CORPORATES HIREs FOR KOMODO AND
DOLLAR BONDS
State-owned Indonesian constructer WIJAYA
KARYA has mandated BNP Paribas, HSBC,
Mandiri Securities and MUFG as joint lead
managers and bookrunners for a potential
offshore rupiah bond.
Investor meetings in Asia, London and the
US started on January 16. The offshore
rupiah notes, dubbed Komodo bonds, will
be offered under 144A/Reg S format, subject
to market conditions.
Fitch has assigned an expected rating of
BB to the proposed notes.
Meanwhile, MEDCO ENERGI INTERNASIONAL
(B2/B/B) has hired banks for a proposed
offering of 144A/Reg S senior US dollar
notes.
CLSA, Credit Suisse, DBS Bank, Mandiri Securities,
Morgan Stanley and Standard Chartered are joint
global coordinators and joint bookrunners.
The Indonesian oil-and-gas exploration
and production company started to meet
investors in Singapore, Hong Kong, London
and the US, starting January 16.
GOLDEN ENERGY AND RESOURCES has also
mandated for a proposed offering of US
dollar senior notes, hiring Credit Suisse and
CLSA as joint global coordinators and joint
bookrunners.
The Indonesian coal producer will hold
MEETINGSûANDûCONFERENCEûCALLSûWITHûlXED
income investors in Singapore, Hong Kongand London, starting on Monday. The issuer
has ratings of B1 (stable) from Moody’s and
B+ (positive) from Fitch. Its proposed Reg S
notes have expected respective ratings of B1
and B+.PHILIPPINES
TENDER HELPS PHILIPPINES PRINT
INSIDE CURVEThe REPUBLIC OF THE PHILIPPINES (Baa2/BBB/BBB)
COMPLETEDûTHEûlRSTû!SIANû53ûDOLLARû
sovereign bond offering of the year, making
deft use of a tender offer to price close to
better-rated China.Issuers strike while high-yield is hot
JUNK BONDS Concord, SSMS succeed at second attempt as yield chase continuesHigher yields and hot market conditions allowed
low-rated Asian issuers to revive US dollar
bond offerings this past week, underlining the
strength of demand for new credits at attractive
valuations.
China’s CONCORD NEW ENERGY and Indonesia’s
SAWIT SUMBERMAS SARANA (SSMS) both
completed new issues they had shelved two
months ago, but their higher yields reflected
investors’ new pricing expectations.
Wind and solar power producer Concord
completed a US$200m three-year Green bond
on its second attempt, pricing at 7.9%. It had
marketed the note in November at the 7.125% area.
Indonesian palm oil producer SSMS on Tuesday
managed to price a US$300m five-year non-call
three at a yield of 8%, in from guidance of the
8.125% area. Last year, it had started at initial
guidance of the 7.25% area for the same tenor and
narrowed to 7% before pulling the issue.
The strong response helped Indonesian palm
oil and sugar producer TUNAS BARU LAMPUNG
price its own US dollar maiden a whopping
100bp inside SSMS the following day, raising
US$200m from a five-year non-call three note
at 7%. Bankers away from the issue said the
differential seemed wide, despite ratings of
Ba3/BB– (Moody’s/Fitch) for Tunas and B1/B+
(Moody’s/Fitch) for SSMS.
Tunas, too, had tried to issue last year, hiring
banks in July for a proposed bond in Singapore
dollars, but it did not come to fruition.
All three notes rose in secondary trade, with
investors keen to take advantage of higher yields
following a sell-off in the sector late last year.
SSMS’s new note jumped two points to yield
7.1%, close to the 7% it was targeting on its first
attempt. The bond from Tunas jumped more
than a point, even after pricing 50bp inside
initial guidance.TATA STEEL added to the momentum on
Thursday with India’s first high-yield bond of the
year, raising US$1.3bn with a lighter covenant
package than in previous offerings.
”Investors continue to seek ways to enhance
the yields of their broader portfolios given the
relatively supportive fundamentals of the asset
class, where defaults continue to descend from
their more recent peaks witnessed in late 2016,
while recoveries remain elevated, consequently
pointing to minimal default losses,” said Andrew
Jessop, managing director and high-yield
portfolio manager at Pimco.
“This was accentuated by the recent
sell-off of high-yield from late October through
mid-November, where sector-based selling
that stemmed from idiosyncratic risks within
select sectors led to broad-based selling,
resulting in higher yields and improved
valuations, providing a better entry point for
investors.”
The average yield on a five-year US dollar
high-yield bond from Asia ex-Japan has risen to
5.805%, according to Thomson Reuters credit
curves, up from 5.19% in early November.LOOKING FOR VARIETY
The momentum is expected to continue. A banker
on an upcoming seven-year non-call four MEDCO
ENERGI deal said he had received significant
interest. Other high-yield issuers to have held
investor meetings ahead of proposed transactions
include GCL NEW ENERGY and ZHONG YI HOLDINGS.
“I think the general view is to strike while the
iron is hot,” said the Tunas banker.
The reception to last week’s issues also
suggests that investors are keen to diversify
away from the continuous supply of Chinese
property bonds that boosted Asian high-yield
offerings to a record US$41bn in 2017.Yields on offshore Chinese property bonds have
widened about 40bp–50bp since October as a
flurry of regulatory approvals and thin new-issue
premiums deterred investors. This paved the way
for high-yield issues from other industries, which,
on an absolute basis, have generally offered
higher returns than real estate offerings.
“Investors are receptive to different industries
and new names, and there is hunger for
diversification in their portfolios,” said a banker
on the SSMS deal. “Especially in jurisdictions
like Indonesia, high-yield deals were mostly
concentrated in the coal and energy sectors.
SSMS is a palm oil producer, and we haven’t
seen supply from that industry in years.”
Chinese fund managers have also accounted
for growing portions of Indonesian high-yield
issues as they too search for diversification from
property. A banker on the Tunas issue said a third
of the notes was allocated to Chinese investors.
However, concerns about rising rates and
heavy supply remain.
Wan Howe Chung, head of Asian fixed income
at Amundi Asset Management, said investors
would pick and choose the issues they liked.
“The two deals weren’t able to come to
market in November because they were
priced too tight thinking the market would
accept it. This speaks to the market being very
disciplined,” he said.
A banker working on a recent high-yield
Chinese property bond said valuations were
especially important.
“Gone are the days when investors fall over
each other to buy high-yield. There’s so much
supply to choose from and we saw a repricing in
the sector across Double B and Single B,” he said.
“Investors want to deploy cash, but are being
smart about it.”
Frances Yoon