Renminbi deposits in Hong
Kong stood at Rmb532.75bn at
the end of August, down 47%
from the peak of Rmb1.004trn in
December 2014, according to the
Hong Kong Monetary Authority.
Most of the buyers of BMW’s
notes were asset managers.
While there has been an active
market in privately placed CNH
notes in the past two years,
asset managers, unlike bank
treasuries, are generally unable
to buy them because of liquidity
requirements in their investment
mandates.
BMW did not disclose
distribution statistics, but sources
said 80% of the notes were
allocated to Asian investors and
20% to Europeans.
Another banker pointed out
that the cash invested in the
four recent deals came primarily
from old money redeemed from
previous Dim Sum bonds.
“Lots of Dim Sum bonds are
coming up for maturity, which
means investors now have the
cash to put to work, but we
still need to see whether it is
a temporary thing or, actually,
represents a broader trend
towards the market opening
again,” the banker said.
Meanwhile, China’s vast
onshore renminbi bond market
is diverting investment away
from the offshore Dim Sum
market, particularly with the
recent launch of the Bond
Connect scheme, which allows
offshore investors to access
China’s interbank bond market
directly from Hong Kong.
A Hong Kong-based CNH
trader with a large Chinese bank
doubted that the offshore Dim
Sum market would return to its
past glory, given that offshore
investors now have the direct
access to onshore renminbi
bonds without quota restrictions.
Currently, the onshore
renminbi bond yields looked
more attractive than offshore
peers, he said, providing less
motivation for offshore Chinese
investors to buy Dim Sum notes.
Onshore AAA rated three-year
notes were quoted at around
4.60% last week.
“I guess investors behind
recent (Dim Sum) deals were
either those who were not yet
ready for Bond Connect, or those
who had the mandate to only
invest in offshore bonds or in
foreign names,” he said.
BMW’s notes were issued in
the name of BMW Finance NV,
an intra-group lending company,
based in the Netherlands, with
BMW as guarantor.
Credit Agricole was sole
arranger and manager on the
issue. HSBC was sole lead on that
of BOC Aviation. Anchor tranche glitch
tarnishes IEX IPO
Equities Late discovery of FDI rule prevents foreign
participation in floatBY S ANURADHAIn an embarrassing and
unprecedented about-turn in
the Indian IPO market, INDIAN
ENERGY EXCHANGE had to freeze
out foreign investors from its
Rs10bn (US$152m) float after
custodians flagged a rule that
precluded their participation.
The company had allocated
1.03m shares of the IPO’s
1.82m-share anchor tranche to
11 foreign portfolio investors
on October 6. Less than a week
later, it backtracked and cut
the tranche to 789,120 shares
on realising that FPIs could
buy shares of an electricity
exchange only in the secondary
market.
Because the IPO comprised
only secondary shares,
bookrunners Axis, IIFL Holdings
and Kotak had apparently
assumed that the float could
have foreign anchors.
But the custodians that
were to hold the shares on
behalf of the FPIs sought
clarification from the Securities
and Exchange Board of
India to establish whether
the purchases were valid in
light of the FDI rules. As Sebi
refused to give an immediate
opinion, and the books were
due to close on October 11, the
bookrunners decided to cut the
anchor tranche and to transfer
the unallocated shares to the
qualified institutional buyer
tranche.
A person with knowledge
of the transaction said both
the BSE and National Stock
Exchange had told the
custodians that FPIs could buy
IEX’s IPO shares. However,
since the clarification had not
come from Sebi, the custodians
took the view that FPIs could
not buy.
The 11 foreign anchors,
out of a total 23, included
institutions like NomuraSingapore, National
Westminster Bank, Smallcap
World Fund, Eastspring
Investments and Nomura Fund
Ireland.
Although they were initially
allocated shares and pre-paid
for them, they will now only be
allowed to buy once the stock
starts trading, potentially at a
higher cost.
IEX said in a statement:
“The company and the lead
managers discussed this
development with the regulator
in order to identify potential
solutions. However, as this
has arisen late in the day and
during the offer period an
appropriate solution could not
be implemented in the short
time span available ... The
company would like to reiterate
that this development is arising
out of regulatory concerns
raised by the custodians rather
than any pricing concerns.”
Despite the anchor snafu,
the IPO priced at the top of the
Rs1,645–Rs1,650 range and was
subscribed 2.28 times. The QIB
tranche was covered 2.56 times,
the high-net-worth investor
tranche 0.85 time and the retail
tranche 2.61 times.
Around 6.1m secondary
shares, or 20% of the post-
issue paid-up capital, were
sold. Among the vendors were
11 shareholders, including
Tata Power, AF Holdings,
Multiples Private Equity Fund,
Madisons India, Aditya Birla
Private Equity and Golden Oak
Mauritius.
The shares will be listed on
the BSE and NSE.
IEX, one of the two electricity
exchanges in India, started
operations in 2008. The
company was originally backed
by Financial Technologies and
state-owned PTC India Financial
Services before the two sold
their stakes. IEX had 63
shareholders prior to the IPO. For daily news stories
visit http://www.ifrasia.comacross Singapore, Vietnam, the
Philippines, Indonesia, Thailand,
Taiwan and Malaysia.
“Frankly, these countries
are underpenetrated in terms
of e-commerce and digital
entertainment,” the banker said.
The company’s principal
businesses are digital
entertainment under the Garena
name, e-commerce under Shopee
and digital financial services
under AirPay.
Pricing is expected to take
place on October 19 and the
shares will start trading on the
New York Stock Exchange on
October 20.
Credit Suisse, Goldman Sachs
and Morgan Stanley are the
bookrunners. BDO Capital, Cathay
Securities, Citic CLSA, Citigroup,
Cowen, DBS, Nomura, Piper Jaffray,
Mandiri, PWP Securities, Stifel
Nicolaus Weisel and Viet Capital are
the co-managers.
Founder Forrest Li and Tencent
are Sea’s major shareholders. Li
has a 34.7% stake, split between
a 20% direct holding and 14.7%
in his Blue Dolphin Ventures BVI
vehicle. Tencent entities hold
39.7%. Other investors in the
company include global investors
such as SeaTown Holdings, an
affiliate of Temasek, Khazanah
Nasional, GDP Venture, Mistletoe,
General Atlantic, Ontario
Teachers’ Pension Plan, Keystone
Venture, and Skype co-founder
Toivo Annus.
Sea will have a dual-class share
structure under which Class A
ordinary shares will be entitled
to one vote and Class B shares to
three votes.