10 International Financing Review March 21 2020Top news
Sasol heads expected queue of
coronavirus rescue deals
Equities Opportunity for ECM but only on right terms and feesBY ROBERT VENES, LUCY RAITANOShares in South African oil and
chemicals company SASOL fell by
more than 40% last week to a
valuation of R18.86bn
(US$1.08bn) – making a US$2bn
rights issue that was announced
on Tuesday something of a
challenge.
The fully underwritten rights
issue is part of a US$6bn set of
measures (including asset sales)
designed to address the fallout
from the coronavirus outbreak
and the related fall in oil and
chemical prices.
Sasol has been hard hit by
recent events: versus a Thursday
close of R30.20, its stock was
trading above R310 in early
January.
Terms are expected after
publication of Sasol’s full-year
2020 results to June 30, due in
September, a long time for a
volume underwrite in thecurrent market. Bank of America
and Citigroup are global
coordinators with JP Morgan as
bookrunner.“It is amazing how Sasol
basically came together in
around a week; that’s a hell of a
statement,” said a head of ECM
away from the deal about the
underwriting. “What has
surprised me is that
conversations are happening
much faster than last time with
THEûlNANCIALûCRISISûWHENûITûTOOKûabout a year for conversations
around funding to begin.”
Liquidity is key, said the head
of syndicate at a European bank.
“We are in uncharted territory,
but everyone is looking at their
balance sheet to see what
liquidity reserves they have; it’s
THEûlRSTûTHINGûCORPORATESûNEEDûTOû
lGUREûOUTv
Bankers said that there were
obvious sectors that would be
initially affected by the latest
crisis, such as hospitality and
travel, but also supply chain
services and any sector related to
auto or transportation.HOW LONG?
One of the key differences here
is that no one knows how long
the coronavirus will be a threat
or how long it will impact global
economies and lifestyles.
“You could take a view last
time on what amount was
NEEDEDûTOûlXûTHEûPROBLEM vûSAIDûthe ECM head. “Here it’s much
harder to model what will be
enough when we don’t know
how long this will continue;
we’ve never seen anything like
this.”
Companies will not want to
address funding issues now with
ANûEQUITYûRAISEûONLYûTOûlNDûTHEYû
still need cash several months
down the line if there is no
resolution to the crisis.
The head of syndicate added
that it would be hard to “call the
bottom”, adding that the
knock-on effect will be that
companies will struggle to
provide full-year guidance or
even guidance on next year. That
has a material impact on already
listed companies, as well as
private businesses looking at a
listing.MAX HEADROOM
There is little suggestion that
ECM will not provide backingChina ECM pipeline builds for second half
Equities Global spread of virus reduces chance of second-quarter market recoveryBY FIONA LAUEquity capital markets bankers in
Asia are ramping up preparations
for a busy second half even as
market volatility looks set to
continue for some time.
Last week was one of the
busiest for China ECM since the
coronavirus outbreak began.
WEDOCTOR and XPENG MOTORS held
beauty contests for sizeable IPOs
with all major banks pitching
for roles. Tencent-backed
WeDoctor could raise about
53BNûFROMûAû(ONGû+ONGûmOATû
while Alibaba-backed Xpeng is
looking at a US$500m–$1bn US
listing.
In early March, Hillhouse-
backed liquid detergent maker
BLUE MOON also held a beauty
contest for a Hong Kong IPO ofup to US$1bn. The company is
understood to have selected CICC
and Citigroup as leads. Bank of
America is also expected to join
the deal later.
“With this extreme market
VOLATILITY ûTHEûlRSTûHALFûISû
basically gone now. We are
hoping to win mandates for
some sizeable deals that could
come in the second half,” said an
ECM banker.
“The virus is everywhere now
and it has become a global issue.
It’s unlikely for the markets to
recover anytime soon. We may
see some biotech IPOs and
opportunistic blocks coming out
in the second quarter but that’s
basically it,” said another ECM
banker.
NONGFU SPRING is another
US$1bn-plus Hong Kong IPO thatcould come in the second half.
The company, one of China’s
biggest bottled water and
beverage companies, applied to
the China Securities Regulatory
Commission last Tuesday for an
overseas IPO.
However, Nongfu Spring does
NOTûHAVEûAûDElNITEûPLANûONûWHENû
TOûlLEûTHEû(ONGû+ONGûLISTINGû
application. CICC and Morgan
Stanley are working on the
transaction.MOVING PARTS
CHINA BOHAI BANK, which counts
Standard Chartered as its
second-largest shareholder,
COULDûBEûTHEûlRSTûTOûLAUNCHûAû
multi-billion dollar Hong Kong
IPO once markets stabilise.
4HEû#HINESEûLENDERûlLEDûAû
listing application in lateFebruary for a deal that could
raise about US$2bn–$3bn.
“In theory, the IPO could come
out in the second quarter. But
it’s hard to predict the timing
right now given that there are so
many moving parts,” said a
person close to the deal.
ABC International, CCB
International, CLSA and Haitong
International are the joint sponsors.
Another potential mammoth
deal in the second or third
quarter is the secondary listing
of JD.COM in Hong Kong. The US-
listed Chinese e-tailer is working
with Bank of America and UBS on
the transaction. It is looking to
bring the deal to the market as
early as around mid-year but the
plans could change depending
on the development of the
pandemic.“Here it’s much harder
to model what will be
enough when we don’t
know how long this
will continue; we’ve
never seen anything
like this”4 IFR Top news 2325 .p 2 - 12 .indd 10 20 / 03 / 2020 19 : 08 : 59