Singapore’s UOB priced a €500m
September 2023 (Aaa/NR/AAA)
considerably tighter, at swaps
plus 7bp, in September.
That is partly down to the
KHFC bond’s expected rating
of Aa1 by Moody’s, as well a
smaller investor pool than for
more established borrowers.
Singaporean banks, by contrast,
have become relatively
frequent issuers since their first
euro covered trade in 2016.
KHFC’s Shin recognised the
merits of frequent issuance,
underscoring his resolve to
come to the euro market again
to help tighten pricing in the
future.
KHFC’s covered rating is
higher than those of the issuer
and the sovereign, but lower
than the Triple A covered bond
ratings of DBS, OCBC and UOB.
A banker on the deal explained
that KHFC’s latest covered bond
has a hard-bullet structure,
under which the principal is
due after five years.
That contrasts with some
other jurisdictions such as the
UK, Canada, Singapore and
Australia, in which Triple A
ratings are made possible by
soft-bullet structures that give
the issuer an additional 12
months after the maturity date
to pay back the bonds.
Korea’s Kookmin Bank was
able to get a Triple A rating
for a US$500m five-year
covered bond in 2015, but
the commercial bank at the
time included mechanisms
that insulated offshore swap
counterparty cashflows from
any sovereign risks.
EMEA accounted for 90%
of the KHFC deal, with the
remainder going to Asian
investors. Asset and fund
managers bought 60% of the
notes, banks took 24% and the
rest went to central banks.
KHFC’s Social covered bond
framework was established
to raise funding to finance or
refinance KHFC’s mortgage
loan products and provide
stable and long-term housing
finance. The framework
complies with the ICMA Social
Bond Principles and has been
reviewed by Sustainalytics.
The 144A/Reg S and 3c
bonds will be backed by Korean
residential mortgages.
BNP Paribas, DBS Bank, ING
and Societe Generale were joint
bookrunners and joint lead
managers for the Social covered
bond offering. Tenaga uncovers
10-year demand
Bonds Malaysian utility attracts quality accounts against
tricky backdropBY FRANCES YOONTENAGA NASIONAL, rated A3/BBB+
(Moody’s/S&P), successfully raised
long-term funds in a fragile
market that was still recovering
from recent losses and kept
other US dollar issuers away.
Malaysia’s largest electric
utility priced a US$750m 10-
year bond at Treasuries plus
170bp, allowing it to term out
maturities beyond 2025 and
2026.
Appetite from the Middle East
for the first Asian corporate US
dollar sukuk since 2016 was
modest. A banker on the deal
explained that Middle Eastern
interest was currently skewed to
domestic assets given higher oil
prices and a stronger US dollar.
Concerns about sales of
Malaysian assets by foreign
investors and trade tensions also
softened investor appetite, the
banker said. The World Bank this
month said Malaysia’s economy
is expected to grow at a slower-
than-expected 4.9% this year due
to cancellations of infrastructure
projects and the trade situation.
Tenaga’s shares are down 7%
in the year to date, while the
yield on its US$750m 3.24% 2026
bond spiked more than 20bp in
the second quarter, according to
Refinitiv data.
Malaysia will continue to face
substantial risks because of the
uncertain external environment,
the World Bank said.
Since the election victory of
Mahathir Mohamad’s coalition
in May, the new administration
has pushed to review major
infrastructure projects launched
by the previous government.
However, the ringgit has
weathered volatility better
than its Asian peers, with the
currency down only 2.8% so far
this year against the US dollar.
The Indonesian rupiah and
Indian rupee have weakened 12%
and 15% during the same period.“The market presented itself
to be not the best, but the issuer
framed the deal well during the
roadshow. The credit is solid
and the quality of this book was
good,” said the first banker. “We
could have pushed for more and
had 160bp in our pocket, but
we didn’t, judging by the softer
sentiment. People appreciated
that.”
The notes were spotted at
165bp/163bp the next day.
Moody’s said Tenaga’s
financial profile is expected to
weaken over the next three
years, after factoring in the new
sukuk, planned capital spending
and a new tariff. Tenaga is also
planning to invest in emerging
economies with strong growth
potential. Moody’s warned that
this could expose it to uncertain
regulatory and operating
environments, such as a recent
M$206.5m (US$50m) asset
impairment in Turkey.
Fair value was based on
Tenaga’s outstanding October
2026s, which were spotted
at the Treasuries plus 145bp
level. Adding a two-year curve
extension brought fair value to
155bp–160bp, leaving a new
issue concession for investors of
around 10bp–15bp.
Initial price guidance had been
announced on Tuesday morning
at 190bp area.
The Reg S issue drew final
orders of over US$1.25bn from
94 accounts.
Of the notes, 82% went to Asia,
15% to Europe, and 3% to the
Middle East. By investor type,
44% went to fund managers, 42%
to banks, and 14% to insurance,
pension funds and sovereigns.
The bonds will be drawn from
a multi-currency sukuk issuance
programme via TNB Global
Ventures Capital. The sukuk
is expected to be rated A3/BBB
(Moody’s/S&P).
BNP Paribas, CIMB, Citigroup and
HSBC were joint bookrunners. For daily news stories
visit http://www.ifrasia.comin favour of an IPO. But with
the float in limbo, it may now
reconsider.
Some bankers close to the
deal, however, believe PEXA has
a sound story to tell in an IPO.
The company is currently
the only electronic platform
in Australia on which property
market participants can settle
real estate transfers online.
“The beauty of simplicity has
made the business appealing,
and that would drive a lot of
interest to this float because it’s
easy for Australian people to
understand how this business
works and how much time and
money it could save,” said one
of the bankers before the deal
was put on hold.
A likely comparable of the
business is NYSE-listed software
company Ellie Mae, which was
valued at US$2.76bn as of last
Thursday.
PEXA is owned by a
Macquarie-led consortium.
Macquarie has a stake of
around 23.9%, followed by
Link Group at 19.8%. The other
investors include Western
Australian Land Information
Authority and the big four
Australian banks – Australia
and New Zealand Banking
Group, Commonwealth Bank
of Australia, National Australia
Bank and Westpac.
Link intends to sell
approximately 12.5m of the
26.5m shares it currently holds
through the IPO.
PEXA was expected to
receive about A$80m from
the IPO through the sale of
primary shares. It plans to use
the proceeds to invest in its
digital service and for general
corporate purposes.
Macquarie and Morgan Stanley
are working on the deal.