Cheung Kong Infrastructure $1.2bn perpetual NC5
Joint bookrunners: Deutsche Bank, HSBC and JP Morgan
Cheung Kong International’s fixed-for-life perp provided a textbook example of how to sell a not very investor friendly structure in challenging markets.
The borrower launched the deal right after Chinese New Year. While the fixed for life coupon made less sense for investors considering the expectation of a rate raise, the borrower was looking to substantially save costs by replacing its outstanding $1bn 6.625% PNC5, which was sold in September 2010.
As a result, the leads positioned the transaction as a liability management exercise, making it clear to existing investors that the borrower intended to call the legacy notes. Combined with the borrower’s credentials and the lack of supply in primary market, the deal saw a strong response from investors.
The final order book of around $2.4bn allowed the borrower to comfortably raise $1.2bn and the 5.875% coupon was the lowest among all CKI’s hybrid issues.
In addition, the transaction also opened the perp market in Asia with European and Australian issuers following in its wake, making it our choice for the Best Country Deal – Hong Kong.
Intas Pharmaceuticals $795m dual currency term loan
Mandated lead arrangers and bookrunners: Axis Bank, Citi, HSBC, ICICI Bank, Kotak Mahindra Bank and Mitsubishi UFJ
Local regulations make it difficult for Indian banks to take the lead in financing acquisitions for domestic companies. Indian lenders are not allowed to finance inbound investments or Indian-to Indian acquisitions, restricting them to outbound transactions where they face fierce competition with international banks
This is what made this financing for Intas Pharmaceuticals’ acquisition of Actavis UK and Actavis Ireland from Israel's Teva Pharmaceutical Industries such a standout.
The package comprised a €260m six year loan and a £385m five year facility and it was one of the rare occasions when Indian banks provided the majority of commitments. It was also the first transaction from Kotak Mahindra’s branch in Gift City (Gujarat International Finance Tec-City).
Banks operating in the financial centre enjoy certain tax exemptions and can offer foreign currency loans to Indian firms and their overseas subsidiaries and joint ventures, which they are not allowed to do elsewhere in India.
Cikarang Listrindo Rph3.62bn IPO
Joint bookrunners: Citi, Deutsche Bank, UBS and Indo Premier Securities
Cikarang Listrindo’s IPO provided a much needed shot in the arm to Indonesia’s equity capital markets when it priced in May. Until the company listed, activity in the country’s equity market had been fairly quiet despite the generally positive outlook for the country.
The electricity supplier had plenty to attract investors. Most importantly it offered some rare diversification in a market dominated by commodity companies as the first power and utility company to list in Indonesia. It also offered an attractive yield.
In addition, Cikarang already had strong market recognition as a repeat issuer in both the domestic and international bond markets.
Books opened after a roadshow that took in stops in Asia, Europe and the US and were covered on the first day. International investors were especially keen to get their hands on the stock with the largest long-only accounts coming from overseas, and US and European names accounting for 25% of the final book.
The result was the largest IPO in Indonesia in five years and a revival in Indonesia’s stock market – a natural choice for Best Country Deal – Indonesia.
Ministry of Finance of the Lao PDR Bt11bn five tranche bond
Sole adviser: Twin Pine Group
Joint bookrunners: Bank of Ayudhya, Kasikornbank and Siam Commercial Bank
Joint lead arrangers: Krungthai Bank and Thanachart Bank
Making a sixth appearance in a bond market is not often something to crow about, but Laos’ commitment to funding offshore outside its domestic currency is noteworthy.
Rather than rest on its laurels, for its outing in November, the Ministry of Finance wanted to broaden its investor base beyond the institutional accounts that had bought its previous notes. To do this Krungthai Bank and Thanachart Bank were brought into the syndicate specifically because of their ability to distribute to high net worth individuals.
This transaction also had to deal with rules Thailand introduced in late 2015 that restrict foreign issuers to using the proceeds of baht bonds onshore and without cross-currency swaps. As a result, sole adviser Twin Pine spent time before applying for permission to sell the bond, working out permitable uses for the proceeds.
The solution was to use the proceeds to repay Laos’s existing shorter dated US dollar loans from Thai commercial banks. This included structuring the transaction to allow for difference between the original and repayment currency.
The leads also took Laos on a four-week non-deal roadshow ahead of bookbuilding to meet potential new investors
The work paid off with Laos raising Bt11bn across the three, five, seven, 10 and 12-year bonds with 61% of the notes going into the hands of high net worth individuals.
Sime Darby MR2.36bn primary placement
Sole bookrunner: Maybank Kim Eng
To say this record breaking placement had a lot going against it is something of an understatement. Sime Darby had taken on a fair amount of debt for a recent acquisition of a palm oil company. In order to bring down its gearing it planned to list its automotive business but had to shelve the plan due to the sector’s poor outlook. As a result its credit rating came under pressure.
To tackle the problem, Sime Darby announced a placement on the back of a rebound in the group’s fourth quarter earnings in August. This was to be the company’s first equity raise since listing in 1980. Adding to the headwinds was the fast that there was not a single buy call on the stock.
The key for sole bookrunner Maybank Kim Eng was to convince investors that the company’s earnings were at an inflection point. The lead took Sime Darby on a roadshow mainly to meet existing shareholders in Hong Kong, Malaysia and Singapore and had good visibility on demand when books opened in October.
The result was a more than 2.5 times subscribed deal with strong support from domestic long only accounts that ranks as the largest primary placement in Malaysia since February 2014. Not to mention a rising share price.
Mongolia $250m dual tranche term loan
Mandated lead arranger and bookrunner: Credit Suisse
Mongolia had a tough time accessing the capital markets last year as the country’s deteriorating outlook meant investors were cautious on the country. When discussions about a potential bond issue hit a roadblock at the beginning of 2016, the sovereign turned to the loan market and to Credit Suisse to raise capital to fund infrastructure projects.
For its second loan arranged by the Swiss bank – the first was a $300m five year from November 2014 — it opted for a dual tranche three and five year. Having two tranches allowed the borrower to reach out to non-bank investors this time around. Credit Suisse also underwrote the total loan which provided extra comfort to lenders.
The strategy paid off with syndication for the amortising deal wrapping up in five weeks, attracting investment from funds and insurers and well as Chinese banks.
The loan provided Mongolia which some much need funding at a time when its credit was viewed less than favourably by international investors, demonstrating that with the correct strategy frontier markets can access international liquidity and provide a good return for investors. For this reason it wins our award for Best Country Deal in Mongolia.
Engro Fertilizers Prp19.31bn secondary placement
Joint bookrunners: Arif Habib Ltd and Credit Suisse
The secondary placement for Engro Fertlizers has a number of reasons why it is our pick for Best Country Deal in Pakistan.
The transaction is the largest secondary sell-down in a private company increasing the company’s free float by 22% to 45%, no mean feat for a market that is still in the process of opening up and remains dominated by state-owned companies.
Not that it was an easy sell. While the fertiliser sector is profitable, it had been under stress due to inventory build-up and margin compression. But with the company looking to raise some much needed funds for expansion, it needed to go ahead with the trade.
The leads embarked on a roadshow targeting both domestic and international investors, educating them about the stock and the sector. One issue the banks were keen to highlight was the fact the transaction was Islamic compliant and so was suitable for shariah funds which were a potentially huge source of liquidity.
The trade launch with just a 4.2% discount but that did not deter investors who piled in to generate a 1.3x subscribed book from 166 accounts. Final allocations saw foreign investors awarded 41% with the rest going to domestic accounts.
PAPUA NEW GUINEA
Papua New Guinea $200m five year term loan
Mandated lead arranger and bookrunner: Credit Suisse
The loan heralds Papua New Guinea’s first appearance in the international capital markets, making the deal a natural winner. Frontier market credits are always a tough sell but the relative geographical remoteness of the country and its tricky credit story means this transaction was also going to need some time for lenders to get comfortable with the story.
Papua New Guinea is certainly a tough name for credit committees to approve. The B2 rated country was downgraded by Moody’s in April 2016 because of a deterioration in foreign currency reserve adequacy and elevated balance of payments pressures. The sovereign had also tried and failed to get a bond off the ground in the last few years.
But Credit Suisse continued to burnish its emerging market credentials by having the confidence to believe it could sell a transaction to the market, underwriting the whole loan which launched in November. While syndication was still ongoing as we went to press, the landmark nature of the transaction and the credit make the deal worthy of recognition.
Cemex Holdings Philippines Ps25.13bn IPO
Joint global co-ordinators: Citi, HSBC and JP Morgan. Domestic lead arranger: BDO Capital & Investment Corporation
When Cemex Holdings Philippines began pre-marketing its IPO at the beginning of June, markets were pretty certain that there was little chance the UK would vote to leave the European Union in a poll at the end of the month.
So when books opened in the week of the referendum, there was little concern of any fallout. Of course the opposite turned out to be true, but such was the strength of the Cemex story that it still ended as the biggest IPO in the Philippines since 2013.
Cemex certainly had plenty going for it. The company is the third largest cement producer in the country and six cornerstones came into the transaction including BlackRock and Fullerton Fund Management.
And so even though the price range had to be narrowed following the Brexit vote, it was still able to price at a premium to its peers in the cement sector through southeast and south Asia. And the IPO performed so well in the aftermarket that the leads terminated the stabilisation option two weeks early.
Astrea III $510m private equity collateralized fund obligation
Originator: Azalea Asset Management
Financial and structuring agent: PJT Partners/Park Hill Group
Joint lead managers: DBS and Credit Suisse
Astrea III is one of the few securitizations anywhere to be backed by cash flows generated by private equity funds. PE CFOs have been largely absent globally since the financial crisis with the only notable example being 2014’s Astrea II, which was mostly placed to a single investor.
But unlike its predecessor, the main objective of Astrea III was to engage a wider investor base in an effort to make the asset class more mainstream. This required a fully marketed transaction, which was no easy feat as most investors do not have the mandate or the technical knowledge to buy the product.
As a result, Azalea engaged PE specialist Park Hill of PJT Partners to identify assets within parent Temasek Holdings’ collection that would suit a wider audience. The end result was a mature portfolio with weighted average vintage year of 2009 and total NAV of $1.14bn from 34 PE funds.
Lead managers Credit Suisse and DBS also spent time sounding out investors, educating them about the assets and getting their thoughts on pricing.
There were also concerns about the uncertain nature of private equity distributions and the multi-currency exposure of the asset pool. The former was balanced by a liquidity facility provided by Credit Suisse to cover expenses and interest payments in case of cash flow shortfalls, while the latter was compensated by built-in currency hedges.
The trade was officially announced on June 6 and an extensive one and a half week roadshow soon followed. But the issuer made a deliberate decision to not rush the trade and allow investors to digest the structure, complete their credit work and obtain internal approvals.
This cautious approach was also apparent in the bookbuilding process, which lasted for two trading days between June 17 (Friday) and June 20 (Monday) — a decision that was vindicated by an eight times covered book, plus an even distribution among fund managers (29%), private banks (32%), insurers (10%) and others (29%).
Samsung BioLogics Co W2.25tr ($1.9bn) IPO
Joint lead managers: Citi, Credit Suisse, JP Morgan, Korea Investment & Securities and NH Investment & Securities
A reliance on cornerstone investors characterised IPOs last year, more often than not in a bad light. So, Samsung BioLogics Co’s W2.25tr deal stands out from the crowd, not only being the second largest IPO in Asia Pacific ex-Japan last year and the largest in Korea for three years, but for being completed without cornerstone investors.
BioLogics was after a large sum of money but had not posted a profit since it was founded in 2011. But the firm is the jewel in Samsung Group’s crown and in two or three years is expected to be the dominant player in the multi-billion-dollar global biopharmaceutical manufacturer market. So, in February it started asking banks how it could raise money.
Fast forward to the last week of October and BioLogics priced its IPO at the top end of the W113,000-W136,000 guidance range, multiple times subscribed, with a bulging book of high quality demand. The team of bookrunners had managed to sell the company using a 2021 price-to-earnings multiple and the story of its future as a contracted manufacturing organisation (CMO).
But BioLogics’ most striking success was its aftermarket performance. Debuting the day after Donald Trump took the White House, BioLogics’ stock price had a minor blip and then proceeded to climb 16.1% over the next two weeks to November 25. It came in contrast to a long list of headline IPOs in Asia, which flopped after listing.
Democratic Socialist Republic of Sri Lanka $700m three year loan
Mandated lead arrangers and bookrunners: Citi, Credit Suisse, Emirates NBD, Gulf Bank, HSBC, Indian Bank, Industrial & Commercial Bank of China, Mashreqbank, State Bank of India and Syndicate Bank
Sri Lanka returned to the international loan market after an absence of eight years last year, receiving a blowout response to its borrowing.
While Sri Lanka’s credit story has improved over the past few years, it took a knock in 2016 with Fitch downgrading the country to B+ from BB- in February, following which Moody’s changed its outlook to negative from stable in June on the back of rising debt levels.
As a result, original MLABs s Credit Suisse, Citi, Emirates NBD, HSBC and Mashreqbank started cautiously, targeting a syndication of $300m but with the option to upsize to $700m.
Despite the country’s long absence, there was a strong response in syndication as the rarity of the credit coupled with attractive pricing of Libor +250bp — higher than a five year bond it sold earlier in the year – attracted a mix of lenders from China, Japan, India and the Middle East.
A successful roadshow in which bankers were impressed with the leadership of the Sri Lanka Ministry of Finance helped banks get comfortable with the credit. The result was Sri Lanka’s largest ever syndicated loan despite the challenging backdrop.
Foxconn Far East $1bn dual tranche bond
Joint bookrunners: Bank of China, Citi, Goldman Sachs and HSBC
Abundant dollar liquidity in the domestic bond market meant there was little reason for Taiwanese borrowers to venture offshore in 2016.
But having made its debut with a $650m five year deal in 2012, Foxconn, which is also known as Hon Hai Precision Industry, was keen to return to the international market.
This time around the borrower had bigger ambitions with plans to launch a dual tranche note including a 10 year bond.
The leads decided to pull the trigger in mid-September, one week before the Federal Reserve meeting when there was some uncertainty about whether there would be a rate rise. This meant there was some investor caution but with no competition in the market and as the first Taiwanese name to sell a dollar bond all year, the bond managed to tighten pricing 20bp across both tranches and secure a final order book of more than $1.3bn for the five year tranche and $850m for the 10 year.
Banpu Power Bt13.62bn IPO
Joint bookrunners: Bualuang Securities, CIMB, Credit Suisse, Kasikorn Securities and Thanachart Securities
Banpu Power’s IPO was one of the most anticipated deals of the year. The size of the transaction meant it was the country’s largest listing in 12 years. It was also the only IPO open to international investors and ended up accounting for 45% of new market capitalisation in 2016.
Still, the transaction found itself navigating a difficult market. The shares priced on the day it was announced the country’s beloved king had died and bookbuilding took place during the US election.
Fortunately the leads had done enough in the run up to pricing to ensure the deal could go ahead. Pre-deal investor education took in Singapore, Hong Kong, Kuala Lumpur and London which brought in two cornerstone investors that took up 35% of the institutional tranche. In addition, 30% of the overall transaction had been offered to shareholders in Banpu’s parent meaning that 50% of the trade was covered before book building began.
Once books opened, such was the demand for the institutional tranche that the leads increased it from 43.7% to 48.1% of the deal. Books ended up closing early and the IPO priced at the top of guidance.
Vietjet Aviation Joint Stock Co D3.79bn IPO
Joint bookrunners: BNP Paribas, Deutsche Bank, JP Morgan and Viet Capital Securities
The IPO of Vietjet Aviation was a true market opening event. The transaction was the first in the country with an international Reg S compliant prospectus and also the first listing to have global banks as part of the bookrunning group. In effect, the transaction offered international investors a rare chance to get access to Vietnam.
Completing an IPO in Vietnam with an international tranche is no easy feat. The main stumbling block is the fact there is around a two month gap between an IPO pricing and the stock listing on the exchange which means investors have to be comfortable with their funds being locked away for that amount of time.
But the leads had confidence that the Vietjet IPO, which was the biggest ever on the country’s exchange and a direct play on the country’s booming consumer growth story, was a strong test case.
To ensure a smooth process, the bookrunners held three rounds of marketing meetings in Asia and Europe with shadow indications of interest enough to cover the deal. In the end, international investors accounted for 24 of the approximately 30 accounts that came in for the IPO. And the wait was worth it with the shares popping 20% when they started trading on February 28.
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