Bond issuers: If at first you don’t succeed – confess

^{This story has been amended to reflect information that came to light subsequent to publication. At the time of writing the original story on February 10, and despite requests for information from the banks involved in the transactions, we were unaware that the cancellation of the deals had been posted in a Bloomberg message at 10.44am HKT on February 9 for MAXpower and 8.54am on February 10 for Century Properties. We are happy to clarify that the deals were pulled at those times, although we stand by our reporting of the confusion in the market until the point of pulling the deals.}

It took a while, but Asia’s high yield bond market finally sparked into life at the end of last month, following a series of setbacks after the bond default by Chinese property developer Kaisa Group Holdings.

A strong run of deals started with India’s Delhi International Airport (Dial) and was soon followed by a raft of other names. The bullish tide even encouraged Chinese property developers to test their luck, with Shimao Property Holdings successfully pricing the sector’s first high yield bond of the year in early February.

But this winning streak came to a sudden halt when two untested and unknown southeastern Asian debutants jumped in. Indonesia gas-fired power specialist MAXpower and Century Properties from the Philippines opened books on February 4 but failed to price, eventually closing books on February 9 and 10, respectively.

With no official updates from the leads until the deals were pulled (Goldman Sachs, JP Morgan and Standard Chartered for MAXpower, and HSBC, StanChart and UBS for Century) the market was confused as to whether the books were still open or not.

In a bull market, the failure of a couple of deals would not be too much of a cause for concern. But with investors jittery since the start of the year, this uncertainty has killed off the market, with only one borrower launching a bond since MAXpower and Century Properties.

Markets do tend to calm down in the run-up to Chinese New Year, but bankers are sitting on clogged pipelines and many were hoping to push out some of their trades in the last full week before the holiday.

Part of the problem is that with bankers on the trades refusing to speak about their progress, no one away from the deals has a clear idea as to what the strategy is.

The leads need to realise that their lack of transparency was irresponsible in the current climate, was disrupting market sentiment and hurting other issuers.

Ahead the deals being pulled, bankers said that as long as bookbuilding appeared to drag on — no-one else wanted to launch a deal on a day that could coincide with these two bonds getting formally pulled.

If that were to happen, high yield credits, especially those looking to issue debut bonds, will be hit hardest. But the last thing the market needs is another setback.

Nobody likes to admit defeat, but for the sake of the wider market MAXpower and Century should have brought some clarity to their transactions and cleared the path for others. 

Let’s call it a Chinese New Year Resolution.