Markets

Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

Singaporean bondholders aren't the pushovers they used to be. The company to find that out is a unit of Tata Group, as if the controversy-plagued Indian conglomerate needed any more trouble.

On Tuesday, Tata International Singapore Ltd. extended a deadline for bondholders to agree to let the company buy back its perpetual securities immediately at 100 cents on the dollar, instead of in 2019 as the original contract stated. Tata plans to replace the Singapore dollar debt with similar securities denominated in U.S. currency.

The move prompted a backlash from holders of the debentures, with a significant group vowing to vote against the move.

This isn't a reaction to Tata, in particular. Investors in the city-state are simply showing they've learned the lesson from a string of bond contract changes in the past couple of years that turned out very badly for creditors. Curiously, it's arguable whether the changes this time would even disadvantage them.

Shifting Ground
Singapore-listed companies have recently taken to changing the terms of their bonds at an unprecedented pace
Source: Bloomberg
* Numbers refer to each exercise. Some consent solicitations changed several bonds at the same time.

No matter. Investors are feeling burned and in no mood to acquiesce. In February, creditors agreed to change terms on almost all the bonds of Swiber Holdings Ltd., allowing the oil rig maker to avoid meeting an interest coverage requirement. The company went on to declare bankruptcy in July. Had creditors not consented, Swiber would have been in technical default and forced into an earlier restructuring that might have left them in a stronger position.

Swiber wasn't alone. In 2015, six of eight bond consent solicitations were requested by energy companies. Many of them are now under some level of financial duress and investors are realizing they agreed too easily to undermine their power as creditors.

They are starting to take a stand -- though the target in this case may be misplaced. Tata's request at least enables bondholders to get their money back right away, even if it deprives them of the ability to receive a juicy 6.65 percent coupon for two more years.

Perhaps Tata is just on an unlucky streak. From the Singapore bond market's standpoint, though, the resistance is positive news. It means investors are finally reading before signing on the dotted line.

Who knows, in future they might even start analyzing a company's ability to repay before lending.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Christopher Langner in Singapore at clangner@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net