Way Open for Proposed MBSB Merger; Mudajaya Secured Financing

22 December 2016

Credit Markets Update

Way Open for Proposed MBSB Merger; Mudajaya Secured Financing 

¨      APAC USD Credit Market: Oil weighed on Treasuries. Dampened inflation outlook, Brent price weakness (-1.6% to c.USD54/bbl) coupled with the underperformance in US equities led to lower benchmark UST yields. UST 2y and 10y shed 2-3bps to 1.19% and 2.53% respectively. Moving to Asia, both IG credit spreads and average speculative bond yields were unchanged at 182.1bps and 6.85%. Elsewhere, the iTraxx AxJ IG declined 7.8bps to 115.6bps driven by lower CDS spreads observed in banking credits such as IDBI Bank, ICICI Bank and Bank of China.

¨      SGD Credit Market: Bondholders reject Rickmers consent solicitation. There was a mild decline in the short-to-mid SOR curve by 1-1.3bps, with the 2y and 5y closing at 1.76% and 2.43% respectively. Rickmers Management Trust, which is seeking to reverse the technical default on its sole outstanding SGD100 RMTSP 5/17, failed to receive approval from its bondholders for its proposal to extend its bond maturity. Meanwhile, Sembcorp Industries (NR) announced that it had secured financing for its Bangladeshi power plant project from sources including International Finance Corporation while Keppel Corp (NR) announced that it has won the bid to develop Singapore’s fourth desalination plant.

¨      MYR Credit Market: New facility from Lafarge Cement; Mudajaya’s new financing alleviates liquidity concern. RAM has assigned AA2/Sta rating to Lafarge Cement Sdn Bhd’s proposed MYR500m Sukuk Wakalah Programme. Receiving a similar rating to that of its holding company, Lafarge Malaysia, as Lafarge Cement is the main operating subsidiary which accounts for over 70% of the Group’s total revenue over the past few years. The proceeds from the first issuance from the proposed Sukuk, estimated at MYR280m, is earmarked for refinance existing Lafarge Malaysia’s ICP maturing on 16-Jan next year, hence the Group’s gearing should remain stable at 0.14x, similar to current levels. Meanwhile, BNM has no opposition for the M&A proposition of MBSB and Asian Finance Bank, a 66.7% owned bank by Qatar Islamic Bank. The merged entity, if the M&A succeeds, would fetch a total asset value of MYR47bn based on the latest quarter result as at 30-Sep, about 85% of the total asset size of Alliance Financial Group. Elsewhere, Mudajaya (A2/Neg) has secured a USD50m term loan facility from UOB Malaysia along with the USD60m bond issuance, which alleviates the concern of its upcoming MYR240m bond repayment maturing on 23-Jan-17. Moreover, govvies rallied further yesterday with the 3y and 5y MGS declining to 3.52% (-10bps) and 3.68% (-7bps) respectively, while the MYR lingering slightly below the 4.48/USD level. Corporate volume totaled at MYR383m where CMBS 5/17, Kimanis 12/18 and LPPSA 9/23 were the top traded.