Thursday, February 17, 2011

CapitaMall Trust to issue retail bonds

ANOTHER major firm - this time property giant CapitaMall Trust (CMT) - is tapping the bond market and targeting retail investors.

CMT's move will be the third corporate bond offering with a retail tranche in just six months. Its move comes as firms tap into the huge amounts of cash in the local economy looking for better returns.

The owner of Plaza Singapura, Junction 8 and other malls is offering $200 million of two-year bonds to public and institutional investors at a fixed interest rate of 2 per cent per year.

The minimum investment for retail investors is set at $2,000 to give them a chance to participate - and reap a better return than fixed deposit rates of less than 1 per cent on offer at the banks.

CMT set the minimum amount 'very low' as the firm wanted to give the man in the street a chance to participate in the bond issuance, said Mr Simon Ho, chief executive of CapitaMall Trust Management, CMT's manager.

The public will be offered $50 million while $150 million will be set aside for institutional and other investors. But CMT's manager is prepared to raise the issue as high as $300 million with a flexible allocation if there is a strong response.

The bond offering will allow CMT to diversify its sources of funding for future projects, such as the revamping of JCube and The Atrium@Orchard, which are expected to be completed next year.

Some of the cash raised will also be used for refinancing purposes and general working capital, Mr Ho said.

He added that the two-year timeframe was chosen as it hit the 'sweet spot' - not too short, not too long. It also fits in nicely with CMT's debt maturity profile, which currently has no loans due in 2013.

CMT has an asset size of about $8.1 billion. The public offer opens today and closes on Feb 23.

In September, Singapore Airlines sold $150 million in bonds to small investors. CapitaMalls Asia (CMA) was next, launching bonds last month that raised $200 million and also with a $2,000 minimum investment for retail investors.

Mr Christopher Tan, chief executive of financial advisory firm Providend, said retail bonds are a good alternative to bank deposits when interest rates are low but are less attractive for investment purposes. 'Bond prices are inversely proportional to interest rates... There could be a chance that interest rates might go up and I wouldn't want to buy a 10-year bond and be locked in,' he added.

However, he expects the CMT bond to be well-received as it has a two-year timeframe and will attract those looking to park their money outside of banks.

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