Amid soaring expectations of multiple bank defaulters, credit from the country was not down to any form of misconception on its
spreads had ballooned to enormous levels. Many debt capital market part, but a calculated move.
bankers and investors were dubious of getting any deals getting done at The bank will likely shudder at the thought of the amount it had to
all. pay for years to come, but fact remains that Kexim did what it had to
That put the Republic of the Philippines in a difficult situation. The do. In doing so it ensured that 25 other Korean borrowers could raise
sovereign borrower is a perennial feature each January, always striving US$19 billion of US dollar-denominated bonds at increasingly narrow
to raise most of its international borrowing needs through a major US spreads during the year, while the bank itself ended up issuing US$3.9
dollar deal. Were it to fail to do one it would set a bad precedent to its billion in dollar debt.
borrowing. Other deals such as Temasek’s US$1.5 billion deal or Hutchison
Given that nobody knew whether the credit market conditions Whampoa’s US$3 billion issue were well-executed and worthy of
would improve or worsen, treasurer Roberto Tan decided to press praise, but Kexim deserves recognition for its practicality.
ahead anyway.
The three bookrunners went into the market and quickly extracted
US$6 billion of orders from 281 investors. BESTHIGH-YIELDBOND
They ended up pricing the bonds to offer an 8.5% yield. The sover- AdaroIndonesiaUS$800million7.625%bondsdue2019
eign ended up paying a 21 basis point (bp) premium over its existing Bookrunners:CreditSuisse;DBS;UBS
2019 bonds, but in a market in which many had openly feared that issu-
ing new debt was impossible, it was a relatively small price to pay.
It also looked appealing when compared with 40bp and 50bp premi- Asia’s high-yield bond market did not begin to see deals in any mean-
ums that Colombia and Brazil had paid for deals just before the ingful fashion until investors’ risk appetite had begun to settle. As a
Philippines. result, most deals only emerged in the latter half of the year. But
The most enduring feature of the Philippines’s success was that it when they came, they came in a flurry.
helped to raise the confidence of other Asian borrowers. The deal During late September and into October a welter of high-yield
demonstrated that investor demand was still out there for borrowers issues were priced. Many were from Chinese property companies, and
that were determined and respected enough. a large number failed to perform. Amid all of these bonds, however,
Other sovereign borrowers such as Indonesia were to follow with was one from Adaro Indonesia.
their own deals, while the Philippines itself ended up conducting four The Indonesian mining company is widely regarded as a virtual
deals during the year, each of which were well received. blue-chip company with the misfortune of operating in a junk-grade
Many bankers now consider the country’s treasury department to be country. But it was not a straightforward sell.
among the savviest of Asian borrowers, but this deal proved that it also For a start, Adaro wanted to issue 10-year bonds and no other
had courage. Indonesian corporate had done so before. Secondly, Adaro planned to
on-lend some of the funding to its mining services subsidiary, mean-
ing that the debt would effectively be subordinated in the event of any
BEST INVESTMENT-GRADEBOND credit problems.
Export-ImportBankofKoreaUS$2billion8.125%bondsdue2014 While Adaro offers its unlisted unit a full guarantee, Asian
Bookrunners:BankofAmerica-MerrillLynch;Citi;DeutscheBank; investors seized on this fact to try and get more yield from the issue.
HSBC;RBS When Adaro began marketing the deal with Asian investors they
began by saying that they wanted to see a yield of up to 9%. The com-
pany wanted tighter pricing and offered pricing guidance of 7.75% to
While the Philippines faced the problems of being a regular sovereign 8.25%.
borrower, Export-Import Bank of Korea (Kexim) had an additional bur- When demand from the region proved lacklustre, the company
den to bear. Not only did it need funding itself, it was also the de facto looked instead to emerging market investors in Europe and the US.
sovereign borrower during a year when there was a huge amount of They were less worried about the structural subordination and
Korean companies needing to issue G3 bonds. were prepared to buy the bonds at a tighter range. It allowed the min-
Kexim contemplated an early year issue even as consternation was ing company to price the deal eventually with a 7.75% yield.
rising about the sheer level of international debt that Korean companies At that relatively tight yield the bookrunners still ended up regis-
needed to raise in dreadful markets. Many observers were privately tering US$5.75 billion in orders from 262 investors. It was an
voicing fears that some companies would have to be bailed out by Seoul extremely impressive result, well inside where Adaro had priced its
to prevent defaults. only previous international bond.
Amid these jittery feelings, the state policy bank was realistic. It
needed a successful, benchmark deal. Given the woeful market senti-
ment at the time that meant paying up. BESTDOMESTICCURRENCYBOND
Critics of the deal say that Kexim had been prepared to pay anything SanMiguelBeverageP38.8billion(US$801million)threetranche
to get the deal done, and it ended up paying too much. To view the issue bondissue
at the end of 2009 it is easy to say that the 8.125% coupon it offered, Bookrunners:BDOCapital&InvestmentCorp.;ChinaBankingCorp.;
equivalent to 677.7bp over Treasuries, was extremely generous. The DevelopmentBankofthePhilippines;FEBInvestments;FirstMetro
bonds tightened in by over 300bp in the six months after pricing. InvestmentCorp.;HSBC;ING;LandBankofthePhilippines;
But that observation completely misses the point. Korean borrowers PhilippinesCommercialCapital;RizalCommercialBankingCorp.;
are not well-known for being profligate. Horror stories abound within StandardChartered
DCM banking circles about cost-conscious treasurers from the country
haggling for hours over one basis point on the pricing of a new deal.
So the fact that Kexim utterly put such considerations to one side in While the past year has witnessed a surging tide of international
order to force open the door for a huge pipeline of following deals bond issuance, during the early part of the year the local currency
www.asiamoney.com 39
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