S&P upgraded PLN by two notches from BB,
citing improved coordination in the
ministries that oversee it, and the
government’s ongoing willingness to
provide support in times of distress.
The dollar bonds were seen trading 1bp–
2bp wider on Friday morning in a broadly
weaker market.
Citigroup, HSBC, Mandiri Securities and
Standard CharteredûWEREûJOINTûBOOKRUNNERS
Proceeds from the offering will be used
partly to fund capital expenditure and also
FORû0,.SûPROGRAMMEûTOûADDû û
megawatts of extra capacity.
MALAYSIA
TENAGA LIGHTS UP SUKUK PLANSTENAGA NASIONAL, rated A3/BBB+
(Moody’s/S&P), last week kicked off a series
OFûlXEDûINCOMEûINVESTORûMEETINGSûINû!SIAû
and Europe ahead of a potential US dollar
Reg S bond offering.
BNP Paribas, CIMB, Citigroup and HSBC were
appointed to arrange the roadshows, which
KICKEDûOFFûONû/CTOBERûûINû+UALAû,UMPURû
and will end in London on October 22.
A bond sale, pending investor feedback,
will be drawn from a multi-currency sukuk
issuance programme via TNB Global
Ventures Capital. The sukuk are expected to
be rated A3/BBB (Moody’s/S&P).
The Malaysian utility last made a foray
INTOûTHEû53ûDOLLARûMARKETûINû/CTOBERûû
WHENûITûSOLDû53MûOFû
YEARû)SLAMICû
BONDSûATûBPûOVERû53û4REASURIESû4HEûDEALû
had pulled in orders of more than US$2.9bn.
POLITICS SPOOKS MALAYSIAN BONDSUncertainty over the fate of big
INFRASTRUCTUREûPROJECTSûSPONSOREDûBYû
Malaysia’s last government is holding back
domestic bond issues as the new
administration of Prime Minister Mahathir
Mohamad grapples to rein in M$1trn
(US$243.9bn) of federal debt.
Ringgit bond sales in May to September
TUMBLEDûBYûûTHISûYEARûTOû-BN û
ACCORDINGûTOû2ElNITIVûDATA ûANDûSOURCESûSAYû
state-linked agencies such as LEMBAGA
PEMBIAYAAN PERUMAHAN SEKTOR AWAM (LPPSA)
and DANAINFRA NASIONAL had been waiting for
WEEKSûFORûOFlCIALûCLEARANCEûTOûSELLûUPûTOû
-BNûOFûBONDSûEACHû7HILEû,003!ûlNALLYû
received the go-ahead on Friday, the status
OFû$ANA)NFRASûlNANCINGûWASûNOTûCLEARûATûTHEû
time of writing.
Before the May 9 election toppled the
previous Barisan Nasional administration,
approvals were given rapidly as the
FUNDRAISINGSûSUPPORTEDûPROJECTSûIDENTIlEDû
as essential by the previous government.
0UBLIC
SECTORûHOUSING
lNANCINGûAGENCYû
LPPSA provides preferential housing loans
to government employees, while DanaInfra
is responsible for constructing and rolling
out mass rapid transit systems as well as for
DEVELOPINGûTHEûPAN
"ORNEOûHIGHWAYûPROJECT!FTERûCOMINGûINTOûOFlCE ûTHEûNEWû0AKATANû
Harapan government cancelled a number of
INFRASTRUCTUREûPROJECTSûTOûSCALEûBACKû
expenditure, but has already reversed its
decisions in several cases. For example, after
announcing a ban on highway tolls duringEMERGING MARKETS ASIA-PACIFICHordes snap up DBM’s solo bond
MONGOLIA International investors show confidence in Mongolian reformsDEVELOPMENT BANK OF MONGOLIA drew a blowout
book for its first offshore bond offering without a
government guarantee, reflecting solid investor
confidence in the country’s economic reforms.
DBM, which has a dual role as a development
bank and an export-import bank, and is wholly
owned by the Mongolian government, sold
US$500m of five-year bonds last Tuesday.
The issue was priced at 98.973 with a coupon
of 7.25% to yield 7.5%. That was a hefty 75bp
inside initial guidance of 8.25% area, and came
after guidance was revised to 7.875% area and
then 7.625% area.
Orders totalled US$3.2bn from 217 accounts,
having peaked at US$4.1bn, with strong demand
from the US and Europe. The offering benefited
from a risk rally in the US trading session, but
anchor orders, notably from European accounts,
also gave confidence that the deal would go ahead.
“Emerging market investors still have a lot of
cash to deploy and when they are engaged they
can go all-in,” said a market source. “Investors
do not expect a lot of supply coming out of
Mongolia in the next couple of years.”
North American investors bought 39% of the
144A/Reg S notes, EMEA 37% and Asia-Pacific
24%. By investor type, asset managers booked
86%, pension funds and insurers a combined
12%, and others 2%.
Some investors felt DBM should pay a spread
of 50bp–150bp over the sovereign, while others
thought 200bp–300bp, a spread usually applied
to commercial banks, was more appropriate.
Mongolia’s 2023 bonds were seen at
6.25% and its 2024s at around 6.60%, so
the interpolated yield for a new five-year was
estimated at 6.5%. That meant DBM paid just
100bp over the sovereign, the tightest print for
a Mongolian transaction without a government
guarantee, signalling that investors saw it as a
quasi-sovereign credit.
The notes have expected ratings of B–/B
(S&P/Fitch), in line with Mongolia’s rating. In
January, Moody’s upgraded DBM to B3 from
Caa1, following an upgrade of the sovereign,
noting that Mongolia had made reforms under
its International Monetary Fund programme that
would reduce the impact on its finances from
commodity price volatility.
“Some investors considered the Mongolian
sovereign bonds relatively expensive comparedwith names like Sri Lanka and Pakistan, but
Mongolia is on a deleveraging course and has
stopped issuing domestic debt, aiming for a 55%
debt-to-GDP ratio on a NPV [net present value]
basis in 2019,” said Florian Schmidt, who acted
as adviser to DBM.
DBM has no other dollar bonds outstanding,
following the exchange last year of its US$580m
government-guaranteed 5.75% bonds due
March 21 2017 into new sovereign bonds, weeks
before maturity.
However, it has a ¥30bn (US$267m)
Samurai due December 2023 that does carry a
government guarantee.
The new dollar bonds come with a cross-
default clause into DBM’s Samurai bond, so
any default on the new notes would impact
the sovereign, giving both the issuer and the
government good reason to ensure the dollar
bonds are paid on time.
In addition, the notes will be considered in
default if the Mongolian government ceases to
wholly own or control DBM.
Last year, revisions were made to the DBM
Act as part of reforms under Mongolia’s IMF
programme. These strengthened the policy
bank’s independence from the government and
allowed it to make its own decisions on financing
projects, meaning that it now puts more focus
on whether projects are commercially driven,
export-driven and add value to the economy.
DBM also received a capital injection from the
government.
Proceeds will refinance existing debt, and
DBM did not raise any new money.
“DBM is refinancing short-dated and floating
US dollar debt, with the objective of extending
duration and eliminating interest rate risk while
also reducing its duration-adjusted cost of
capital,” said Schmidt.
This foreign-currency debt comprised a
loan from Credit Suisse due in December
next year, as well as borrowings from China
Development Bank and some South Korean
banks.
The new bonds were seen slightly higher in
the immediate aftermarket, bid at a cash price
of 99.1.
HSBC, JP Morgan and Morgan Stanley were
joint bookrunners for the bond offering.
Daniel Stanton