PEXA waits amid market sell-offs
Equities ASX IPO postponement comes after Coronado cuts deal sizeBY CANDY CHANPROPERTY EXCHANGE AUSTRALIA
(PEXA) has delayed a proposed
ASX IPO of up to A$862m
(US$610m) as investors have
turned cautious amid global
market sell-offs.
The Australian online
property settlement services
provider put the deal on pause
on the last day of institutional
bookbuilding last Thursday,
a person with knowledge of
the matter said, adding that
the board would monitor the
situation over the next couple
of weeks.
Asian markets saw deep sell-
offs last Thursday following
a sharp drop in US marketsovernight. The benchmark ASX
200 index fell 2.83%, taking its
one-month drop to 8.76%.
Against this backdrop, PEXA
failed to generate enough
institutional demand. The
company, which was scheduled
to list on the ASX on November
22, was slated to lodge its
prospectus last Friday before
opening books for retail buyers
from November 5 to November
13.
PEXA’s postponement came
a week after CORONADO GLOBAL
RESOURCES slashed its ASX IPO
size by 33% to A$774m. Despite
pricing a smaller deal at the
bottom of the indicative price
range, its shares fell 10% on
their trading debut last Tuesday.“The IPO window is closed,”
said Jason Teh, chief investment
officer at Sydney-based Vertium
Asset Management. “With
the stock market sending
a cautious note, not many
people would want to pay high
multiples for a fast-growing
company.”
At a planned deal size of
A$753m–$862m, PEXA was
poised to surpass MYOB’s
A$833m float in 2015 and
become Australia’s biggest
domestic listing by a
technology services firm. The
company set a price range
of A$13.60–$15.80 per share,
representing an enterprise
value of A$1.8bn–$2.1bn.
Formed in 2010 to fulfilthe Australian government’s
initiative to deliver a national
e-conveyancing solution to the
country’s property industry,
PEXA is reported to have made
losses of A$40m in 2016 and
A$79m in 2017.
However, it is expected
to turn profitable after state
governments mandated that
all property transactions
must be conducted via an
electronic platform, replacing
the traditional paper-based
system. Victoria has kick-
started the practice in October,
while Western Australia will go
digital by December and New
South Wales in July next year.PRIVATE SALE?
The IPO delay may put a private
sale option back on the table.
PEXA declined a A$1.6bn
offer from a consortium led
by shareholder Link GroupKHFC makes euro covered debut
Bonds Yield pick-up helps Korean housing company negotiate volatile marketBY FRANCES YOONKOREA HOUSING FINANCE CORPORATION,
rated Aa2/AA– (Moody’s/Fitch),
issued its first euro covered
bond, detouring from its
usual US dollar route after it
got stronger feedback from
European investors in a soft
market.
The €500m (US$573m) five-
year covered bond priced at
mid-swaps plus 40bp, drawing
final orders of over €1.65bn.
At three times covered,
the transaction was deemed
a success given that this was
the Korean state entity’s first
foray in euros, and also the
first for a Korean issuer in that
currency for covered bonds.
KHFC is solely responsible
for implementing the
government’s housing finance
policies.
The deal structure had the
traditional, familiar elements
sought by European investors,
including a dual recourse
structure and asset segregation.
It falls under the KHFC Act,a regulatory framework that
governs the government
entity’s covered bonds.
“It was a big move to deviate
from the US dollar covered
bond market, where they have
traditionally issued for years,”
said another banker on the
deal. “We were able to find
out during the roadshow that
Europe is indeed the deepest
market for covered bonds,
and investors will appreciate
the commitment to building a
curve. If they do this correctly,
this market will be available.”REGULAR EURO ISSUANCE
Shin Seung Yong, KHFC’s
securitisation planning team
head, told IFR that the issuer
plans to sell covered bonds
on a regular basis in the euro
market from next year.
“US investors are familiar
with Korean names, which are
frequent issuers in US dollars.
Korea also issues sovereign
bonds in dollars,” said Shin.
“But European investors liked
that we are a stable jurisdictionand can offer a structure that is
similar to those issued at home.
Liquidity is also better. We’re
hoping that this deal will set
a good benchmark for more
issuance from Korea.
“We were surprised to
see that we attracted more
covered bond investors in
our deal than similar deals
recently.”
The transaction is also the
first Social covered bond from
Asia. In Europe, there is a lot
of overlap between demand
for Social bonds and demand
for covered bonds, so the
deal ticked a lot of boxes for
investors, another banker on
the deal said.
KHFC helps provide
affordable housing for low-
income families and socially
underprivileged households.
Its role has become crucial
amid soaring home prices in
the country’s capital of Seoul,
which prompted President
Moon Jae-in to implement
multiple rounds of cooling
measures.WEAK MARKET
Wary of ongoing market
volatility, KHFC spent a
week gathering IOIs before
announcing the deal at mid-
swaps plus 50bp area on
Wednesday.
Comparables included the
Singaporean covered bonds
from DBS and UOB, which were
trading in the mid-swaps plus
10bp–15bp area, and Korean
state-owned banks such as
Kexim and KDB’s euro bonds,
which were around the 30bp
area.
“It came tighter than we
would have done a dollar deal
on a swaps basis, but it was
mainly because they want to
come back to the euro market- there’s not really a covered
bond buyer base in dollars, it’s
a bit hit and miss,” said a lead.
“And this deal will trade
much tighter quite quickly.”
The spread on offer is at the
higher end of the euro covered
bond spectrum – only Italian,
Spanish, Greek and Polish paper
have priced wider this year.
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