F&N, bondholders set for showdown

PHOTO: F&N, bondholders set for showdown

Sharefolders of conglomerate Fraser & Neave (F&N) will today vote over the proposed spin-off of the group's property business.

F&N, which is planning to list Frasers Centrepoint (FCL) separately, also needs to get approval from bondholders to buy back $808.25 million worth of bonds early as part of the exercise.

This separate bondholder vote is taking place tomorrow and apparently there is unhappiness among some F&N bondholders who believe they are being short-changed.

F&N has offered to buy back the bonds at par, with accrued interest and an additional prepayment of half the bond's coupon.

Bondholders who accepted the offer prior to Tuesday's deadline were given an extra acceptance fee, subject to conditions. This formula applies to all six series of bonds involved.

F&N will meet holders of the six different bonds tomorrow in what appears to be a simmering battle as some bondholders feel they deserve more compensation.

Some holders of two F&N notes - one with a 6 per cent coupon due in 2019, and the other with a 5.5 per cent coupon due in 2016 - are outraged, claiming the offer price is below market value.

An F&N spokesman told The Straits Times that it "understands from media reports that some noteholders are unhappy with the call price" of the two notes.

A local fund manager, who declined to be named, voiced his displeasure at the offer price "to let others know that F&N is short-changing its bondholders".

He felt that F&N's offer should be closer to market levels, and its failure to do so "breaks away from proper market behaviour".

Grandtag Financial Consultancy chief executive Ben Fok said that the offer price would be fair if it matches what had been stated in the bond agreement or prospectus, and the caveat emptor or "buyer beware" rule applies.

The early redemption clauses outlined in the F&N prospectus state that it would pay bondholders par and accrued interest.

Some market watchers said that F&N has given bondholders a reasonable deal as it is paying them an early redemption amount on top of what it is obligated to.

Concerns have also been raised that F&N may accept the default on its bonds if it does not get approval to redeem them earlier. This would mean bondholders would receive only the principal sum and accrued interest.

Recent media reports suggested that the Monetary Authority of Singapore (MAS) has stepped in to monitor the looming dispute.

The Straits Times understands that the MAS has contacted "market players" as part of its standard practice to learn more about the deal. It does not flag likely intervention or a belief that any party has been unfairly treated.

Mr Fok noted that there will be bondholders unhappy with the early redemption. "Many investors buy into a bond or note and hope to hold it till maturity with regular returns or interest," he said.

"If the early call-back gets approved by the majority of the bondholders, they would have to source for alternative investments at a similar rate of return which may not be easy."

In the spin-off, F&N shareholders will receive two FCL shares for each F&N share they own. The listing is being done by way of "introduction" which means neither FCL nor F&N will receive cash proceeds.

Separately, F&N Tuesday said its full-year net profit rose to $5.43 billion from $837.5 million, thanks to the sale of its stake in Asia Pacific Breweries (APB).

The directors have recommended a final dividend of 12 cents a share, bringing the total dividend for the year to 15.5 cents, compared with 18 cents last year.

The reduced dividend reflects the group's earnings following the loss of contribution from APB and the capital reduction of $3.28 per share.


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