Part 2 &ndash Rights Issue of Rights Mandatory Convertible Bonds (MCB) (raising $3.5 billion)

The MCBs are more unique. I don&rsquo t think I&rsquo ve seen these ever being offered to retail investors, at least not in this debt cycle.

The MCBs are pretty technical, so we&rsquo ll skip all the mumbo jumbo and go right into what it means.

Imagine that you own $1000 of MCBs.

These are zero coupon, so you&rsquo ll not get paid any interest (or coupon) each year.

But these MCBs can be redeemed by SIA any time within 10 years.

And on redemption date, they will pay you $1000 (being the principal) + an extra amount equivalent to the interest that would have been due on the bonds for the duration that you held it.

And the interest is 4% for the first 4 years, 5% for year 5 to year 7, and 6% for year 8 to year 10.

So basically, if SIA redeemed the bonds in year 4, you will get no interest payments for the first 4 years, but on redemption date you get a lump sum payment equivalent to $1117.166, which is the $1000 you put in originally, and $117.166 which is equivalent to the 4 years interest at 4% a year.

If redeemed in Year 5 &ndash then SIA basically pays 5% a year to you, but as a lump sum at the end. 

So no interest is payable by SIA every year, which is great because nobody knows when COVID19 goes away. This gives SIA lots of flexibility to repay the MCBs only when cash flow has recovered to a point where they are comfortable paying these off.

What if SIA doesn&rsquo t have the cashflow to redeem the MCBs? Then in year 10, you still get paid a lump sum of $1,806.11, which is the $1000 principal and 10 years&rsquo worth of 6.0% coupons. Only difference is that instead of being paid in cash, you&rsquo ll be paid in SIA shares.

So you will get the number of shares equivalent to $1,806.11 dollar value &ndash based on S$4.84 per Share (subject to adjustments). This works out to roughly 373 Shares per 1000 MCBs.

 

Part 2 &ndash Rights Issue of Rights Mandatory Convertible Bonds (MCB) (raising $3.5 billion)

The MCBs are more unique. I don&rsquo t think I&rsquo ve seen these ever being offered to retail investors, at least not in this debt cycle.

The MCBs are pretty technical, so we&rsquo ll skip all the mumbo jumbo and go right into what it means.

Imagine that you own $1000 of MCBs.

These are zero coupon, so you&rsquo ll not get paid any interest (or coupon) each year.

But these MCBs can be redeemed by SIA any time within 10 years.

And on redemption date, they will pay you $1000 (being the principal) + an extra amount equivalent to the interest that would have been due on the bonds for the duration that you held it.

And the interest is 4% for the first 4 years, 5% for year 5 to year 7, and 6% for year 8 to year 10.

So basically, if SIA redeemed the bonds in year 4, you will get no interest payments for the first 4 years, but on redemption date you get a lump sum payment equivalent to $1117.166, which is the $1000 you put in originally, and $117.166 which is equivalent to the 4 years interest at 4% a year.

If redeemed in Year 5 &ndash then SIA basically pays 5% a year to you, but as a lump sum at the end. 

So no interest is payable by SIA every year, which is great because nobody knows when COVID19 goes away. This gives SIA lots of flexibility to repay the MCBs only when cash flow has recovered to a point where they are comfortable paying these off.

What if SIA doesn&rsquo t have the cashflow to redeem the MCBs? Then in year 10, you still get paid a lump sum of $1,806.11, which is the $1000 principal and 10 years&rsquo worth of 6.0% coupons. Only difference is that instead of being paid in cash, you&rsquo ll be paid in SIA shares.

So you will get the number of shares equivalent to $1,806.11 dollar value &ndash based on S$4.84 per Share (subject to adjustments). This works out to roughly 373 Shares per 1000 MCBs.

 

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