13-08-2012, 11:50 AM
Ok my fault with poor choice of words. I should not use "call" but "redeem" or "redemption" instead as it is confusing with typical callable bonds.
(13-08-2012, 10:47 AM)CityFarmer Wrote: [ -> ]I had gone thru few bond issues, due to my holdings. None of them are base on interest coverage etc.
Let bring back the discussion to our context. I had highlight call on demand for bank debt (at the first sign of trouble), rather than at bank free will. So we are aligned.
(13-08-2012, 12:29 PM)l0nEr Wrote: [ -> ]Actually, in the recent bond issue, there is a covenant "Limitation on Indebtnedness and Preferred Stock". The details will probably be out when the offering circular is online on the sgx website.
Meanwhile, I'll point you to a recent bond issue by Ezion Holdings (you can find the prospectus in SGX...
http://info.sgx.com/listprosp.nsf/b7f097...a0024e899/$FILE/1371679_v(1)_Ezion%20IM_090512_Clean_v16_Low%20(Final%20IM%20dated%209%20May%202012).PDF
On page 11, there is a summary of the financial covenants.
(i) the Consolidated Tangible Net Worth will not at any time be less than U.S.$ 250,000,000 ;
(ii) the ratio of Consolidated Total Borrowings to Consolidated Tangible Net Worth shall not at any time be more than 2:1 ;
(iii) the ratio of Consolidated Secured Debt to the Consolidated Total Assets of the Issuer shall not at any time be more than 0.6:1 ; and
(iv) the ratio of EBITDA to Interest Expense shall not at any time be less than 3.5:1 .
...
(13-08-2012, 02:17 PM)l0nEr Wrote: [ -> ]In contrast to the loan/debt issue, actually I'm more curious about what you like about the company.
I'm interest in it too because of the water treatment industry. Seems like droughts and floods are going to be a big problem, with world wide food shortage (seems like a well-known story already).
However, it seems like the industry is a bit fragmented and seems quite hard for non-SOE companies to win large projects. I see competition from large SOEs such as Beijing waters enterprise. I also read somewhere that their projects have a payback period 8-10 years, although order books seemed to have strengthened, how do you value a company like this? Also, it seems like their ROC for the past two years have been aroud 12-13%, while ROA is about 8%, why pay 12% for a debt deal?
(13-08-2012, 03:12 PM)CityFarmer Wrote: [ -> ]Before our discussion go nowhere, i would like to recap it to our initial context, funded debt is riskier than bank debt, due to it is more likely bank debt been called than funded debt under similar financial crisis. Funded debt is unlikely been called, if interests or coupon been paid promptly.
To put us under the same context, there is a flaw in your posting, the flaw of fragmented info causing misleaded conclusion. If i refer to the document of Ezion Holdings bond's document page 40, which stated the detail of the Financial Covenants. The financial covenants will become effective if coupons is outstanding i.e. not pay promptly
The Issuer has further covenanted with the Trustee in the Trust Deed that so long as any of the Notes or the relative Coupons remain outstanding, it will ensure that:
(i) the Consolidated Tangible Net Worth will not at any time be less than
U.S.$250,000,000;
...
(13-08-2012, 10:55 PM)l0nEr Wrote: [ -> ]Ah, i must admit i didnt do much research on the WWT industry. I was just looking for some WWT companies after hearing the story of WWT in China (as you have described), before noticing this company. At that time, I thought the company had ROE that is better-than-peers and lower PE too, but stock kept falling so i forgot about it until now. I attributed the lower PE was due to the S-chip status in Singapore, and its smaller scale.
Im just more curious about the long payback. One report from Poems said about 10 years, another said about 8-10 years. Is this the norm for the industry? including other players like Hyflux? Coz the long payback means the company will need a lot of cash and long-term debt for liquidity, while being in negative FCF in the near term. It will probably lower the IRR of the projects too. Besides, the company still derives most of its revenue from building projects (instead of recurring income). While more projects, means more debt. That said, i certainly like that the company has the backing of IFC, a renowned investor.