F&N Bondholders Potential Barrier to Property Unit Spin Off

Fraser & Neave Ltd. may learn as soon as today whether bondholders will allow the company to amend the terms on S$808.25 million ($650 million) of debt so it can spin off its property unit without triggering a default.

The beverages and property conglomerate, controlled by Thai billionaire Charoen Sirivadhanabhakdi, asked debt holders to waive certain default clauses and allow the company to buy back the securities on or before June 30, 2014 for a fee, according to Oct. 28 announcements to the Singapore stock exchange. The company offered to pay 100 cents on the dollar and a fee worth half of the note’s coupon and the accrued interest on the date that Fraser & Neave can call the securities, the documents show.

Failure to secure a positive vote may upset F&N’s plans to carve off its real estate division via a Singapore listing later this year. The 130 year-old conglomerate is seeking to separate that division from its other operations including its beverages and publishing units to focus on each units’ individual expansion strategies after the S$13.8 billion takeover by Thailand’s richest man.

“We have considered all options, and decided that this would be the most consistent and fair approach for us to adopt,” said Jennifer Yu, a Singapore-based investor relations manager at F&N. “We are grateful for and appreciate the support of our lenders.”

Bond Yields

The terms are below market levels for F&N’s higher coupon bonds, according to three investors in the S$108 million 5.5 percent notes due 2016, who all intend to vote against the proposal.

Another investor said F&N’s S$200 million of 6 percent notes due 2019 were being offered for sale at about S109.378 cents on the dollar prior to the announcement, while the company is offering S103.25 cents for the notes, including the early acceptance fee.

The S$108 million debentures were yielding 2.7 percent on Nov. 5 compared with 2.43 percent at the start of the quarter, Bloomberg-compiled pricing show. Average corporate bond yields in Singapore fell to 3.087 percent on Oct. 30, the least since June 24, HSBC Holdings Plc indexes show.

Early-bird Bonus

Bondholders accepting today will receive an early-bird bonus of S$625 per S$250,000 of notes, while those investors who say yes by Nov. 12 will receive S$375 for every S$250,000 of securities, the documents show.

F&N will hold a shareholders meeting on Nov. 13 about the spin off of Frasers Centrepoint Ltd., which had S$9 billion of assets as of June. Charoen’s company will vote in favor of the transaction, according to an Aug. 27 statement.

F&N’s shares have fallen 40 percent this year, and closed down 1.9 percent at S$5.79 in Singapore. The company in July undertook a capital reduction exercise, returning some S$4.7 billion to shareholders.

Bonds subject to the vote also include S$150 million of 3.62 percent debt, S$50 million of 2.45 percent securities due 2015, S$220 million of 2.48 percent notes due 2016 and S$80 million of 3.15 percent debentures due 2018, according to F&N’s Oct. 28 announcement.

Charoen, who acquired F&N via his companies including Thai Beverage Pcl earlier this year, had a net worth of $9.2 billion as of Nov. 5, according to the Bloomberg Billionaires Index.

(Updates with share price close in 10th paragraph.)
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