PROPOSED ISSUANCE OF SENIOR UNRATED PERPETUAL SUKUK PURSUANT TO A PERPETUAL SUKUK PROGRAMME OF RM2,000,000,000 IN NOMINAL VALUE UNDER THE SHARIAH PRINCIPLE OF MUSHARAKAH

Issuer: Tropicana Corporation Berhad
Indicative Coupon: 7% area
Tenure: Perpetual Non-Callable 5 years
Issue Rating: Unrated
Seniority: Senior Secured
Distribution Frequency: Semi Annually
Expected First Issue Size: RM200.0 million, with option to upsize (“First Issuance”)
Sole Principle Advisor / Lead Arranger / Lead Manager: CIMB Investment Bank Berhad
Minimum Investment Amount (Nominal Value): MYR250,000
Deadline: 23rd Aug 2019, 12 pm (order after deadline is handled on a case by case basis)

Credit Highlights

1. First tranche of RM 200 million is guaranteed by the founder of Tropicana (Tan Sri Dato’ Tan Chee Sing), who is also the major shareholder at 63% both through direct and indirect interest (as per IM)

2. First tranche also secured by commercial land in Johor Bahru that’s worth more than twice of the first tranche

3. Step-up rate of 2% if bond is not called in the first call date. 1% step-up annually thereafter

4. This perpetual is considered a secured bond and is ranked equally as other senior unsecured bonds of Tropicana

5. Tropicana’s pro-forma (taking into account the proposed tranche’s issue) net gearing is at 0.35x

6. (Total Borrowings less Cash/ Total Equity) compared to SP Setia at 0.64x, UEM Sunrise 0.55x, YNH Berhad at 0.95x while Mah Sing is a net cash company.

7. Only YNH Berhad and Mah Sing offer perpetual bonds with YNH being the direct comparable as the years to next call of YNH perp is in 5 years (similar to Tropicana) while Mah Sing next call date is in 2.64 years

8. Adjusted Net Gearing for the respective developers are:
• Tropicana = 0.35x
• YNH = 0.95x
• Mah Sing = Net Cash

9. Yield to Next Call for the respective bonds are:
• Tropicana = 7%
• YNH = 6.75%
• Mah Sing = 6.14%

how it works?

Deleted

This post has been edited by ikanbilis: Aug 20 2019, 02:15 PM

7% Coupon rate...
Not bad 👍 but the minimum entry is kinda high side....
Even previous Maybank bond Coupon rate if I'm not mistaken is around 5%+ only...

I am interested in this, 7% is attractive.

How long should I hold?

See above quoted.

Perpetual - no expiry date.

This post has been edited by cherroy: Aug 20 2019, 02:45 PM

Minimum 250k lah.

https://www.bondsupermart.com/bsm/prelaunch...-factsheet/1547



Is this terms and condition normal?



This post has been edited by Drian: Aug 20 2019, 04:11 PM

7% how come gimme a junk bond feeling.

High yield junk bond

Perpetual Non-Callable 5 years

so i'm confused here..
its perpetual but has a limit of 5 years?
or is that 5 years the non-callable period?

5 years lock-in period, you cannot redeem it during that time.

ic thanks

you have RM252.5k spare money, give it as loan without collateral to a company you have confidence x 5 yrs.
Business running fine you get 7% pa.
5 yrs later you get back RM250k


Perpetual PBB bond (PZ090011) coupon rate 7.5%, completed 10 yrs 5.6.19


Holding power for 5yrs, if price goes up, you want you can cash out early and pass the 7% coupon to the next buyer.



junk bond has high risk of default,not worth the risk for just a 7% return.

you must have better reason to feel it junk
cant be just becos it pays 7%,
care to share with us ?


For that i would expect above 10% coupon rate.


Attached File(s)
 Tropicana_Perpetual_Sukuk_Information_Memorandum__final___1_.pdf ( 2.12mb ) Number of downloads: 50

Just to earn extra 3% than FD but the default risk is there, I don't want.

If we take perpetual bond issuance as debt, the gearing of these companies should be higher... Mah Sing is not net cash in that case.. I think ...

Another question ..if perpetual bonds are never repaid, what happens when companies become insolvent?? Have to depend on other buyers to bail u out?

Not sure about the first part.

But for the second, secured loans/bonds always comes first , then bankruptcy expenses, preference shares etc etc..
They can just keep it in perpetuity .. but need to pay that 7% coupon forever..

1. But it is a secure bond (land).. meaning if Trop goes under, this piece of land is secured to pay off the loan? But the loan is perpetual leh... means how?

2. Callable in 5 years means what? Means paying off in 5 years right? It is not perpetual lah then...

Confused..

1. Yes. Loan je perpetual. I means the term = infinity instead of regular 2year, 5 years etc ...
doesnt effect the land whatsover, unless there are plans to sell the land beforehand.

2, as viktor said. 5 years lock in/noncallable period. can still run perpetual ,

Lovely. Called up my cimb RM. He doesn't even know abt it..sigh..gonna send him the pdf.

Perpetual only in name and financial treatment as equity. Practically it will be called between 5-10years be cause of the stepup interest

When a bond is perpetual means it can go forever as long as the company pay the coupon rate.
So you cannot redeem the bond if the company does not wish to call back, but you can sell at bond secondary market, as long as there is another buyer wish to have the bond.

Non-callable means, the company will not call back the bond within the period.
Perpetual bond means forever, but normally company has the option to call back based on company wish, but not a must. It can let the bond run forever as the term of perpetual.

Perpetual bond is treated as one form of equities instead of as liabilities in the balance sheet, as company has no obligation to call back due to no expiry date.

But company can call back at their wish, subjected to tnc of the bond.

Unrated bond means the bond is not being rated by credit assessment agency, like RAM, S&P, Moody etc, whereby they assigned AAA, A+, BBB, etc rating.
So some unit trust manager may not able to buy them, as some fund managers based on the fund prospectus that has a mandate that they must buy BBB or A+ above rating bond.

PS : Not all perpetual bond are the same, their tnc may be vary from each other, ranging callable option, coupon rate step up or not etc. So please read their specific conditions before purchasing.
Disclaimer : I have no information about this or any particular bond discussed in here, just a general explanation on bond.

Means if not called by end of 5th year, then 9%.. then 10%.. Wah.. like ah long already..

But let’s say at year 10th you still holding earning 10%... if u want the principal ... how? Where is the secondary market to sell? Ask RM to sell or what?

Main issue is that this is a perpetual bond. If they choose not to pay you the 10% at that point, you can't haul them to court or take any action against them. For a perpetual bond to be treated as equity from an accounting perspective, it must allow coupons to be deferred indefinitely and not be treated as a default. Cue Hyflux case.

This post has been edited by Havoc Knightmare: Aug 21 2019, 12:29 PM

Guys is there anywhere to learn about all the small terms and condition of bonds like this?

For eg:-


Does this mean they can default anytime they want and you can't sue them?


This post has been edited by Drian: Aug 21 2019, 12:57 PM

Unfortunately there is no avenue for individuals in Malaysia to learn except through people who are familiar with the bonds itself, who are mostly in the banking/finance/accounting industry.

And yes, they can default anytime and investors are unable to pursue legal action against them. Hence the high coupon to compensate for that risk. Singaporean investors learnt this the hard way. Given the flood of new perpetual bonds in recent years, it's just a matter of time before one blows up here. DYODD.

This post has been edited by Havoc Knightmare: Aug 21 2019, 07:19 PM

Hi Havoc, i have read many of your posts and i know you are one of those well informed in Bonds.

I am sure many in here would appreciate your views and comments


The bank agents told me:

1. First tranche of RM 200 million is guaranteed by the founder of Tropicana (Tan Sri Dato’ Tan Chee Sing), who is also the major shareholder at 63% both through direct and indirect interest (as per IM)

2. First tranche also secured by commercial land in Johor Bahru that’s worth more than twice of the first tranche



Would that make the Bond safer for us to invest in?
Is it true the first tranche issued is usually "safer" compared to subsequent 9 tranches?


3. Come Sept 2019 if the FTSE Russell really remove the Malaysian government bonds from WGBI,
would that seriously increase the risk of default in this bond?


Thanks for views and opinions shared.

Hmm 7% and the company in the property business which is not expected to do well in near future due to overhang.

I do think ASM has better risk reward ratio.


This post has been edited by Drian: Aug 22 2019, 10:24 AM

It is unrated. So it has higher rate of return.

Thank you for your feedback/inputs. Appreciate it.
I never bought any corporate bonds before, but 7% is really attractive compared to my lousy investment track record.

This post has been edited by spiderman17: Aug 30 2019, 01:55 PM

are you buying from FSM?

I got it from CIMB. Allocation supposedly confirmed. My RM asked me to withdraw FD on 3rd Sep...but till today the money is still sitting in my saving acc ...

You WD FD from Bank rakyat put in CIMB Savings?
Why your RM didnt use those money in CIMB SA do FD for you?

I also WD FD from BR, put in CIMB FD 6 month @ 3.9%pa

Can see interest accumulate daily, already earned >RM400
nd my RM said will let me earn few more days
till next week only she WD.

My FDs are originally in cimb. Placed almost 1year ago, due end of this month.
..sigh...my RM is really lousy when compared to yours. First he didn't even know abt this bond. Then he asked me to withdraw FD so much earlier...lost at least 7days interest on 250k.
Sigh...

your RM really teruk, money in CIMB why hurry you to withdraw FD?

wasting interest only and now internal system is "down"
so it will sleep there even longer.
I am happy the longer "system down" the better for me.
may be by Friday only system can absorb it into Bond.

If buy the bond from CIMB through your RM, do they charge any commission?

Yes at 1.5%

is it possible to avoid this charge?

pls note that i'm new to buying bond... don't wanna end up the blind leading the blind
so far I only know 2 ways to get into bond, either thru bank like CIMB, of thru FSM.

check this post:
https://forum.lowyat.net/index.php?showtopi...post&p=93775221

avoid fully?? definitely No.
Avoid fully means you buy at PAR, ie the price =RM100

the lowest fee I got was 0.6% CIMB Bond PZ160016- A1 rating coupon 5.5% till 2021.

I m new here. I read some of the quotes and found some misunderstanding of bond investment.

Tropicana perp non callable 5 is not mean u cannot sell within first 5 yrs but the issuers cannot "call" within first 5 yrs.

What is "call"?
When issuer call the bond, means they buy back from bond holders (those investors bought the bonds) with a specific price. The specific price not necessary the same price u bought the bond. After the Non callable period, the issuer can call at anytime OR specific periodical time table e.g every 12 months later.

Why bond issuer (in this case is the Tropicana), set a perpetual bonds with a callable feature?
This is because if the bond is pure perpetual, u wont get back ur principal because there is no maturity date. That's why usually such perpetual bond comes with a callable feature offering to callback /buyback the bond at specific price at specific time. So u know u still got a chance to get back ur principal if the issuer exercise the call.

But what if the issuer don't exercise the call?
Bond issuer is NOT mandatory to exercise the call. They can choose to ignore it and wait for next available call date to see whether they want to exercise the call or not. Usually to give some confidence to bond investor that they will likely to call is by offering "step up rate". Means if they don't exercise call, the bond issuer will increase the coupon rate. This will sweeten the deal and at the same time give the issuer some flexibility. If the issuer by the call date got no money or financially stressed, they can skip the call and accept the fact that they pay higher coupon rate.

I hope now u see there is some additional risks of buying a perpetual bond. Just my 2 cents

Yup, you are right about that.

Just realised someone explained the bond call concepts earlier. Hope I didn't say anything wrong. Cheers