Capital markets executive summary | Fri 13 Oct 2023

Capital markets executive summary | Fri 13 Oct 2023

AirAsia to issue USD400m revenue bonds

The budget carrier, part of the Capital A group, is looking for a USD400m (RM1.8b) loan, half of which will be from private credit, to refinance debt. The loan will be in the form of revenue bonds with the source of repayment being ticket sales from 10 AirAsia flight routes. In Apr, Capital A’s engineering and maintenance subsidiary, Asia Digital Engineering, secured USD100m from private credit provider OCP Asia Ltd. The global private credit market is USD1.5t but Asia’s contribution is negligible. Major investors including Blackstone see growth in the region. In particular, the aviation industry is a target for private credit lenders as earnings rebound with passenger load factors returning to pre-covid levels. Capital A closed at 96 sen.

Impian Ekspresi’s bank-guaranteed bonds AAA ratings affirmed

RAM Ratings affirmed the ratings of the company’s RM450m medium term notes (MTN) programme (2013/2024) comprising RM300m guaranteed by Bank Pembangunan Malaysia Berhad and RM150m guaranteed by Maybank. The company is developing Pavilion Damansara Heights, an integrated development with 9 office towers, 3 residential towers and a retail mall. The Company has to deal with liquidity issues with the MTN programme maturing in Nov 2024 and repayment of existing term loans in Q42024. Tan Sri Desmond Lim, the majority owner, has given an irrevocable and unconditional undertaking to the banks to make sure there is enough money to complete the project. The redemption of the outstanding MTN will be paid with the proceeds from the disposal of the retail mall or from a refinancing exercise. WCT Berhad, the main contractor, bears any cost overruns in the fixed-price turnkey construction contract. The project will be completed in 3Q2024. All 9 office towers have been fully taken up. The take up rate for the residential towers is 65.4%. For the mall which will open this month, 72.6% of its net lettable area have either a lease or commitment to lease. Malton closed at 41 sen, WCT at 58 sen and Pavilion REIT at RM1.21.
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Country Garden downgraded to B3 with negative outlook

RAM Ratings downgraded the rating of Country Garden Real Estate Sdn Bhd’s (CGRE) Islamic medium term notes (IMTN) programme due to recent developments with China-based ultimate parent Country Garden Holdings Company Limited (CGH), which is also the corporate guarantor of the IMTN. There were reports of more offshore bonds coupon payments being missed, warning about being unable to meet offshore debt obligations, non-payment of HKD470m indebtedness and maturity extension of onshore bonds. CGH’s liquidity stress means that the corporate guarantee no longer enhances the IMTN and the rating is now based on CGRE’s standalone credit profile. In recent years, the take up rate of projects in the Klang Valley and Johor Bahru improved and together with inventory sales allowed CGRE to service its obligations. Excluding the RM6.9b shareholder advances at end-Dec 2022, CGRE’s operating profit before interest and tax debt coverage was 0.03 times in FY2022. In July 2023, there were 3 ongoing projects with at least 71% take up rate. In early Aug 2023, the company had RM110m unrestricted cash although continued support from domestic lenders will be needed for the principal redemption in Mar 2025.

BNM approved AmBank’s AT1 and Tier 2 programme

The subsidiary of AMMB Holdings Bhd received the approval from Bank Negara Malaysia (BNM) to establish the AT1 and Tier 2 subordinated notes programme on 10 Oct. It subsequently submitted the documents on the programme to the Securities Commission on 11 Oct. The subordinated notes programme, which has perpetual tenor, complies with Basel III regulations and conforms to the Capital Adequacy Framework (Capital Components) issued by BNM on 9 Dec 2020 as amended. RAM Rating Services assigned a long-term rating of A2 to the AT1 notes and AA3 to the Tier 2 notes. AmInvestment Bank is the principal adviser, lead arranger, lead manager and facility agent. AMMB closed at RM3.89.

J&T Global Express value down 35% on Hong Kong IPO from 2021 valuation

The courier startup will launch an initial public offering (IPO) on Mon that will value it at USD13b (RM61.3b), similar to its May funding round but lower than the USD20b in its 2021 funding round. Chinese courier SF Holding bought 26.14m shares or 1.54% in the May round while investors including Boyu Capital, Hillhouse Capital Group, Sequoia Capital China and Tencent Holdings invested USD2.5b in 2021. The Shanghai-headquartered company started out in Indonesia in 2015 and expanded across Southeast Asia. In 2021, it bought Best Inc’s express delivery business in China in a USD1.1b deal and aggressively expanded to become a top 5 courier service in China. It has operations in Latin America and the Middle East. The IPO proceeds have been cut by half to USD500m after talks with investors revealed pessimistic market sentiment as weak consumer spending depressed the company’s e-commerce clients. This will be the 2nd largest listing in Hong Kong in 2023 after Chinese spirits maker ZJLD Group’s USD675.2m IPO in Apr.