Ezion

Ezion: Short note by Maybank-KE issued today. Ezion is issuing $120m worth of 5-year notes under its $1.5bdebt issuance programme at a rate of only 3.65%. This is the lowest rate not only among the bonds it has previously issued, but
also lowest among Singapore small-mid-cap O&M companies.

Furthermore, the notes are backed by a committed funding facility provided by DBS. This means that the bank cannot withdraw this facility unless Ezion breaches its covenants.

House views that Ezion’s continued access to the debt capital markets and at such low cost reflects the bank’s confidence in its business. Comparatively, Ezra Holdings had to raise $200m through a rights issue at 38% discount to its theoretical ex-rights price recently. The 3.65% is also substantially lower than bond yields of most O&M peers and closer to that of the large caps.

Ezion had US$345m of cash as at 1Q15. The new funds, together with expected improvement in operating cashflows would help strengthen its balance sheet and meet any near term debt and capex obligations. House has not factored in the new loans into its balance sheet forecast, pending further review after its 2Q15 results, which is expected on 13 Aug 15.