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CapitaMall Trust issues 3.08% yielding 7 year bond

CapitalMall, one of the 2 oldest REITs in Singapore issues a 3.08% 7 year bond.

  • Fixed Interest (coupon) of 3.08% per annum. The coupons will be paid half yearly on 20th Feb and 20th Aug each year
  • From 2014 to 2021
  • S$150 million will be issued to public
  • Offer starts on: 11 Feb 2014 9 am
  • Close on: 18 Feb 2014 12 pm
  • Apply through: ATM at DBS, POSB, OCBC, UOB
  • Minimum investment amount: S$2,000 (incremental multiples $1,000)
  • Joint Lead Managers and Book Runners: DBS, OCBC and UOB

A bond is different from a REIT. It is an IOU. You borrow money to CapitaMall. They take the money to work in their business. The coupon you get is fixed for this 7 years, it will not increase it will not fall.

If you held this amount for 7 years, you will get back your principle sum.

You can choose to sell off the bond or buy the bond when it is listed on the Singapore Stock Exchange (SGX). When you sell off within this 7 years, you may make or lose money.

CapitaMall is a rather large company, but even then it carries the risk that it will default on paying you the coupon and back your money. As a debt collector, you have to access the issue.

How does this compare to a government bond (AAA rated) with the same 7 year duration? You can see that a 7.3 years to maturity bond yields currently 1.9% which is like 1.18% lower than this.

Interest rates may be rising, and Capitamall may be using this time to lock in some really low interest debt.

The decision to purchase or not depends on

  1. Whether you need a low volatility, predictable allocation
  2. Whether you need a low correlated asset in your portfolio allocation
  3. If you are very risk adverse
  4. How long you need this money to be locked in

To get started with dividend investing, start by bookmarking my Dividend Stock Tracker which shows the prevailing yields of blue chip dividend stocks, utilities, REITs updated nightly.

Make use of the free Stock Portfolio Tracker to track your dividend stock by transactions to show your total returns.

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Kyith

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H

Monday 10th of February 2014

i'm comparing this to the average [hedged] debt cost (3%ish) that SG Shipping corp is currently paying (happen to be reading its latest AR now).

assuming CMT is rated-higher than SSC and have better access to credit (economies of scale since it's balance sheet is a lot larger & very likely to have access to better bankers/underwriters) -- do u think it's CMT wanting to lock in debt-capital at it's current low-but-might-not-be-low rates, or to re-roll maturing debt obligations?

thanks.

H

Monday 10th of February 2014

i'm comparing this to the average [hedged] debt cost (3%ish) that SG Shipping corp is currently paying (happen to be reading its latest AR now).

assuming CMT is rated-higher than SSC and have better access to credit (economies of scale since it's balance sheet is a lot larger & very likely to have access to better bankers/underwriters) -- do u think it's CMT wanting to lock in debt-capital at it's current low-but-might-not-be-low rates, or to re-roll maturing debt obligations?

thanks.

H

Monday 10th of February 2014

i'm comparing this to the average [hedged] debt cost (3%ish) that SG Shipping corp is currently paying (happen to be reading its latest AR now).

assuming CMT is rated-higher than SSC and have better access to credit (economies of scale since it's balance sheet is a lot larger & very likely to have access to better bankers/underwriters) -- do u think it's CMT wanting to lock in debt-capital at it's current low-but-might-not-be-low rates, or to re-roll maturing debt obligations?

thanks.

Kyith

Tuesday 11th of February 2014

i think its hard to see them having altruistic values. more or less securing a large 7 year debt at attractive predictable cost is what they are looking for.

surprised you compared to SSC

H

Monday 10th of February 2014

i'm comparing this to the average [hedged] debt cost (3%ish) that SG Shipping corp is currently paying (happen to be reading its latest AR now).

assuming CMT is rated-higher than SSC and have better access to credit (economies of scale since it's balance sheet is a lot larger & very likely to have access to better bankers/underwriters) -- do u think it's CMT wanting to lock in debt-capital at it's current low-but-might-not-be-low rates, or to re-roll maturing debt obligations?

thanks.

H

Monday 10th of February 2014

i'm comparing this to the average [hedged] debt cost (3%ish) that SG Shipping corp is currently paying (happen to be reading its latest AR now).

assuming CMT is rated-higher than SSC and have better access to credit (economies of scale since it's balance sheet is a lot larger & very likely to have access to better bankers/underwriters) -- do u think it's CMT wanting to lock in debt-capital at it's current low-but-might-not-be-low rates, or to re-roll maturing debt obligations?

thanks.

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