Deutsche Bank acted as sole bookrunner on the transaction, which includes a S$50 million ($32 million) greenshoe that can be exercised within 30 days. The bonds have a seven year maturity with a five-year put.
The convertible was the fourth from an issuer listed outside of India or Hong Kong in just over a week and like the other three û by Indonesian oil and gas explorer PT Medco Energi, Taiwanese chip maker Winbond Electronics and Singapore-listed soybean products producer Celestial NutriFoods û it attracted a certain amount of investor attention from a diversification point of view.
However, Celestial NutriFoods and this yearÆs only other Singapore-listed CB issuer of size - wastewater technology firm Bio-Treat Technology û are both Chinese-based companies. Keppel Land is a pure Singapore play. In fact it is even linked to the government through Keppel Corp, which holds 53% of the company and is in turn 72% owned by Temasek.
The sale was the first CB done by a government-linked entity in the Island state since April 2003 when Temasek itself issued bonds exchangeable into Keppel Land shares.
Another rare feature, which according to a person familiar with the transaction says added to the attraction, was the fact that the bonds will pay a coupon rather than accrue all the interest for a one-off payment at redemption - assuming the bonds havenÆt already been converted by then. In exchange for the coupon, the Keppel Land bonds will be issued and redeemed at par.
The coupon, which accordingly will also be equal to the yield, was offered to investors in a range between 2.4% and 2.9% and fixed towards the tight end at 2.5%.
The conversion premium was also aggressively set right at the top of the indicated range of 35% to 40% above yesterdayÆs closing price of S$4.68, giving a conversion price of S$6.55. The longer than usual maturity and the fact that there is no issuer call likely made it easier for investors to accept that steep a premium.
The share price has also had a strong run, gaining 106% over the past 12 months and currently trades close to the all-time high of S$4.96 which was reached on May 9.
However, the deal was heavily oversubscribed by more than 70 participating investors, which allowed for an aggressive pricing overall. The book was said to comprise a diversified set of high-caliber accounts, including outright funds and CB specialists.
According to the sources, the bookrunner provided a combination of asset swaps at 120 basis points above the Singapore Interbank Offered Rate and credit default swaps at 100 basis points over. The deal also featured a flexible dividend protection that will allow the issuer to pay out 35% of its net profit before having to compensate bond investors. The companyÆs most recent payout ratio was about 24% of net profit, and based on that the stock currently trades at a dividend yield of about 1.05%.
There is stock borrow available in the market at a cost of 100 to 150 basis points.
The bond floor came out just below 90% at 89.35% and the implied volatility at 27.7%, which was close to the historic volatility of 28%, according to an investor who took part in the transaction.
If fully converted, the company will have to issue new shares corresponding to about 5.3% of the company, which based on an average daily turnover of S$7 million would account for about 25 days worth of trading.
The proceeds will be used to refinance outstanding debt and for general corporate purposes.
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