PETALING JAYA: Yinson Holdings Bhd, which is bidding for three to
six projects and fresh from inking a deal to sell part of its
African unit to big-name Japanese investors, is now embarking
on a massive perpetual securities programme of up to US$500mil
(RM2.13bil) to fund its growth.
Yesterday, the floating production, storage and offloading
(FPSO) service provider announced on Bursa Malaysia that it had
established a US$500mil multi-currency perpetual securities
programme, which it has unconditionally guaranteed.
Essentially, the establishment of this perpetual securities
programme enables Yinson to issue perpetual securities when
required for general corporate purposes.
During the group’s recent AGM, group CEO Lim Chern Yuan said
that Yinson prefers not to tap into the primary equity market
to raise funds.
“We will instead rely on the ability of the company to
velocitise the future cash flows from its firm contracts
through strategic partnerships, any form of hybrid securities,
or bond raising from the market,” he said.
Hence, there is no timeline for Yinson to issue the perpetual
securities, as the group can decide to do so at any given time
under the programme in full sum or in tranches, depending on
the market reception, as well as preferred coupon, tenure and
other relevant pricing supplements.
Based on Yinson’s past track records, when raising funds from
the market, the proceeds are usually earmarked for the
embarkment of new projects.
In addition, Yinson has also received an approval-in-principle
from the Singapore Exchange Securities Trading Ltd (SGX-ST) for
permission to deal in, for any perpetual securities pursuant to
the programme, the official list of the SGX-ST.
The perpetual securities are to be listed on the SGX-ST as it
is an international Regulation S bond, which has a wider range
of investor base.
Perpetual securities are commonly listed on three exchanges,
namely, the London Stock Exchange, the Hong Kong Stock Exchange
and the SGX.
Perpetual securities are usually classified as equities under
the international financing reported standard and increase
shareholders’ funds of the issuer group, reduce the gearing
ratio and enhance gearing headroom to take on new projects.
The common ticket size per issuance of perpetual securities
ranges from an estimated US$150mil to US$500mil for it to be
In 2015, Yinson, via unit Yinson TMC Sdn Bhd, issued a
Regulation S perpetual securities amounting to US$100mil
(RM429.82mil), the first of its kind in Malaysia, at a pricing
handle of 7% for a tenure of non-call five (five years).
The estimated FPSO returns are in the range of 16% to 25% based
on analyst consensus, while Yinson’s perpetual securities
issued in 2015 has a 7% coupon rate.
Should this continue to be the case, then this would indicate
that it is worthwhile for Yinson to issue bonds based on the
lucrative FPSO returns.
With this low cost of equity funding, it is presumed that
Yinson will be more competitive in its FPSO bidding process,
which is capital-intensive.