Perennial offers 3-year retail bonds at 4.65%

Chief executive of Perennial Real Estate Holdings, Mr Pua Seck Guan.
Chief executive of Perennial Real Estate Holdings, Mr Pua Seck Guan. PHOTO: ST FILE

Up to $150m offered to public; issue size can be doubled if public offer is oversubscribed

Property firm Perennial Real Estate Holdings (PREH) is launching three-year bonds to the retail market with an annual payout of 4.65 per cent.

Up to $150 million of the bonds will be offered to the public although some may be re-allocated to institutional and other investors if applicable, PREH said in a statement.

The total issue size can be raised to $300 million if the public offer is oversubscribed.

Chief executive officer Pua Seck Guan said: "The maiden retail bond offering further diversifies our sources of funding and optimises our capital structure."

Mr Pua said the bonds have one of the shortest tenure among retail bonds issued by companies in recent years. "(They) also allow retail investors to participate in our company's quality portfolio, which is underpinned by a robust balance sheet, relatively low net-gearing, and strong and reputable sponsors."

Net proceeds from the bond issue will be used for general corporate purposes, including refinancing borrowings and working capital.

PREH's offer comes after jewellery firm Aspial Corporation's issuance in August, which offered a coupon rate of 5.25 per cent over a five-year tenure.

"PREH's core business appears to be just real estate, and given the still soft property sector in the major countries the company operates in - China, Malaysia and Singapore - the near-term outlook might be challenging," said IG market strategist Bernard Aw.

However, considering Aspial's retail bond issue was 8.7 times oversubscribed, "it appears there is strong demand for corporate bonds. However, for Aspial, there was good demand from institutions and accredited investors, which gave confidence to the retail tranche", he added.

Bonds are losing their shine given expectations of an interest rate hike and the recent rise in Sibor (Singapore interbank offered rate), said remisier Alvin Yong.

"An increase in interest rates will result in a decrease in bond prices... Given the (United States) Federal Reserve is still looking to hike rates this year, investors ought to take that into consideration."

Even so, four of five other locally listed retail corporate bonds were trading above par yesterday, suggesting there is still a market for them.

Application for the bonds opens at 9am today and ends at 9am on Oct 21. The bonds are expected to be issued on Oct 23, with trading set to start on Oct 26. DBS is the sole manager and bookrunner.

Retail investors need at least $2,000 to subscribe. Interest will be paid semi-annually in arrear.

A version of this article appeared in the print edition of The Straits Times on October 13, 2015, with the headline 'Perennial offers 3-year retail bonds at 4.65%'. Print Edition | Subscribe