S'pore bondholders have learnt their lesson

SINGAPOREAN bondholders are not the pushovers that they used to be. The company to find that out is a unit of Tata Group. On Tuesday, Tata International Singapore Ltd extended a deadline for bondholders to agree to let the company buy back its perpetual securities immediately at 100 cents on the dollar, instead of in 2019 as the original contract stated. Tata plans to replace the Singapore dollar debt with similar securities denominated in US currency.

The move prompted a backlash from holders of the debentures, with a significant group vowing to vote against the move. This is not a reaction to Tata, in particular. Investors in the city-state are simply showing that they have learnt the lesson from a string of bond contract changes in the past couple of years that turned out very badly for creditors. Curiously, it is arguable whether the changes this time would even disadvantage them.

No matter. Investors are feeling burned and in no mood to acquiesce. In February, creditors agreed to change terms on almost all the bonds of Swiber Holdings Ltd, allowing the oil rig maker to avoid meeting an interest coverage requirement. The company went on to declare bankruptcy in July. Had creditors not consented, Swiber would have been in technical default and forced into an earlier restructuring that might have left them in a stronger position.