Singapore’s builders are facing a bleak year amid maturing debt, falling confidence and declining earnings.
A record S$9.6 billion (US$6.8 billion) of bonds were repaid this year but the industry still has to contend with S$6.4 billion of maturities next year, S$2.3 billion in 2017 and S$7.4 billion in 2018, according to Bloomberg data.
Contractors Ley Choon Group Holdings Ltd. and Swee Hong Ltd. are restructuring their debt with lenders while Tat Hong Holdings Ltd. is asking bondholders to ease financial covenants in its July 2018 notes, according to stock exchange filings.
Five Singapore home builders classified by Bloomberg have an average debt-to-equity ratio of 48 times.
Construction emerged as one of the least optimistic industries in a quarterly survey of local firms by Singapore Commercial Credit Bureau, a credit assessment venture between Dun & Bradstreet and the Association of Small and Medium Enterprises.
Five of six industry indicators — net profit, inventory, employment, selling price and new orders — are seen shrinking in the first three months of 2016.
“Some of the issuers we have looked at in the industry are quite leveraged,” said Neel Gopalakrishnan, an emerging markets fixed income analyst at Credit Suisse Group AG’s private banking and wealth management unit in Singapore.
“Hence, we have not recommended their bonds.”
The yield on Tat Hong’s 2018 local-currency debt rose to 6.09 percent on Dec. 7, according Bloomberg data, versus 4.5 percent when they were sold in July 2013.
Dollar-denominated securities issued by Singapore entities returned 0.6 percent in the past three months in a JPMorgan Chase & Co. index, the second worst performance in the ASEAN region.
Singapore was flagged by Standard & Poor’s in August as having the highest corporate leverage in Southeast Asia, with this year’s debt levels predicted to rise to more than four times companies’ operating earnings.
While the economy averted a recession last quarter, the slowest growth in almost two years is weighing on contractors amid falling property values, rents and occupancy rates.
The construction sector, which accounts for about 5 percent of gross domestic product, grew at an annual pace of 1.6 percent last quarter, slowing from 3 percent in 2014 and 6.3 percent in 2013, according to data published by Monetary Authority of Singapore.
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