Abaci's Common Sense Investing

CG has announced a US$100m bond issue. This is a massive offer compared to its capitalization of HK$1.3b, after falling by more than 10% at one point this morning, and NAV of only some HK$400m. I may be over-reacting but I'm very allergic to any junk bond offering. Interest rate is over 9% p.a. and underwriting fee is 4%, plus I don't like its lead manager Standard Chartered either (no offense to the bank though, just the department). By taking this terms I can only guess CG has run out of funding options, and there's little demand for its shares nor loans. In fact I think the terms are even worse than what Zhejiang Glass got from the IFC when it was in deep trouble.

I guess with this big a warchest CG will continue to expand its presence actively in the glass market. But I doubt whatever good comes out of this will mostly go to the bondholders and shareholders are left in a very vulnerable position - head you win and tail I lose.

The last junk bond of Ocean Grand really turned into junk. I really don't have a good feeling for this one either.

DISCLOSURE: I don't hold 3300 at time of writing.