to ensure that other deals did not
compete for investor attention
with China’s offshore sovereign
bond offering during the party
congress. Other aims include
restricting developers’ access
to finance to cool the property
market and managing outbound
currency flows.
NDRC has not announced any
new registrations since October 9.
REFINANCING PRESSURES
The registrations will ease
pressure on Chinese issuers with
refinancing needs. The DCM
head estimated that US$40bn of
Chinese G3 bonds are due for
redemption next year, with that
number doubling to US$80bn in
2019.
Several Chinese issuers with
short-term funding needs have
taken advantage of a loophole
in the NDRC rules that exempts
offshore bonds with maturities
of less than a year from
registration.
There have been rumours that
the NDRC might clamp down
on this practice, but issuance
continued apace recently,
with Hainan Airlines, Maoye
International and China Singyes
Solar Technologies selling notes
with tenors of less than one year
in the past month. HNA GROUP on
Thursday priced a 363-day US
dollar bond at 8.875%.
Such issues have helped
cash-hungry companies, such
as property developers, raise
funds for new projects, but they
will need to be refinanced next
year and NDRC approval for a
longer-dated bond issue is not
guaranteed.
Ironically, some bankers think
some companies might stand
a better chance of winning
NDRC approval next year if they
issued short-dated bonds this
year, since they would be able to
demonstrate a clear refinancing
need in dollars in 2018.
“The NDRC is more receptive
to refinancing than new
issuance,” said a bond banker at
a foreign house. “Issuers that do
364-day notes have a gun against
their heads.”
Banks are still planning
more short-dated issues. Some
recent ones, like that of TEWOO
GROUP, included a regulatory
call allowing the issuers to call
the bonds if they receive NDRC
approval for offerings with
longer tenors. One bank has also
looked at 364-day bonds with
rolling maturities, allowing them
to be extended if issuers do not
win NDRC approval to sell bonds
before the notes fall due. Indika Energy enjoys
re-rating benefit
Bonds Successful fundraising clears way for Kideco
stakebuildingBY FRANCES YOONINDIKA ENERGY took full advantage
of strong demand for high-
yield credits to raise funds for
a doubling of its stake in an
Indonesian coal producer, a
move that is expected to lead to
higher credit ratings and better
financials.
The Indonesian integrated
energy group last week sold a
US$575m seven non-call four
bond at 6.125%, tightening
a chunky 50bp from initial
guidance as total orders reached
US$3.5bn.
Investors expect the
company’s financial profile
to improve following the
acquisition of an additional 45%
stake in Kideco Jaya Agung,
the country’s third largest coal
producer. Indika already owns
46% of the company, which is its
largest coal asset.
The stake increase to 91% will
give Indika more control over
Kideco’s operations and strategy
and access to its cash. Rating
agencies view the investment
as credit positive, even though
Indika is having to raise debt to
fund it.
Moody’s and Fitch, which
have already upgraded Indika in
April from Caa1/CCC to B2/B–,
have placed the company and
its proposed notes on review
for another upgrade to Ba3 and
B+, respectively, following last
month’s announcementof the
Kideco deal.
“Through two trades this year,
the company was able to show
a clear improvement in their
financials and debt maturity
profile that has been reflected
by rating agency upgrades,” said
Rishi Jalan, vice president in
Citigroup’s Asia debt syndicate
team. “While the market was
definitely there for them, the
story of the credit post the
acquisition is very impressive.”
Moody’s and Fitch have initialratings on the notes of B2/B+. In
its first US dollar bond this April,
the company issued a US$265m
five non-call three.
In the latest offering, Asia took
50% of the notes, the US 29% and
Europe 21%. By investor type,
fund and asset managers were
allocated 92%, banks and private
banks 7% and insurers, pensions
and others 1%.
The transaction comes
after Indika Energy received
approval from 97.1% of holders
of its US$500m 6.375% 2023s
to proposed amendements
and waivers that will allow
the company to complete its
purchase of Kideco.
Both Moody’s and Fitch have
said they expect the acquisition
to be credit positive, since Kideco
has a long reserve life of over 13
years and the deal would also
improve Indika’s leverage.
Fitch said Indika’s business
profile and credit metrics will
be comparable with low BB
rated coal peers following the
proposed share purchase, but the
lumpy debt maturities around
2022 and 2023 constrain the
ratings.
The company has a US$500m
6.375% 2023 that has a call date
in January 2018. Those bonds
were trading at 101.5/102.5,
according to Thomson Reuters
data.
Indika’s first trade of the year,
the April 6.875% 2022s, which
were rated Caa1 by Moody’s at
the time of pricing, were trading
at a cash price of 105/106 to yield
a record tight 4.67%, according to
Thomson Reuters data.
In addition to funding the
Kideco acquisition, proceeds
from the new 144A/3c7/Reg S
notes will also be used to be used
for general corporate purposes.
Indika Energy Capital III will
issue the notes, while Indika
Energy will serve as guarantor.
Citigroup and Standard Chartered
were joint bookrunners. For daily news stories
visit http://www.ifrasia.com2010, according to the media
reports.
Leshi, a listed unit of indebted
technology group LeEco, faced
media accusations of financial
fraud at the time of the listing,
although no official action has
been taken against it or its
sponsors so far.
Trading in Leshi’s shares
was suspended in April
when it announced an asset
restructuring.
“There are a lot of recent signs
that the regulators have taken a
stronger stance on IPO fraud and
weak candidates, which remind
us to perform high standards
of due diligence and internal
compliance for IPOs,” said the
banker.
As of October 31, the
CSRC had rejected 59 listing
applications out of a total
420 this year – triple the 18
rejections denied in the whole
of 2016.
More candidates were rejected
this year for reasons of financial
strength, sustainability of profits
and information disclosure,
bankers reckon.
“Based on recent cases,
the regulators paid high
attention to financial flaws
and the comprehensiveness of
information disclosure,” said
another banker. “They also
asked a lot of questions in the
areas of corporate compliance,
independence, and accounting,”
he said.
Unlike in the previous
session, there are no longer
two separate groups handling
main board and ChiNext
listings. The integration aims
to unify standards and improve
efficiency, according to the
CSRC.