(CapitaLand Mall Asia 10-year Callable Step-up Bond; Counter Name: CapMallA3.8%b220112)
CapitaLand Mall Asia’s (CMA) retail bonds bearing an annual interest rate of 3.8% that are expiring in 2021, are recently traded at S$1.02.
CMA has the rights to redeem the bonds in Jan 2017 which means that investors can get back principal of S$1.00, lower than the amount they have invested but not including transaction fees. Retail bonds investors may end up with negative rates of returns.
My view is that CMA will LIKELY redeem the bonds at PAR as the coupon rate it has to pay will increase from 3.8% to 4.5% in 2017 if it does not redeem the bonds. I think that the company can refinance this bonds by issuing another bonds for the same tenure at much lower rate than 4.5%.
Do consider carefully if you want to buy this bonds at a premium in the secondary market!!
1 comment:
Bond investment can be very rewarding. However, sometimes certain investors gets it wrong as they become too focus on headline "yields". In this case, not realizing that there is a fundamental call feature for the bond (which is quite common feature for certain bonds). Other times, the yield chase causes some investors to take on higher credit risk eg. more recent case of Swiber. Best to study the sustainability of the yield and consult an investment advisor for an additional opinion.
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