atans1

Robin Hoods? Our private bankers/Why ministers may need a pay rise after GE?

In Banks, Energy on 11/05/2015 at 1:24 pm

They make rich S’porean clients poorer, taking from the rich to give to their even richer employers? They are really the “Princes of Thieves”, better than “Robin Hood “Prince of Thieves”.

Remember these bond deals pay good commissions to the private banks (and their private bankers): they get fees from their clients (for giving them access to these now toxic products), and the issuing companies (for stuffing their mullets with junk).

Go KPKB to CASE, CAD and the central bank. Hehehe. Wonder if millionaire ministers kannsa burnt? They’ll need a pay increase.

Remember DBS’ Indian FT blowing up its Treasured clients with credit notes? This could be alot worse for the private clients.

Singapore’s richest investors are hoping that “never” means about three years in the bond market.

Holders of perpetual notes with no set maturity face the island’s first redemption options in September, when three companies including oil services firms Ezra Holdings Ltd. and Swiber Holdings Ltd. can choose to repay securities sold in 2012. While Ezra says it plans to pay off the notes and refinance, their yield has surged more than 200 basis points over the last year to 14.2 percent, suggesting it may be costlier to replace them. Swiber faces the same test after saying it plans to redeem its bonds, which have added more than 230 basis points.

Private banks have snapped up the bulk of Singapore’s S$9.5 billion ($7.1 billion) of corporate perpetuals on behalf of wealthy clients, reckoning the companies would repay the notes at their soonest chance rather than incur higher interest rates when a so-called step-up coupon takes effect. While that would offer some compensation if the debt stays alive, any mishaps could shake faith in securities that have funded about 15 percent of the island’s corporate debt over the last four years.

If any issuers choose not to pay in September, “there would be some discomfort among investors when they realize that what they’ve been holding is not necessarily going to be paid off at the time they expected,” said Vishal Goenka, the Singapore-based head of local currency credit trading at Deutsche Bank AG. “There is nothing right or wrong, issuers have already told them from the beginning the option was there, but there would be some confusion.”
And
Demand for higher returns in Singapore bonds from the city’s swelling private banking industry has brought with it greater risks.

Three out of every 10 notes sold last year are yielding more than 6 percent. Halcyon Agri Corp. went to debtholders last month asking them to waive interest cover requirements before it’s even had to stump up a coupon payment. Bloomberg’s default model shows that VTB Capital SA has an almost 50 percent chance of reneging on its debt.

“The recent swings have been a good wake-up call,” said Vishal Goenka, the Singapore-based head of local currency trading in Asia for Deutsche Bank AG. “Investors need to analyze the credit quality of issuers more thoroughly.”

Junk-rated companies in Singapore must find funds to repay $2.1 billion of debt this year, up from $1.7 billion in 2014 and $1.1 billion in 2013, according to data compiled by Bloomberg. That accounts for 35 percent of all bonds maturing in Singapore in 2015. Wealthy clients of the island’s private banks snapped up 86 percent of the highest-yielding http://www.bloomberg.com/news/articles/2015-01-05/singapore-alert-to-risks-as-cracks-emerge-for-junk-asean-credit
And then there is the probability of a rise in US rates in September.
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  1. No worries man. Ministers put 80% of their money into intermediate treasuries and other sovereign bonds, plus properties in premier cities around the world. They don’t buy bonds from some local or cheena Kuching kura company.

  2. The inside track has it that the notes are flipped by the private banks. They are distributed to the millionaire clients at a price discounted by the arrangement / syndication fees and are sold back at par or better. Said millionaire pocketed the fees, said private banks blow trumpet about their “enviable client list”, Anton Casey types think they are master of the universe. That’s what millionaire friends told me.

    • Wah lan private banking that competitive meh/ Worse for the private bankers if there are problems with bonds, they lose clients.

  3. The SG owned and controlled AUM as a % of the total AUM of the “wealthy clients” including international FT is probably pretty small.

    That said, all that international AUM booked in SG, advised to invest in SGD denominated issues by newly graduated SG born and bred private bankers ( a larger proportion of SG bankers % relative to FT) … is a economic planning masterstroke.

    What other industry / segment is big enough to hoover up the graduating batch every year, who all want to do cushy private sector jobs ?

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