BEST SOVEREIGN BOND/BEST LOCAL CURRENCY BOND
Republic of the Philippines Ps44.1 billion (US$977.48 million) 4.95% bonds due 2012
Global coordinators: Citi, Deutsche Bank
Joint bookrunners: Credit Suisse, Goldman Sachs, HSBC, J.P Morgan
By virtue of its structure and relative novelty, the Republic of Philippines’ Ps44.1 billion global peso synthetic bond issue wins both our best sovereign bond, and the best local currency bond to boot.
The country raised the finance from a globally marketed deal, the first deal of its type to be seen in Asia and the largest peso-denominated deal.
Interest and principal payments on the bond are linked to the performance of the peso against the dollar, but all the cash flows are settled in US dollars. A savvy borrower, the deal allowed the sovereign to access a wider investor-base who wanted to take part in the currency appreciation story but would struggle to access the local currency market.
Before this deal came to market foreign participation was limited due to central bank regulation on foreign currency inflows and a requirement to set up a local custodian for local investments. But this structure allowed international investors to tap the sovereign’s debt in its local currency without becoming embroiled in local tax obstacles.
The Philippines’ bonds are fixed at a peso/dollar exchange rate of 44.109, meaning that an investor who bought US$10 million of bonds would get bonds worth the peso equivalent of Ps441.1 billion. When the bonds mature, that investor's holding will still be worth that amount, but if the peso has strengthened against the US dollar by 50%, the dollar redemption amount will now be worth US$20 million.
Local 10-year government bonds were yielding 6.48% around the time deal priced but investors have to pay 20% withholding tax, meaning the net yield on those bonds is 5.184%. The 4.95% coupon on the 10-year bullet deal strongly implied global investors were willing to give up some relative value in order to more easily participate in the movement of the currency.
What also supported this deal as the best in this category—just ahead of the commendable Sri Lankan 10-year sovereign bond—was the fact it has helped develop the Philippines’ bond market. Subsequently a corporate has followed its government into the fold, in the form of the Petron transaction, and more could come afterwards.
Although not heavily oversubscribed, Petron proved there was sufficient appetite in the market for a bond that exposes you to an emerging market currency and to a corporate credit.
More than 280 investors placed orders worth around $13.5 billion for the Philippines’ deal. The strength of demand allowed the bookrunners to place 37% of the book in Asia, 32% in the US investors 32%, and 31% in Europe.
BEST INVESTMENT GRADE BOND
Reliance Holding USA US$1.5 billion dual tranche bond issue
Bookrunners: Bank of America-Merrill Lynch, Citi, HSBC, Royal Bank of Scotland
Indian conglomerate Reliance Industries received a big response to its US$1.5 billion benchmark international bond, drawing orders worth around US$11.6 billion. The company split the deal between 10- and 30-year tranches—and big demand for the longer-dated note ensured it rallied strongly in the secondary market.
The strong response to the deal would have helped inspire greater supply from Indian borrowers, but also other large investment grade deals to the market regionally, including the successful Sinochem US$2 billion dual tranche note which, despite government backing, came in at very similar spreads.
Reliance’s deal also earned points for setting records. The issue size is the largest-ever corporate bond from India and, notably, the first private Indian corporate investment grade issuance since 1997.
It was also the first US dollar 30-year private corporate issuance out of Asia since 2003, proving the ability for private corporate to borrow in longer tenors. It was Reliance’s first dollar-denominated bond in over four years and its first benchmark US dollar deal, meaning some bankers saw it effectively as its debut.
What was also notable, according to those working on the deal, was the borrower’s willingness to leave a little juice on the table for investors despite strong demand.
“It’s shows good business and relationship-building sense,” says one banker. We believe this warrants commendation.
The banks approached investors with guidance of 200 basis points (bp)-225bp over Treasuries for the 10-year tranche, and 237.5bp-262.5bp for the 30 year tranche.
In total 429 accounts took part in the deal from a diverse mix. They placed around US$6.9 billion of orders for the 30 year tranche.
BEST HIGH YIELD BOND
Alliance Global Group (Cayman Islands) US$500 million 6.5% bonds due 2015
Bookrunner: UBS
Philippine conglomerate Alliance Global Group netted a very respectable US$500 million with an unrated international seven-year deal in August this year, demonstrating the strength of demand for credits from the country at home and abroad.
The transaction was the largest ever Philippine single tranche US dollar international corporate bond issuance, and it also boasted the lowest coupon from the country.
Execution was quick, with only 36 hours from announcement to pricing. In addition, the book was oversubscribed within the first 30 minutes of book building.
UBS was the sole bookrunner of the five-year bond, which priced to yield 6.625%. That was at the tight end of guidance set between 6.625% and 6.75%, and followed a 6.75% whisper from the sole lead the day before the issue priced.
This was a deal that bankers always suspected would get a good response. It did.
The borrower had originally been aiming to raise US$400 million but increased that after strong demand for the credit. Some 150 investors placed a rather impressive US$3.7 billion of orders, nine times oversubscribed.
There have been a small handful of deals sold by Philippine corporations this year—International Container Terminal Services’ US$200 million 2020 issue and FirstPac’s US$300 million 2017 deal to name a few—but international issues from the country remain relatively rare.
These bonds are traditionally supported by a strong bid from Philippine investors looking for somewhere to put their dollar remittances, which investors elsewhere see as an effective liquidity backstop.
Philippine investors took around 17% of the issue, out of the 89% sold into Asia. European
accounts bought 7%, and offshore US investors bought the remaining 4%.
BEST SYNDICATED LOAN
Wilmar International US$1.84 billion dual tranche loan
Bookrunners: ANZ, HSBC
Singaporean agribusiness Wilmar International’s acquisition financing of Australia’s CSR’s sugar business Sucrogen proved a worthy contender for loan deal of the year for the demand shown by investors to get involved and the complex cross-border nature of the deal.
Lenders in the deal were queuing up for a rare chance to extend term financing to the borrower in an oversubscribed deal that was originally structured as a US$1.65 billion facility but finally upsized to US$1.84 billion.
The acquisition facility is Wilmar’s first move into the offshore loan market. It is also the largest undertaking for the company in 2010 and, with the upsize, is the also largest to emerge out of South-east Asia, pipping the US$1.66 billion loan for Vital Asia completed in June.
The multi-tranche facility gave lenders a rare opportunity to get term exposure to Wilmar, one of Singapore’s best credits, which typically finances through revolving credit facilities. The debt facilities were split into a US$1.3 million term-loan facility sub-divided into four tranches of differing tenors, and a A$600 million working capital facility.
The facility was oversubscribed with the support of 10 banks. Interestingly the company had to approach at least 10 lenders with the deal to avoid paying withholding tax on the money it raised. ANZ and HSBC were the bookrunners and mandated lead arrangers on the deal.
The transaction was conducted because Wilmar had agreed to buy Sucrogen for A$1.75 billion (US$1.75 billion) in July. The financing was mandated in August but delays by Australia’s Foreign Investment Review Board forced it to be postponed. The board approves all non-US investments into Australia over A$231 million, and it extended the timeline for a decision on the takeover by 90 days to accommodate Australia’s general election.
Sucrogen is the largest producer of raw sugar in Australia and through QSL the second-largest exporter of raw sugar globally.
BEST PROJECT FINANCING
SportsHub S$1.76 billion (US$1.3 billion) four tranche project financing
Bookrunners: BNP Paribas, Credit Agricole, DBS, HSBC, Mitsubishi UFJ Financial Group, National Australia Bank, Natixis, OCBC, Standard Chartered, Sumitomo Mitsui Financial Group, WestLB
The S$1.76 billion financing for Singapore Sports Hub was the world’s largest sports infrastructure public private partnership (PPP) deal and is Singapore’s largest such transaction of any kind.
It also took a very long time to complete. The project closed in August, more than five heart-wrenching years after first launching.
The scale and nature of the development is unique for a PPP project, comprising a 25-year concession to design, build, finance and operate the new National Stadium and sport facilities for the Singapore Sports Council.
The facility, which features a 55,000-seat stadium, an aquatic centre, indoor arena, the existing Singapore Indoor Stadium and a retail shopping centre to be located at the site of the existing national stadium.
SportsHub, the project company, raised a S$1.5 billion 10-year soft mini-perm from a group of 11 banks and a S$266 million equity bridge with a three-year, seven-month tenor from four of those banks. Singapore Sports Hub Consortium is sponsoring the 25-year concession.
The consortium comprises HSBC Infrastructure, Dragages, United Premas and Global Spectrum, and it has entered into a 25-year agreement with the procuring authority.
After taking so long to come to the market—the global financial crisis causing the most of the delay— it has been said the deal has re-opened the debate on what a PPP financing structure should be able to achieve in terms of innovation and providing good value to the public good.
This is no easy task when there has been considerable pressure globally for governments to move away from these activities. It has been widely acknowledge that the Singapore government drove a hard bargain.
Asiamoney did not include the best securitisation and best leveraged financing categories this year due to a dearth of submissions.