given the strength of its brand.
HDFC’s stock has risen 36% year
to date, while that of SBI and
ICICI Bank rose 1.2% and 19%,
respectively.
“There is no way HDFC will
settle for a valuation lower
than State Bank of India or
ICICI Bank. It is already behind
in the IPO race and can’t fall on
valuations, too,” said a banker
away from the deal.
ICICI Prudential, SBI Life
and HDFC Standard Life are
the top three life insurers in
India behind the state-run Life
Insurance Corporation of India.
For state-owned GIC and
NIA, getting retail investors to
participate is important to meet
the government’s objectives.
State-owned companies do not
have an anchor tranche, where
investors waive price sensitivity
in return for guaranteed
allocations, adding to the need
to be attractively priced.
Axis , BNP , Citigroup , Deutsche
Bank , ICICI Securities , JM Financial ,
Kotak and SBI Capital were the
bookrunners on the SBI Life
IPO.
Bank of America Merrill Lynch ,
ICICI Securities , IIFL , Citic CLSA ,
Edelweiss and JM Financial
managed the ICICI Lombard
float.
For daily news stories
visit http://www.ifrasia.comshares will ultimately be
cancelled also helped push the
stock above the November 2015
IPO price of ¥1,400 per share,
which was seen as politically
desirable.
Ultimately, the state plans to
raise a total of US$35bn from
the reduction of its stake in the
holding company to one third,
helping fund reconstruction
for areas damaged in the
2011 tsunami. According to a
second banker on the deal, it is
possible that the next portion
of the privatisation could come
around a year from now.
Daiwa, Goldman Sachs and
Nomura are global coordinators.
Daiwa, Mitsubishi UFJ Morgan
Stanley, Mizuho and Nomura are
domestic lead managers. Bank of
America Merrill Lynch and Goldman
Sachs are lead managers on the
international side.
Syngenta seeds discontent
Bonds Pulled bond issue follows turbulent days for prized acquisitionBY SHANKAR RAMAKRISHNAN,
ELEANOR DUNCANSYNGENTA pulled a US$7bn bond
offering last week, in a move
that capped a difficult fortnight
in the Swiss agribusiness giant’s
efforts to raise fresh capital.
Facing a raft of lawsuits
connected to its genetically
modified corn, the company
struggled to drum up interest
in a bond that many saw as
light on investor protections.
After starting marketing
on September 11, lead
banks twice postponed the
deal’s announcement – once
ostensibly due to hurricanes –
before putting it on hold.
“It left a bad taste in
investors’ mouths,” one
fund manager told IFR. “The
question now is the pricing –
and what protections will be
there in a new deal.”
The bond was to help
refinance the acquisition of
split-rated Syngenta (Ba2/BBB-/
BBB), which was taken over by
CHEMCHINA earlier in the year in a
US$43bn transaction.
While several bankers said
the company will probably be
able to get a new transaction
over the line, it may be some
time before the buyside is ready
to embrace the credit.
“It may not be tomorrow
or in a week,” said one senior
banker. “But there is definitely
an opportunity for the issuer to
come back.”SEED MONEY
The bond deal was in the
spotlight from the start, thanks
to the ChemChina takeover –
the largest foreign acquisition
by a Chinese company.
China was also at the heart
of Syngenta’s problems with
US farmers, who filed suit
over GMO corn seed that
Syngenta sold them before it
had been approved by Chinese
authorities.
China rejected millions of
tonnes of US corn importsbefore the strain was approved
years later, leaving those who
had grown it out of pocket and
US corn prices in freefall. The
company denied wrongdoing.
Against that backdrop, it
seemed even more confusing
that Syngenta announced a
settlement covering most of
the lawsuits just one day after
postponing the bond.
“When this deal went on
hold after marketing began
on September 11, people were
wondering for days whathappened,” said one credit
analyst.
“I don’t think the banks on
the deal were fully aware of
what was happening.”
BNP Paribas , Citigroup ,
Credit Suisse , HSBC , MUFG and
Santander were bookrunners on
the trade.TROUBLE SETTLING
Though the settlement does
not cover suits by industrial
heavyweights Archer Daniels
Midland and Cargill, the
reported US$1.5bn sum
suggests final damages may be
less than feared.
While that could bode well
for when Syngenta decides to
try again, any new offering will
still likely be met with a bit of
buyside pushback.
Among other issues, analysts
said the covenants this time
around were weak.
“We were borderline
disturbed by its [liens
covenants] flimsiness,” said
Andrew Brady, global headanalyst of basic industries at
CreditSights.
“There is not a restricted
payments covenant which
would explicitly limit the
amount of dividends that
Syngenta can pay to its parent
ChemChina.”
Bond investors would also
be subordinated to any secured
loan received from ChemChina,
he said.
And while some coupon
step-ups had been embedded
in the structure in case of a
downgrade, analysts said that
may now be a more likely
outcome.
Fitch, which rates Syngenta
as BBB, said the proposed legal
settlement will make it harder
for the company to achieve
deleveraging in line with
expectations.
The rating agency had
expected leverage would
gradually fall to around four
times by 2020 from five times
initial leverage.
Meanwhile the Financial
Times reported that Beijing will
not directly intervene to help
Syngenta with the lawsuits it
faces.
That was counter to the
understanding of S&P (which
rates Syngenta BBB–), which
factored in implied state
support into its rating, said
Brady at CreditSights.
And Moody’s said in a May
report that ChemChina and
the Chinese government “will
be mindful not to endanger
the growth prospects of their
highly strategic acquisition by
putting undue pressure on its
financial position”.
In any case, even if Syngenta
were to lose its investment-
grade status, the US market will
still be ready to welcome the
credit, said one senior banker.
“If they resolve the legal
issues and have a solid
structure, investors will jump
into the trade, irrespective of
whether it is high-yield or high-
grade or split-rated,” he said. “If they resolve the
legal issues and have
a solid structure,
investors will jump into
the trade, irrespective
of whether it is high-
yield or high-grade or
split-rated.”