Far Eastern New Century Corporation (Stock code: 1402, hereinafter referred to as “FENC” or “the Company”) has added to their record of providing innovative products in Taiwan’s bond market after previously launching the first foreign currency-denominated bonds in two currencies three years ago. Leveraging the new underwriting system implemented in the Taiwan’s corporate bond market, FENC was the first to issue NTD denominated zero-coupon unsecured bullet bond adopting the Internal Rate of Return (IRR) concept for pricing. The issuance amount is NT$ 2 billion with a tenure of 5 years. This zero coupon bond will be redeemed at 104.8411% of the face value on the maturity date. Combined with the Company’s conventional unsecured corporate bond of NT$ 6 billion, a total amount NT$ 8 billion was issued and listed on the Taipei Exchange on 29 April 2016.
Compared with conventional corporate bond, the aforesaid zero-coupon bullet bond offers the following advantages: From the investor’s perspective, the bullet payment of 104.8411% of the face value at maturity allows investors to minimize their reinvestment risks due to not having interim cash inflows from the issuer, as well as to eliminate the valuation risks rising from structured bonds. It actually provides investors with alternatives to enhancing bond yield aside from longer bond tenure. From the issuer’s perspective, no interim cash outflow to bondholders allows FENC to maximize its profitability by re-investing in its core business. Thus, after deducting the profit earned, the bond issuing cost can be significantly reduced. From the underwriter’s perspective, despite the increasing supervision responsibility under the new underwriting system, there also should be chances for underwriters to demonstrate their ability in capital planning and the follow-on placements. “This zero-coupon bullet bond can not only activate the domestic bond market with innovative products but also support the government’s new policies. It’s a mutually beneficial resolution for investors, issuers and underwriters,” said the FENC management team.
FENC is the market leader in issuing innovative products in Taiwan’s capital market for the past years. For example,
● In 1990, FENC was the first to issue the convertible bond in Taiwan
● In 1994, FENC was the first to issue the bull and bear bond in Taiwan
● In 1996, FENC was the first to issue the exchangeable bond in Taiwan, and also the first to link the dual underlying stocks (common shares of Far Eastern Department Stores and U-Ming Marine Transport).
● In 2013, FENC was the first non-financial company to issue Formosa bond and Yen bond in Taiwan (RMB 500 million and Yen 5 billion, respectively). Under the IFRS consolidated basis, the bonds were raised and denominated in foreign currencies to improve the Company’s financial structure and to reduce currency risk. The coupon rate of the 3-year Formosa bond is merely 2.95%, which set the lowest interest rate record in the Formosa bonds, even lower than the current coupon rate of above 4% for the same products. The foreign currency-denominated bonds in two currencies not only successfully generate exchange gain but also save interest costs for the Company.
Taking the opportunity of the recent low interest rate environment, FENC issued NT$ 8 billion of corporate bonds to secure its long-term, fixed, currency risk-free financing to replace its existing Formosa bond and Yen bond, which will be due in the upcoming middle of May. “We are glad our financial management and innovative products have turned a new page for Taiwan’s bond market,” the company management announced.
Over the last 66 years of growth and expansion, FENC (formerly Far Eastern Textile Limited), which traces its roots to the founding spirit and core values of “Sincerity, Diligence, Thrift, Prudence, and Innovation,” currently has three major business segments. Despite its leading position in the Production business (including petrochemical, polyester and textile businesses), FENC has been building a comprehensive green supply chain in the polyester industry. In addition to its Production business, FENC currently owns significant land holdings in Taiwan, and a sizable diversified quality investment portfolio ranging through the cement, retail, shipping, financial services and telecommunications businesses. Under management guidelines regarding internationalization and globalization, FENC has been an active participant in placing innovative products in Taiwan's capital market. This zero-coupon unsecured bullet bond is a great match of the issuer’s funding efficiency and investors’ increasing demand. With the concerted efforts of government agencies and underwriters, there will be more innovative products designed and issued to further liberalize and expand the domestic bond markets.
Contact:
David Wang
CFO & Acting Spokesperson
Tel: 2737-8735
