All is not well with Singapore banks. I will be
shorting SG bank stocks if I were you. With rates so low for so long, it
triggered gluts in various sectors. Oil & gas, and real estate are two
sectors likely to be hit. Low rates have ironically failed to trigger
inflation. Instead it caused deflation. Because many companies over borrow,
over expanded, defaults are likely to follow. The next 5 years will see very
low returns in all asset classes.
I don't see high returns in real estate anywhere.
Most yields are already very compressed and spreads above borrowing costs less
than 2 percentage points. Stocks are not cheap, other than from emerging
markets, especially the BRICs. Investment grade bonds are extremely expensive.
High yield bonds? You may be able to get a bargain if you manage to avoid
defaults. Gold and silver look likely to shoot up with all these QE.
There will be a lot of controversies about how the
corporate bonds were sold in Singapore in future. Hopefully, there will be
further reform, and the better financial advisers; those who are financially
trained, who are good at investing, will prevail, not the salesy, greasy used
car salesperson types.
It is also time to look abroad. Singapore's GDP
growth has plateaued. I cannot see it continue to outperform in the next 10
years.
1. Singapore is vulnerable to terrorism. Terrorists
could camp themselves in the jungles of Johor and Batam / Bintan, fire rockets
into Singapore. Once Singapore is hit, confidence of investors will be shaken.
Things could quickly unravel.
2. Big developed countries are safer. You can live
in quieter suburbs further away from the CBD. You can avoid crowded places. You
don't have hostile terrorists hiding in neighbouring countries awaiting to
attack you across the straits.
3. Global warming will affect Singapore more as we
are not self sufficient in food.
4. Singaporeans generally are narrow minded,
obedient robots, but lack creativity to have foresight and think and act
independently. This does not bode well for the countries' future because to
thrive, one needs to come up with new ideas to make things better. I don't see
that in Singaporeans.
5. Activities in Australia and UK will be more
varied. The sad life of children in Singapore is to shuffle from one enrichment
class to another. Assessment books, cooped up at home. Abroad, one can go
fishing, skiing, camping, hiking, shopping. Life is more well rounded. Such is
the sad life of Singaporeans.
6. The only thing going for Singapore is that the
money is relatively good. It's hard to get jobs that pay over SGD150k in
Australia and UK. But they are aplenty in Singapore, IF YOU WORK HARD, BE
OBEDIENT to your boss and ALWAYS suck up.
Swiber saga DBS says bond sales
driven by demand
Oil and gas contractor
Swiber Holdings has filed a winding-up application, and its directors have
resigned to pursue their own interests. PHOTO: ST FILE
PUBLISHED
AUG 6, 2016, 5:00 AM SGT
EMAIL
Bank adds that Swiber and oil
prices were both going strong when bonds rolled out
The Swiber Holdings bonds sold by
DBS Bank to clients were rolled out to voracious demand, at a time when the
company and oil prices were going strong. So DBS should not be singled out for
scrutiny over bondholders' exposure to Swiber's demise, a bank spokesman noted,
in response to claims that DBS and its staff may have pushed the Swiber bonds
to clients who were little aware of the products' risk profile.
Swiber this week defaulted on its
semi-annual payment for its $150 million 001 Trust Certificates.
A self-employed man, who wanted to
be known only as Mr Jin, said he had invested $500,000 in two Swiber bond
issues through DBS. "I was simply following the advice of my relationship
manager, who never told me much about the company. I just thought, a bank in
Singapore, with this much regulation, would not recommend risky
investments," the 44-year-old said.
DBS said the sale was driven by
demand: "Many clients were reaching out to us and... private banks for
yield instruments, given the very low interest rate environment."
There are two outstanding vanilla
Singdollar Swiber bonds: a $160 million issue in 2013, with an annual yield of
7.125 per cent, got orders of $240 million; and a $100 million issue in 2014,
with a 5.55 per cent yield, had over $500 million worth of orders. The bonds
were distributed by various banks here, including United Overseas Bank and OCBC.
Market conditions were positive,
and concerned investors had plenty of chances to exit, DBS added.
"The two bonds were issued in
2013 and 2014, when oil prices were still above US$100 a barrel and Swiber
stock was trading above $1."
The Swiber bonds were available
only to accredited investors - with net personal assets of more than $2 million
- or those investing a minimum of $250,000.
Mr Jin said: "I'm a new
immigrant and could barely understand English. I just signed whatever papers
the relationship manager gave me."
Another investor, who asked to be
known only as Laura, 34, and a banker, said: "My banker said DBS could
lend me money to invest, so I'm 50 per cent leveraged on Swiber bonds. Now
they've defaulted, I'm asked to pay the bank $250,000 by next Tuesday to cover
the margin."
The DBS spokesman said: "DBS
does lend against all eligible and acceptable market securities, and investment
leverage is offered to wealth customers based on prudent underwriting
standards. This includes imposing criteria on the credit quality and duration
of fixed income securities as well as requiring the underlying investments of
each customer to be diversified."
DBS relationship managers are
rewarded based on a balanced scorecard, and there is no direct link between sales
targets and remunerations, the spokesman added.
SEE FORUM A50
OUTSTANDING PLAIN SING$ SWIBER
BONDS
$160m issue
Issued: 2013
Annual yield: 7.125 per cent
Orders: $240 million
$100m issue
Issued: 2014
Annual yield: 5.55 per cent
Orders: Over $500 millionLondon
Talks, $146 Million DBS Cash Fail to Keep Swiber Afloat
August 4, 2016 — 1:15 PM AEST
Proposed investment
from private-equity firm never came
DBS gave two
short-term loans to help Swiber redeem bonds
A proposed investment that never
happened, talks in London and Singapore, and a last-minute overdraft facility
from DBS Group Holdings Ltd. all failed to prevent Swiber Holdings Ltd.
from filing for
liquidation, according to court documents seen by Bloomberg News.
The saga, which began when executives
of the Singapore-based company pushed to complete a $200 million deal with
London-based private-equity firm AMTC Ltd., gave the outside world little hint
about what was brewing, the documents show. Swiber even repaid two bonds
totaling S$205 million ($153 million) during that period. On Aug. 2, it
retracted its surprise winding up plan and instead sought court approval to
appoint judicial managers to help reorganize its business.
Swiber’s journey from a supplier to
the offshore oil and gas industry to distress highlights the uncertain fate of
investors in S$460 million of bonds and 450 million yuan ($68 million) of notes
that the company has yet to honor. The Swiber incident is also putting on
notice companies in the same industry, said Bernard Aw, market strategist at IG
Asia Pte. Oil-related firms face S$1.4 billion of local-currency securities
maturing through 2018, with S$325 million due by year-end, according to
Bloomberg-compiled data.
Deeper Troubles
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Swiber’s troubles deepened as
negotiations with AMTC dragged on. Swiber broached the idea of a bridge loan
with the London firm. AMTC offered a six-month bridge loan of 100 million
pounds ($133 million) at an interest rate of 6 percent, the investment firm’s
Chief Executive Officer Smith O’Connor said by phone on Aug. 2. Swiber rejected
the alternative offer as too expensive, he said. AMTC turned cold about
investing in Swiber on advice from its consultants, he said.
Swiber Chairman Raymond Kim Goh
didn’t return calls to his office. DBS said Tuesday it provided a bridge
loan to Swiber on “the expected equity injection” from a new investor that it
didn’t identify.
To read a story about the
bondholders’ dilemma, click here.
Swiber officials kept pursuing a deal
with AMTC even after deadlines agreed with the firm came and went. It turned to
DBS, the company’s biggest lender, for more cash as two bonds came due,
according to the documents, filed with the Singapore High Court. Loans from DBS
to repay bondholders helped prolong the survival.
The company even assigned its
receivables, vessel mortgages and a stake in Vallianz Holdings Ltd., as well as
the potential cash infusion from AMTC, as collateral. Senior management at
Swiber also pledged their shares in the company as security for one of the
loans, according to the documents.
Tired of waiting for the AMTC cash
that never came, Swiber’s board met on July 20 and gave itself an ultimatum: If
the private-equity firm’s investment wasn’t in by July 26, the company would
file for liquidation, according to the court documents.
As demands from creditors and trade
suppliers piled up -- and with less than $8 million of cash in hand and no
working capital -- Swiber filed for voluntary liquidation on the evening of
July 27. On Aug. 2, it withdrew its liquidation plan and won interim court
approval for a supervised rescue.
The following is a chronology of
events according to court papers and exchange filings, beginning in late May
when officials from Swiber were pushing for a deal with AMTC.
Timeline:
May 25: Key Swiber executives meet
with AMTC to finalize an investment deal first initiated in February. They
propose that AMTC doubles its planned investment to $200 million by subscribing
to redeemable perpetual preference shares in a unit.
May 27: AMTC enters into a memorandum
of understanding to invest in Swiber and confirms it has funds for the proposed
deal, with the first tranche due on May 31, and the second 30 days later.
May 30: Swiber executives meet with
DBS to seek a bridge loan to redeem a bond due on June 6 while waiting for the
AMTC investment to come through on May 31. A day later, DBS agrees to review
the loan request.
June 2: AMTC writes to Swiber to ask
for more time to pay the first $100 million. On the same day, DBS offers Swiber
an $85 million one-month loan to redeem S$130 million of bonds.
June 9: Swiber’s unit signs a
subscription agreement with AMTC, with completion due on June 16. At the same
time, AMTC asks for longer to undertake due diligence, to which Swiber agrees.
June 22: Swiber engages Cameron
Duncan from restructuring firm KordaMentha Pte to assess its financial status
and cash-flow position amid concern that the AMTC cash infusion will be delayed
because of the extended due diligence.
June 25: AMTC completes its due
diligence and undertakes to remit $200 million by June 28.
June 27: AMTC requests more time to
complete the remittance; Swiber declines to extend the deadline.
June 28: Sensing that the AMTC
investment is not forthcoming, Swiber executives meet with DBS to seek another
loan to repay S$75 million of bonds maturing on July 6.
July 2: Swiber sends letter of demand
to AMTC.
July 4: Swiber Chairman Goh meets
with DBS senior management to inform the bank of its inability to redeem the
S$75 million of bonds.
July 5: Goh and other executives meet
with DBS officials and are offered a $61 million overdraft facility; the bank
lays out conditions including requiring Swiber to appoint a special accountant
from KPMG LLP.
July 14: Swiber executives meet AMTC
in London again, this time to discuss a 100 million-pound bridge loan while
waiting for its subscription to preference shares, without success.
July 20: Swiber holds a board meeting
and decides on liquidation if the AMTC money doesn’t arrive by July 26.
July 26: Letters of demand from
various creditors, trade suppliers and sub-contractors amount to $25.9 million.
July 28: 1:04 a.m., Swiber announces
liquidation application to the Singapore Exchange, which says it will conduct a
“thorough investigation into the developments.”
July 29: Swiber’s lawyers from
BlackOak LLC apply for judicial management for a court-supervised rescue plan
and drop the
liquidation plan after talks with lenders.
Aug. 2: Swiber defaults on bond coupon payment; gets court
approval to appoint officials from KPMG as interim judicial managers.
