debt to ebitda (earnings before interest, taxes, depreciation and amortisation) ratio of 6.76, Bloomberg data shows.
The ratio indicates a firm's ability to service its debt. Oxley's ratio is the 28th highest in the real estate sector, and the 106th highest among all listed firms.
The mainboard-listed developer has about $810.1 million in project- related loans to be paid within one year against $454.1 million in cash and cash equivalents, it said last week when announcing its results for the third quarter.
"We are aware that (Oxley) is one of the more leveraged names out there. This is not surprising, given that property developers often need to... tap either the bond market or bank loans for the refinancing of their projects," Mr Lin said.
Oxley's management is confident there will be no issue with its debt and bond repayments. Chief executive officer Ching Chiat Kwong last week said the firm expects temporary occupation permits for at least six local projects, including NEWest and Oxley Tower, by the end of the year. "Part of the cash flow generated from completion of these projects will be applied towards paring down outstanding project-related loans and we expect our gearing will be reduced significantly thereafter," he noted.
In all, Oxley has unbilled contract value of around $3.2 billion, including from projects in places such as London, Ireland and Cambodia.
Correction note: An earlier version of the story stated that Mr Bernard Aw was a market analyst from CMC. He is actually from IG. We are sorry for the error.