F&N’s Bondholders Potential Barrier to Property Unit Spin Off; Risking a default should bondholders not accept its proposal would be short-sighted and may damage F&N’s ability to raise funds in the future; F&N won’t enforce clause on Heineken competition

F&N’s Bondholders Potential Barrier to Property Unit Spin Off

Fraser & Neave Ltd. (FNN), seeking to amend default conditions on S$808.25 million ($650 million) of debt to spin off a property unit, faces its first test with early bondholder votes due today, consent solicitation documents show. 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 is offering to pay 100 cents on the dollar and a fee worth half of the note’s coupon and the accrued interest at the so-called call-option, the documents show.The terms are well below market levels for F&N’s higher coupon bonds, according to three bond investors in the S$108 million 5.5 percent notes due 2016, who all intend to vote against the proposal. The company is hurting its own reputation in credit markets, two of the investors said, and possibly also harming the reputation of the Singapore dollar bond market, one said, all asking not to be identified because the details are private.

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’ distinct 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.”

Short-Sighted

Another investor said F&N’s S$200 million of 6 percent notes due 2019 were being bid 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.

Risking a default should bondholders not accept its proposal would be short-sighted and may damage F&N’s ability to raise funds in the future, that investor said.

Early acceptance replies are due today for a 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.

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 and S$80 million of 3.5 percent debentures due 2018, according to F&N’s Oct. 28 announcement.

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

To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net

F&N won’t enforce clause on Heineken competition

Thursday, Nov 07, 2013

Yasmine Yahya

The Straits Times

Fraser & Neave has agreed not to enforce an agreement that would have prevented beer giant Heineken from entering Singapore’s soft drinks market within the next year.

There has been no suggestion from the Dutch brewer that it is considering making or selling soft drinks in Singapore, so the F&N move on Monday may be inconsequential in a business sense. Heineken focuses on beer, and has not been known to have a soft drinks business.

What the move does do is nullify the non-compete clause F&N made when Heineken bought out its 50 per cent stake in Asia Pacific Investment last year.

The Competition Commission of Singapore (CCS) began investigating the clause in January and started talks with F&N about it.

The deal was that Heineken would not make, distribute or sell soft drinks for two years from the completion of the acquisition. That cut-off point was Nov 14 next year.

However, F&N said it had offered a voluntary undertaking to the CCS not to enforce the non-compete clause with respect to Singapore. The clause is still enforceable outside Singapore.

“The voluntary undertaking was mutually agreed with the CCS and entered into without any finding of liability by the CCS or any admission of liability by the company,” F&N said.

F&N said it was unaware of any plans by Heineken to carry out any soft drinks activity in Singapore. It had also taken into account the time and resources it would have to spend on further discussions with the CCS.

Corporate lawyer Robson Lee said F&N’s board probably felt that, on balance, it was best for the company and its shareholders not to enforce the clause.

“In my view it would help, in a way, to resolve the issues being investigated, but obviously the underlying reason must be that the board considered it in F&N’s best interest, taking into account the wider interest of the public and the interest of its shareholders.”

The CCS said on Monday that it has stopped its investigation, given the F&N decision.