SIA Retail Bond 2019 – Finance

It is very interesting, this bond issue. See reactions below…

Richard Tay Jun Hao states:

…the short summary is that I am not enthusiastic about the offering… My own personal opinion is that I really can’t see the point of taking on this extra credit risk for an extra 1% of interest a year… Given the stature of Singapore Airlines as our national airline and the pedigree of its largest shareholder (Temasek Holdings), I highly doubt that SIA will have problem refinancing its debt down the road.

Why I am going to avoid the upcoming SIA 5 Year 3.03% Retail Bond. (20 Mar 2019). http://theasiareport.com/why-i-am-going-to-avoid-the-upcoming-sia-5-year-3-03-retail-bond/. The Asia Report.

Kyith wrote this piece entitled Singapore Airlines SIA issues a Safe 5 Year 3.03% Retail Bond – My Take. (19 Mar 2019). http://investmentmoats.com/money/singapore-airlines-sia-5-year-3-03-retail-bond/. Investment Moats. He focused on operating cash flow before working capital and net operating cash flow, but not profit or free cash flow.

…2 bond issues are coming due in 2020 and 2021, and it might be the case this issue is used to refinance one of the loans expiring in 2020.

6 days prior, SIA have announced that they have set up a $2 billion medium term bond program, which will be used to refinance existing borrowings, finance investments and fixed assets and for general working capital purposes.

Their financial position looks strong enough to pay the coupon payment…

Additionally, we see a decline of coupon/interest rates for the current issue (3.03%). Arguably, this is wise on the part of SIA.

• August 2017 – ten year / 3.13% / $700 million
• October 2018 – five year / 3.16% / $600 million

SIA sets up $2b bond programme for senior unsecured debt. (14 Mar 2019). https://www.straitstimes.com/business/companies-markets/sia-sets-up-2b-bond-programme-for-senior-unsecured-debt. The Straits Times, Singapore.

References / Associated

[Highlighting the Transformation Office of SIA] “Singapore Airlines chief executive Goh Choon Phong received $4.32 million in total remuneration in the year ended March 31, 2018, from $5.02 million the previous year… Singapore Airlines (SIA) paid chief executive Goh Choon Phong 14 per cent less in fiscal 2018, reflecting lower bonuses for a lacklustre fiscal 2017 and lower valuations for his share-based compensation, according to the national carrier’s latest annual report.” Rachel Mui. (28 Jun 2018). Singapore Airlines CEO Goh Choon Phong saw pay drop 14% for last fiscal year. The Straits Times, Singapore.

“Singapore Airlines (SIA) has set up a new unit to review its entire business – a move that comes in the wake of its first quarterly loss in five years. The carrier, which lost $138 million in the three months to March 31, said yesterday that the review will include network and fleet planning, and products and services.” Karamjit Kaur. (19 May 2017). First quarterly loss for SIA in 5 years. The Straits Times, Singapore.

In the 2017 Annual General Meeting (AGM),

…SVP Stephen Barnes noted that staff costs increased about 5% from the previous year and explained it was due to staff headcount also increasing by 5%… The chairman added that although the management is conscious of managing its costs, it should never come at the expense of SIA’s service quality…

Adam Wong. (2 Aug 2017). 9 things I learned from the 2017 Singapore Airlines AGM. The Fith Person.

[Regarding Tay Jun Hao] Heritage Global Capital Fund. https://www.swissasia-group.com/funds/heritage-global-capital-fund-cap-intro/. Swiss-Asia Group.

SIA Retail Bond 2019 – Legal (https://chenweilun2014.wordpress.com/2019/03/24/sia-retail-bond-2019-legal/)

https://chenweilun2014.wordpress.com/2019/01/09/valuing-bonds-creditworthiness/

https://chenweilun2014.wordpress.com/2016/03/20/bonds-again/

SIA Retail Bond 2019 – Legal

Information Memorandum dated 13 March 2019 [416 pages]

The SIA (Singapore Airlines) Retail Bond 2019 comes under the S$2,000,000,000 Medium Term Bond Programme (p.15).

On p. 23, the bonds

constitute direct, unsecured, unsubordinated and unconditional obligations of the Issuer and shall rank pari passu and without any preference among themselves and at least pari passu with all other existing and future unsecured and unsubordinated obligations (other than subordinated obligations and priorities created by law) of the Issuer.

On p. 102, taxes

Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including:

(i) interest from debt securities derived on or after 1 January 2004;

(ii) discount income (not including discount income arising from secondary trading) from debt securities derived on or after 17 February 2006; and

(iii) prepayment fee, redemption premium and break cost from debt securities derived on or after 15 February 2007,

except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession.

See below Q7, Frequently Asked Questions (https://www.singaporeair.com/en_UK/us/about-us/retail-bond/)

7. Do I need to pay tax on the interest received on the Bonds?

Interest derived by individuals from the Bonds is exempted from tax.

Please refer to “Singapore Taxation” in the Information Memorandum for more details.

Some Implications

You may end up paying additional legal fees to reclaim the debt in case of SIA’s liquidation. (See Q4 in Restructuring and insolvency in Singapore: overview by Kevin Ho and Angelia Thng, Braddell Brothers LLP. Thomson Reuters). You could also end up with nothing if they have insufficient assets. Secured (senior) debt is paid first followed by unsecured (junior) debt. This bond issue is unsecured.

Moneys recovered by the Official Receiver will be first utilised towards payment of costs and expenses incurred in the liquidation.

Any remaining funds will be used to pay the creditors in accordance with their ranking as set out in section 328 of the Companies Act (Cap. 50):

• Preferential Creditors

Those who are entitled to receive payments in priority, such as employees, CPF Board, Comptroller of Income Tax (see section 328 of the Companies Act (Cap. 50)).

• Ordinary Creditors

Any other unsecured creditors, such as trade creditors and sundry creditors who have filed their claims against the company.

Ministry of Law, Insolvency Office. Information for the Creditors of a Company in Liquidation. (26 Nov 2015). https://www.mlaw.gov.sg/content/io/en/corporate-insolvency/information-for-the-creditors-of-a-company-in-liquidation.html.html. Government of Singapore.

Note

This post may be subject to further additions. The above is only a selection from the total picture.

Luther: How he became convicted

But Luther was tormented by fears and doubts. “I was myself more than once driven to the very abyss of despair so that I wished I had never been created. Love God? I hated him!”

“I don’t understand it!” replied the longsuffering Johann when Luther reported this latest line of reasoning to him. He reminded Luther that Christ died to remit our sins. However, Luther was so afraid of Christ, the judge, that he could not turn to him for relief.

Dean Graves. (revised Jun 2007 / published 28 Apr 2010). Johann von Staupitz, Luther’s Confessor. https://www.christianity.com/church/church-history/timeline/1501-1600/johann-von-staupitz-luthers-confessor-11629932.html.

German Martin Luther acted as one of the major leaders in the Protestant movement against Roman Catholicism.

Yet, before he became this spiritual giant and icon, he too met with great turmoil. His sin troubled him greatly (as you see from above) and this led to constant confession. Such words in turn troubled Johann von Staupitz, who mentored Luther from 1508 onwards (Johann von Staupitz. 24 Dec 2018. Encyclopædia Britannica).

The accounts differ in detail but essentially Staupitz assigned him to teach the Bible. In doing so, the desired result came (via the New Testament books of Romans and Galatians).

In other words, he devised a plan to get Luther’s mind off himself by involving him in ministry to others. It worked. While preparing his lectures on the Book of Galatians, Luther suddenly saw, as if for the first time, that God’s grace trumps all our sins. His studies convinced him that the just are saved by grace through faith alone. That insight changed his life. It altered the course of Western history as well.

Correcting Distorted Images of God. (no date). https://www.focusonthefamily.com/family-q-and-a/faith/correcting-distorted-images-of-god. Focus on the Family.

Additional Reference

Johann von Staupitz was 12th iconic individual in Lutheran Reformation. (5 Aug 2017). http://www.observertoday.com/life/religion/2017/08/johann-von-staupitz-was-12th-iconic-individual-in-lutheran-reformation/. Observer Today. Dunkirk, New York. The Nutting Company.

GERD – Chinese viewpoint

Unlike much of mainstream western medicine that focuses more on the weakening lower esophageal sphincter (LES), the Chinese refer more to ‘qi’ or force/pressure, if you will, that pushes acid up from the stomach into one’s food pipe or some other form of ‘qi’ disruption. Below are some smattering of notes and/or translations (italics). Note that the Hong Kong texts use the Traditional Chinese script instead of the Simplified script. [For simplicity and uniformity, acid reflux = GERD = reflux]

中醫對於胃酸倒流的記載非常早，《黃帝內經》中講到「諸嘔吐酸，……皆屬於熱」，指出反酸多與熱有關… 根據症狀和體質的不同胃酸倒流又可分為：鬱熱型、痰熱型、氣滯型、脾虛型，不同的證型應施以針對性的中藥。

The ancient Chinese medical text《黃帝內經》suggests that bodily heat causes acid reflux…There are 4 different reflux types.

從中醫看胃酸倒流的防治. (28 Apr 2015). https://www.am730.com.hk/column/%E5%81%A5%E5%BA%B7/%E5%BE%9E%E4%B8%AD%E9%86%AB%E7%9C%8B%E8%83%83%E9%85%B8%E5%80%92%E6%B5%81%E7%9A%84%E9%98%B2%E6%B2%BB-58071. 醫理: 浸會大學中醫藥學院 . AM730 Media Limited. 10/F, Overseas Trust Bank Building, 160 Gloucester Road, Wan Chai, Hong Kong.

…几个引发此病症的因素：饮食习惯不良或不当、疲劳过度、晚睡和压力过大…虽然胃食管反流症导致癌症的机率很低，但西医却有这方面的担忧…

Among the other reflux causes are: poor eating habits, over fatigue, sleeping too late, excessive stress… While the eventual risk of reflux leading to cancer is low, conventional western medical doctors still worry about this. [The text also highlights emotional imbalance e.g. bad mood etc as one way to study the cause]

做好对抗胃食管反流的准备. (accessed in Feb 2019 / first published in No.11 of Natura Magazine). https://www.euyansang.com.sg/zh/gird-yourself-for-gerd/eyswellness15.html. Eu Yan Sang. Singapore.

Other references

Case study (includes remedies) of cold type (weakened digestive system) symptoms/causes – …今年 23 歲，去年開始常常感到胸口有灼熱感覺，而且口中常有酸水上泛，伴有胃脘疼痛，特別是工作壓力較大時胃痛及反酸情況加重。整整 1 年，情況沒有好轉，而且還不時咳嗽、痰少色黃難咯、噯氣較多、咽喉疼痛，常常感到咽中有異物。大便偏乾，2-3 日才一次，小便色黃，口乾喜渴冷飲等症狀，遂求診中醫… 脾胃虛弱型…「患者主要得病的原因是經常太夜進食晚餐，而且食無定時，又經常需要外出用膳應酬，嗜食生冷，使脾胃虛弱；再加上工作壓力較大，情志不舒所致。」

中醫如何治療胃酸倒流？(2012-09-06). https://www.healthsmart.com.hk/article_details.php?lv2=intestines&index=I120638. 香港經濟日報. Health Smart Limited. Hong Kong.

The above does not fit entirely with descriptions of hot (heaty) / cold reflux symptoms provided below. [This is understandable since each human being is different]

属于热者：胃脘胸前泛酸或烧灼感，口气重，胃脘胀满，口干口苦，容易发脾气，舌红苔黄，脉弦数。属于寒者：吐酸时作，口有酸味，或泛泛欲吐，饮食喜热，大便不成形，手足不温，舌淡苔白，脉沉迟。

The article is also interesting because it offered a few remedies like drinking 红茶 (red tea) and 生姜和普洱茶 (ginger and pu’er tea soup). In addition, it proposed 洋甘菊, which based on two translations = chamomile. This article would need further research.

胃酸倒流的中医调养. (2017-08-05). https://www.uweekly.sg/health/45684. UWeekly Magazine. Singapore Press Holdings Ltd.