Olam International

[RBM]

Hello tanjm,

The latest prices I have for Olam’s bonds are as follows – this excludes brokerage and the fat mark-ups that some of the private bank units can tend to apply....................

OLAMSP 6.3/4% 01/29/18 SGD.....94.75
OLAMSP 6% 10/25/22 SGD...........92.00
OLAMSP 5.3/4% 09/20/17 USD.....93.80
OLAMSP 2.1/2% 09/06/13 SGD.....99.80
OLAMSP 5.8% 07/17/19 SGD........94.00
OLAMSP 6% 08/10/18 SGD...........92.50
OLAMSP 7.1/2% 08/12/20 USD.....95.50
OLAM 7% Perpetual SGD..............90.00

As you will see, they are all trading below par, by varying degrees - the (ongoing) Muddy Waters episode hit hard, particularly the longer tenor stuff. Excluding brokerage, the 6.3/4% SGD Jan 2018 bond (and it is S$, not US$ according to my understanding) indeed has a yield-to-maturity of ~ 8% …………. but it has almost 5 years left to run…….. and therein lies the risk. Comparing the YTM’s of these Olam bonds, it strikes me that indeed the one you have singled-out has the highest YTM ………….. but are the terms (e.g. subordination, ranking etc. etc.) of this debt paper inferior to the other bonds?? I would respectfully suggest you look carefully at the detailed terms of the specific debt paper you are considering – usually there is good reason for higher YTM’s (and usually it is a higher degree of risk in one way, shape or form).

P.S. – One other recommendation: Don’t do what I did ………….. i.e. don't invest in the Perpetual.

Not worried about interest rates because of the 5y duration and the current 8% ytm. But thanks yeokiwi for this snippet. So the junk bond yield might not be entirely unjustified ... Though you could argue that with a larger amount at stake, Temasek might be more handcuffed to this one.