International Financing Review September 8 2018 7For daily news stories
@ visit http://www.ifre.comof the loan, to avoid banks
making large commitments and
ensure a balanced syndicate
with equal voting rights,
bankers said.
“It’s anything to try and
make people feel more
comfortable,” a second senior
banker said.
Pricing has also been
increased on a US$350m
loan for Turk Eximbank,
which is being coordinated by
Mizuho.
A one-year tranche now pays
195bp for dollars and 185bp for
euros, and a two-year tranche
now pays 300bp for dollars and
290bp for euros.
Turk Eximbank was not
immediately available for
comment.It remains to be seen whether
the pricing increases will be
sufficient to encourage
international banks to join the
deals. Lenders are seeking
approvals from credit
committees.
Turkey’s five-year sovereign
credit default swap rates were
542.6bp at Thursday’s close, up
from 318.9bp on August 1,
according to Thomson Reuters
data.
“They are hoping that the
new pricing will unlock
some liquidity now that
Turkey is quieter. It will be
interesting to see what banks
will support,” the second senior
banker said.
Additional reporting by SandrineBradley (^) n
Treasuries since they were
issued last December, widening
32bp to a spread of 172bp last
Thursday, according to
Tradeweb.
Indonesian five-year
sovereign CDS, meanwhile,
jumped 25bp in a week to
147bp, the highest level since
February 2017, Thomson
Reuters data show.
The sell-off presents a
daunting challenge for the
country, which is considering
another offshore sovereign
bond issue this year to pre-fund
next year’s requirements, as it
has done for the past three
years.
“Personally, it’s concerning,”
an Indonesian finance ministry
official told IFR. “We are in
discussions on what to do with a
sovereign issue. We still have
about Rp200trn (US$13.4bn) left
in gross government securities
to issue.”
The official added: “We’ll
decide on whether to pre-fund
with a sovereign bond once next
year’s budget is finalised by the
end of October.”
Bankers agree that the
country will have to pay up to
get a deal done in the fourth
quarter.
ALARM BELLS
The weak rupiah is also raising
alarm for Indonesian corporate
issuers who have previously
relied on international funding
- even if they hedged their
currency exposure.
“Almost all companies in
Indonesia with FX hedges will
have seen that protection
become less effective, as the
currency spot rate is above the
high-end of the hedges they
have,” said Harsh Agarwal, head
of Asia credit desk strategy at
Deutsche Bank. “The macro
picture doesn’t look great
either, so it’s hard to be
constructive.”
This has become troublesome
for Indonesian developers in
particular. Fitch says those
companies have 50% or more
of their borrowings in US
dollars.
Despite the threat from a
tumbling currency, investors
may draw some relief from the
lack of material maturities in
the next two to three years,
according to Deutsche’s
Agarwal.
“As long as they keep paying
coupons, things should be
okay. There are also some
investors who are happy to hold
double-digit yielding bonds,” he
said.
“Sentiment is not great, but
there is value from a long-term
perspective. In the short term
though, there is no visible
catalyst for a rally.” n
Funding Circle adds
cornerstone to IPO
n Equities ‘Marmite’ story anchored by tech investor
BY LUCY RAITANOPeer-to-peer lender FUNDING CIRCLE
has de-risked its up to £500m
IPO on the London Stock
Exchange by recruiting
Danish billionaire Anders Holch
Povlsen as a cornerstone
investor.
The company is prioritising
growth over profits - losses are
increasing - which is a dynamic
that typically appeals to US
investors more than those
in the UK. But its two US peers
have performed terribly since
their IPOs, although for
different reasons. Hence
the value in bringing in a
cornerstone - another rarity
in the UK.
The company said it will
target £300m in primary
proceeds, and secondary selling
will ensure that it has a 25% free-
float (including Povlsen’s
allocation) once it lists.
The listing will be anchored
by Povlsen’s commitment to buy
10% of the company through his
holding company Heartland.
The commitment is conditional
on a pre-money valuation of no
more than £1.65bn, which puts
his 10% order at up to £195m
and effectively caps the post-
money market value at £1.95bn
and the deal size at nearly
£500m.
The expectation is that the
benefit of Povlsen’s involvement
will outweigh any potential
concerns about an effective free-
float of 15%.
“The anchor investor has a
good track record in investing in
big names in the disruptive tech
space, and their commitment to
buy up to a valuation of £1.65bn
is a constructive and achievable
valuation,” said a banker
working on the deal.
Povlsen owns 30% of online
fashion company ASOS, and
9.96% of German e-commerce
company Zalando.
Funding Circle’s listing is led
by Morgan Stanley, Goldman Sachsand Bank of America Merrill Lynch
as joint global coordinators and
bookrunners. Numis is also a
joint bookrunner.
A greenshoe of 10% of the
total offer size is planned.
The lender is raising the cash
to strengthen its balance sheet
and to enable expansion,
including in new markets.
In the first half of 2018,
revenues grew 54% over H1 2017
to £63m, but the operating loss
widened as operating expenses
during the same period rose
50% to £90.3m. Marketing
spend as a percentage of
revenues was 39% in H1 2018,
up one percentage point from
H1 2017.
As well as persuading
investors to buy into a pure
growth venture, bankers will
also have to reassure prospective
investors that Funding Circle
won’t follow US peers On Deck
and LendingClub, which are
down 60% and 75% from their
December 2014 IPOs
respectively.
Funding Circle’s unique
business structure and lending
mechanism will also create
challenges in pre-marketing.
“This is going to be something
of a Marmite-type story. A lot of
people will look at it as nice and
differentiated, but some won’t
grasp what it actually does,” the
banker said.
A mixture of financial
investors, small-cap investors
and fintech investors is
expected, the banker added. The
list of existing shareholders is
already rather illustrious with
six funding rounds attracting
Accel, Baillie Gifford,
BlackRock and Temasek,
among others.
The registration document
was approved on Monday so pre-
marketing could begin from
September 10. A standard
timetable of two weeks of pre-
marketing and two weeks of
roadshows/bookbuilding willfollow. (^) n
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