Are bond risks of developers really that worrying?

WHILE debt woes have continued to plague the offshore marine sector since the fallout of Swiber Holdings, concerns over the health of the local bond market have risen. It is no surprise that the real estate sector have drawn some flak for potential repayment risks as it forms the lion's share of outstanding bond issuance.

Last week, credit rating agency S&P cast a spotlight on the bond risks of developers, saying that some small developers may face liquidity squeeze, making them more vulnerable to repayment risks on bonds outstanding.

More than 40 per cent of property developers that issued bonds have cash and operating cashflows less than their short-term debt maturities, stated the report. The rationale for adding cash and operating cashflows is proba…