Saturday, January 8, 2011

CapitaMalls to sell retail bonds

RETAIL investors will have a chance to get a slice of the action when CapitaMalls Asia (CMA) launches a bond issue to raise up to $200 million for new projects.

The one- and three-year bonds from the property firm will have a minimum subscription of only $2,000, far lower than most bond issues, and pay more than bank deposits.

The one-year bonds will pay out 1 per cent a year while the three-year ones have an interest rate of 2.15 per cent per annum.

Banks do not pay anything like that for amounts of about $2,000. A check shows that a one-year term deposit earns about 0.35 per cent while the two-year rate is 0.6 per cent or so.

The bonds might also attract investors who shop in CMA malls like Ion Orchard, Plaza Singapura and Raffles City and are familiar with the firm's retail business.

CMA chief executive Lim Beng Chee said the bond proceeds will be used to invest in new developments and other general corporate purposes.

The real estate investment trust (Reit) has $1.4 billion of cash on its books and zero net gearing.

Earlier this week, it revealed plans to double its portfolio of malls in China to 100 over the next three to five years. In total, CMA expects to invest $2 billion in malls in China, Malaysia and Singapore.

Corporate bonds have attracted a keen following among retail investors.

Last October, Singapore Airlines had to raise its offering to $150 million from the original allocation of $50 million after a strong response.

SIA's bonds pay an interest rate of 2.15 per cent a year.

A month later, DBS Group Holdings offered $800 million in new preference shares to retail investors with an annual dividend rate of 4.7 per cent. The offering was more than 3.5 times oversubscribed.

Similarly, analysts expect the CMA offering to attract a good investor demand given the high levels of cash flowing around the market.

Investor Jackson Teo, 59, usually invests in the stock market and said bonds with a longer tenure are not options he would explore.

'Three years is still a bit long because interest rates might go up. But since the minimum is quite low, I might consider putting a small amount like $10,000,' said Mr Teo.

CMA has the option to allocate up to half of its bond offerings to institutional investors.

But one analyst said such investors might shy away because sophisticated investors are typically more aggressive in seeking returns.

CMA will offer the bonds through its unit CapitaMalls Asia Treasury. DBS bank is the sole underwriter and lead manager.

Investors have until Jan 17 to apply for the bonds, which are expected to be issued on Jan 21 with trading on the Singapore Exchange to start on Jan 24.

CMA shares remained unchanged at $1.90 yesterday.

They are down about 10 per cent from their listing price of $2.12 and around 20 per cent lower than their high in January last year.

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