Aspial's second bond issue closes at $1, at par with issue price

The second retail bond offering launched by Aspial Corporation had a quiet debut yesterday.

The four-year bonds closed at $1, or at par with it issue price, with 203,000 units changing hands. This was followed by Aspial's statement last night that its financials and earnings outlook is sound, in response to critics that cautioned against the jewellery and property firm's relatively high level of debt.

Ahead of the debut yesterday, Aspial announced last week that the bonds - its second issuance in less than a year - were met with very strong demand, as investors piled in on the 5.3 per cent annual yield, or coupon rate. As a result, the issue size was pushed up to $200 million from the initial $75 million.

But some market watchers were not sold on the attractive proposition, with a Reuters article yesterday suggesting that the yield-chasing behaviour may be risky as Aspial reportedly has a high net debt to Ebitda (earnings before interest, taxes, depreciation and amortisation) ratio of 75 and a lower-than-acceptable interest coverage ratio of 0.8.

In a filing to Singapore Exchange after the market closed, Aspial said its net debt to Ebitda ratio was 30.72 and the interest coverage ratio was 1.9 as of Dec 31.

"The group wishes to emphasise that both net debt to Ebitda and interest coverage ratios are not among the financial covenants of all of Aspial's outstanding bond issues," due partly to the progressive revenue recognition from its property projects, Aspial said.

"This is especially so for development projects overseas, such as in Australia, where the Group can only recognise revenue upon completion."

The company has locked in around $580 million in revenue for its Singapore projects. More than A$1.05 billion (S$1.08 billion) has also been locked in from property sales in Australia. As these projects are completed and delivered between now and 2020, Aspial will have the revenue to service its debt - including the payment of bond yield - and improve its cashflow, it added.

Last year, Aspial's net profit plunged 80 per cent to $8.6 million, partly on lower revenue recognised from property development.

Its first retail bonds fell 0.3 per cent yesterday to 99.5 cents. Aspial shares also fell, down by half a cent or 1.79 per cent to 27.5 cents.

This article was first published on April 5, 2016.
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