principal should be written down and 10%
converted to shares, which would have been
an unprecedented case of a national
regulator renegotiating the terms of bank
capital securities after a trigger event.
The RBI was within its rights to order the
writedown of the AT1s if it deemed the bank
non-viable, but at the time of the
restructuring announcement Yes Bank had
not disclosed its latest bank capital ratios for
the most recent quarter.
On March 14, Yes Bank disclosed that its
Common Equity Tier 1 ratio at the end of
December was 0.6%, far below the
regulatory minimum of 7.375% and the 5.5%
trigger on the 9.5% and 9.0% AT1 bonds. Its
CET1 ratio had been 8.7% at the end of
September, but plunged after an increase in
provisions for bad loans.
The terms of the 10.5% AT1s sold to
Indiabulls state that the bonds will be
permanently or temporarily written down if
the bank is at the point of non-viability or if
the CET1 ratio drops to 6.125%.
Yes Bank shareholders stand to be
diluted after SBI injects Rs60.5bn in
exchange for a 49% stake in the bank. Yes
Bank has announced that Housing
Development Finance Corp, ICICI Bank,
Axis Bank, Kotak Mahindra Bank, Federal
Bank, Bandhan Bank and IDFC Bank had
also agreed to invest a combined Rs39.5bn
in equity.
SBI must maintain a stake of at least 26%
for the next three years, while the others
must keep at least three-quarters of their
stakes for the same period.
Following the Yes Bank takeover, private
sector lender IndusInd Bank is understood
to have delayed plans for a domestic AT1
offering, but analysts do not expect public
SECTORûENTERPRISESûTOûHAVEûDIFlCULTIESûISSUINGû
capital.
“Generally, market appetite for AT1s was
on the lower side, even before the Yes Bank
incident,” said Sanjay Agarwal, senior
director at Care Ratings.“It tended to be only top-notch banks
that were able to issue. PSEs generally
have government support and are very
comfortably placed to fund through
AT1s, so it is not likely to impact them.
Most smaller banks have not been able to
raise AT1s.”INDONESIA
MEDCO PROPOSES ‘WIN-WIN’ TENDERIndonesian oil and gas producer MEDCO ENERGI
INTERNASIONAL is taking advantage of a slump
in oil prices to buy back a high-coupon 2022
note ahead of its August call date.
Medco, rated B1/B+/B+, is offering to buy
all of its US$400m 8.5% 2022 senior notes at
par, giving investors an early exit at a
premium to depressed market prices.
The notes, issued by subsidiary Medco
Strait Services in 2017, are callable at 104.25
in August, but the company is pre-empting
that with an offer to pay par instead, plus
accrued interest, to bondholders who tender
by March 20.
In an investor presentation, Medco said
the tender offer would allow it to deleverage
earlier and reduce negative carry.
The oil producer has cash on hand to fund
the tender, having raised US$650m in
January from a 6.375% seven-year non-call
four bond via wholly owned subsidiary
Medco Bell. The money was raised to repay
debt of parent guarantor Medco Energi
Internasional.
“Cash has already been raised and
ALTHOUGHûlXED
INCOMEûINVESTORSûDONTûWANTû
bonds to be called early, this tender offer
was easily conceived as a goodwill gesture
due to the current market environment,” a
banker on the offer said.
For jittery investors, the proposal is an
opportunity to cash out early while
minimising the consequences of the recent
credit sell-off, which has seen the 2022s lose
almost 10 points in the week commencing
March 9 to be bid as low as 95.375 on March- Bond prices were dragged down by the
collapse in oil prices and slowing global
demand due to the coronavirus pandemic.
The bonds rose to 97.125 after the tender
offer was announced.
The low cash price of the bond meant that
Medco could have made the tender offer at a
large discount, but setting it at par allowed
it to reward bondholders while saving
around four points compared to the August
call terms.
“In the past three to four years, Medco has
been one of the most prudent issuers in the
Indonesian high-yield space and it’s done
the right thing for a long-term relationship
with investors,” the banker said.
Morgan Stanley and Standard Chartered Bank
are dealer managers for the tender offer.
Medco Energi Internasional is the parent
guarantor of the bonds.S&P DOWNGRADES MNC INVESTAMAS&P has downgraded Indonesian media
holding company MNC INVESTAMA to CCC from
"nûONûGROWINGûRElNANCINGûRISKSûFORûITSû
US$231m senior secured notes due in May
2021.
4HEûRATINGSûlRMûALSOûCUTûTHEûISSUEûRATINGû
on the bonds to CCC from B–.
The negative outlook on MNC Investama
raises the prospect of a further downgrade
by the end of the third quarter in the
ABSENCEûOFûAûCREDIBLEûRElNANCINGûSTRATEGYû
for the maturing debt, S&P said.
It said that weak global economic
conditions and investor sentiment will
MAKEûITûMOREûDIFlCULTûFORûTHEûCOMPANYûTOû
lNDûALTERNATIVEûFUNDINGûOPTIONS ûWHILEûTHEû
management’s willingness to execute
divestments to fund repayment looks
uncertain.
MNC Investama and its operating
subsidiaries, for example, bought Digital
Vision Nusantara in August despite facing
RElNANCINGûPRESSURES
Moody’s also said in a report in January
that MNC Investama is not expected to have
SUFlCIENTûCASHûTOûREPAYûTHEûûNOTESûATû
maturity, citing its limited operational
CASHmOWûASIDEûFROMûTHEûDIVIDENDSûITûRECEIVESû
from subsidiaries.
MNC Investama has a Caa1 rating by
Moody’s and the 2021 notes are rated at
Caa2.
4HEûMEDIA ûlNANCIALûSERVICESûANDû
property group issued the 2021s as part of
an exchange offer for notes maturing in- It had to sweeten the terms of the
offer by adding an extra cash payment and
raising the minimum yield by 100bp from
initial guidance.
GEO ENERGY BUYS BACK MOREGEO ENERGY RESOURCES has bought back more
of its US dollar bonds at a discount, just days
after Moody’s cut its rating and warned that
the Indonesian coal producer might need to
hold a distressed exchange for the bonds.
The company said it repurchased
US$31.8m in principal amount of the bonds
at a deep discount to face value last Tuesday,
paying US$17.168m.
Geo Energy has taken advantage of the
slump in its bond price to buy back some
bonds at a discount, but this is eroding its
cash balance, which stood at US$139m at
the end of December.
Earlier this month it repurchased and
cancelled US$19m in principal amount of its50 International Financing Review March 21 2020INTERNATIONAL ISLAMIC FINANCE DEBT
BOOKRUNNERS: 1/1/2020 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)Excluding equity-related debt.
Source: Refinitiv SDC code: J271 Standard Chartered 8 1,544.12 22.3
2 HSBC 4 751.63 10.9
3 First Abu Dhabi 3 438.82 6.3
4 Islamic Dev Bank 3 424.54 6.1
5 Citigroup 3 412.44 6.0
6 Dubai Islamic Bank 3 385.34 5.6
7 Riyadh Bank 1 300.00 4.3
8 JP Morgan 1 300.00 4.3
9 Landesbanken 1 285.71 4.1
10 Natixis 1 285.71 4.1
Total 9 6,925.318 IFR Emerging 2325 p 47 - XX.indd 50 20 / 03 / 2020 18 : 57 : 17