IFR Asia – June 20, 2020

News

Myanmar leveraged buyout 06 

London Connect 08 

PLDT returns 08

China’s first CDR scoots ahead Equities Ninebot clears hearing after 14-month wait as reforms accelerate „  By KAREN TIAN, FIONA LAU

The first listing of Chinese depositary receipts is finally in sight after Segway maker NINEBOT cleared a hearing last week for a Rmb2.08bn (US$293m) IPO on the technology-focused Shanghai Star market. The Cayman-registered, Xiaomi-backed manufacturer of electric scooters will not only make history as the first issuer of CDRs, but it is also loss-making, comes with a variable interest entity structure and weighted voting rights – all characteristics that were previously banned in China’s capital markets. The nod for Ninebot comes against the backdrop of accelerating market reforms. The Shenzhen Stock Exchange last week began taking applications for its ChiNext board under a new streamlined US-style registration system, giving issuers even more flexibility in some respects than the Shanghai Star board. (See People & Markets.) It took 14 months for Ninebot to receive approval under the Star board’s own registrationbased regime since it filed a listing application in April 2019. The Shanghai Stock Exchange conducted three rounds of inquiries, raising questions about the necessity of the VIE structure and asking the company to disclose in detail the risks of such a structure for investors. Leaving no stone unturned, the exchange also took exception at the Chinese name of the company, which translates as ninth robot, since it does not produce robots. To avoid misleading investors, it asked for a future name change in favour of something that better reflects the nature of the business. The exchange is still negotiating the final details of 4

the CDR offer with Ninebot and its IPO intermediaries, according to people close to the deal. A-SHARE OR CDR? Bankers said Ninebot’s decision to issue CDRs rather than A-shares is issuer-specific and unlikely to start a trend among other overseas Chinese companies planning an onshore listing. “Whether a company issues shares or CDRs depends on its specific circumstances,” an investment banker said. “Ninebot currently has only 63.4m shares as capital, which is too little. That’s why it has to offer CDRs,” the banker said. “The CDR offering could change the trading volume and benefit the company’s future development in the capital market.” An offer of ordinary A-shares may make more sense for other potential issuers. “For us, selling shares or CDRs in an IPO makes no difference,” said a Beijing-based ECM banker. “But all the regulations for redchip listings are in place, and it is easier to offer shares than CDRs. Otherwise, we need to make more explanations during

the roadshow as this is new for Chinese investors. “I assume that most red chips will choose to offer shares rather than CDRs. I would also recommend our potential redchip clients to offer shares.” Ninebot plans to offer up to 70.4m CDRs representing 7.04m Class A shares, or not less than 10% of its enlarged capital, as well as a 15% greenshoe. Ten CDRs represent one share. ALL READY Smartphone maker Xiaomi was the first company to file for a CDR offering on A-share markets two years ago, but it abandoned the plan because of valuation concerns in June 2018. “A CDR offering was the only choice for Xiaomi at that moment if it wanted to list on A-share markets,” the investment banker said. “But now the regulations are ready and there is no restriction for red-chip companies to issue shares.” Indeed, more overseas-listed red chips have announced plans for a domestic share sale after regulators lowered the listing requirements for innovative companies on April 30. Hong Kong-listed GEELY

International Financing Review Asia June 20 2020

last week announced plans for an IPO on the Shanghai Star market that could raise as much as Rmb20bn, following in the footsteps of Hong Kong-listed SEMICONDUCTOR MANUFACTURING INTERNATIONAL. Beijing-based Ninebot posted a net loss of Rmb459m in 2019, down from a loss of Rmb1.8bn in 2018. Revenue rose 8% to Rmb4.58bn in 2019. Beside Segway, Ninebot makes electric scooters for Xiaomi, which accounted for 52.3% of its revenue in 2019. Xiaomi owns a 10.91% stake in Ninebot. Shunwei Capital, which was co-founded by Xiaomi founder Jun Lei, owns a further 10.91%. Other shareholders include Sequoia Capital (16.8%), Intel (3.3%), China Mobile (2.09%) and GIC (1.95%). Ninebot will use the CDR proceeds to build two factories producing intelligent electric scooters and off-highway electric vehicles in Changzhou city, to build an R&D centre in Beijing, to invest in an intelligent distribution robot project, and to replenish working capital. Guotai Junan Securities is the sponsor.  AUTOMOBILE

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NDB makes dollar debut 10 

Indonesia’s triple sukuk 10 

Vietnam ECM 11

Oil sector joins China bond feast Bonds Pricing heads ‘beyond perfection’ in busiest week since January „  By CAROL CHAN

Chinese issuers stepped up their offshore fundraising last week as constructive market conditions lured a total of 18 companies back to the US dollar bond market – including two state oil-and-gas companies that had been absent since at least 2015. CHINA NATIONAL PETROLEUM CORP,

the country’s largest national oil company, last Tuesday priced a US$2bn threetrancher that smashed pricing expectations after orders flooded in. Overwhelming demand for the deal allowed the Reg S trade to price 67bp–70bp inside initial price guidance, and more than 30bp tighter than fair value estimates. Two days later, CHINA OILFIELD SERVICES LIMITED, printed a US$800m dual-trancher 60bp67bp inside guidance and more than 10bp inside fair value. However, the aggressive pricing also caused significant order attrition and poor aftermarket performance. CNPC’s bonds widened about 10bp on average while COSL’s two-tranche bonds widened about 3bp–4bp on their first day of trading. “We’ve seen new issuance continue to receive strong demand. However, we’ve also seen growing resistance from investors about the aggressive tightening in pricing,” said a banker from a US bank. “The strong momentum in the primary market may not be able to stay too long.” Chinese issuers have been relatively slow to take advantage of improving market conditions in recent weeks, despite a pick-up in Asian issuance. That ended last week with 18 Chinese companies raising

nearly US$10bn from the dollar bond market. It was the busiest week from China since the January 5–11 peak for the year, when 22 Chinese issuers priced US dollar bonds, according to IFR data. A banker at a Chinese bank

A1/A+/A+ rated CNPC priced US$600m 1.125% three-year, US$900m 1.35% five-year and US$500m 2.00% 10-year notes at 90bp, 103bp and 133bp over Treasuries. The final pricing was 70bp, 67bp, and 67bp inside initial guidance

“We’ve seen new issuance continue to receive strong demand. However, we’ve also seen growing resistance from investors about the aggressive tightening in pricing. The strong momentum in the primary market may not be able to stay too long.” said central SOEs typically could complete their offshore bond issuance by the end of March or in April, but this year’s situation meant they had to delay, he said. “Some (Chinese) issuers aimed to come out to the market earlier, but their document preparation works, such as publishing audited results or getting their NDRC quotas have been delayed due to the coronavirus outbreak,” said the banker from the Chinese bank. A banker at a European firm said conditions remained strong for those still looking to lock in cheap money. “The macro backdrop remains quite constructive despite some recent corrections following the Fed’s cautious commentary and concern about a second wave of Covid-19 infections globally,” he said. “Overall the market remains biased to the upside and issuers have been making use of the window.” AGGRESSIVE PRICING CNPC had received an offshore debt issuance quota from the National Development and Reform Commission recently and used it in full this time.

announced on Tuesday morning. CNPC’s solid credit and scarcity value attracted huge demand, with orders passing US$4bn within an hour of initial guidance and exceeding US$12.5bn by noon. Books had reached US$20.5bn before CNPC tightened guidance by 40bp on all three tranches, and continued to grow to US$21bn, including US$4.965bn from the leads, before it released final guidance. Revised guidance for threeyear, five-year and 10-year notes was set at Treasuries plus 120bp area, 130bp area and 160bp area, versus 160bp area, 170bp area and 200bp area in the morning. Final pricing at 90bp, 103bp and 133bp was 27bp–30bp inside those revised levels. The second pricing revision was seen as more aggressive and some orders fell away at final guidance. Combined final orders for the three tranches shrank sharply to around US$6.1bn for the three tranches, including US$2.425bn from the leads. COSL, rated A3/A (Moody’s/ Fitch), priced US$500m 1.875% five-year and US$300m 2.50% 10-year at Treasuries plus 158bp

and 190bp, respectively, 67bp and 60bp inside initial guidance of 225bp area and 250bp area. Its books grew to over US$3.5bn for the two tranches about one hour after the announcement of IPG and increased further to over US$5.5bn at noon. Ahead of the release of final guidance, books were about US$7.6bn. Final statistics were not available at the time of writing. Both CNPC and COSL are infrequent issuers in the market. CNPC last tapped the dollar market in November 2014 with a US$1.5bn threetranche deal, while COSL’s last deal was its US$1bn dualtrancher priced in July 2015. By contrast, Chinese state-owned peers China Petrochemical Corp (Sinopec), the country’s second largest oil and gas company, is a regular issuer in the dollar bond market, as is China National Offshore Oil Corp, the third biggest, via its 64%-owned Hong Kong listed subsidiary. COSL is 50.5%-owned by CNOOC. A Hong Kong-based portfolio manager from a Chinese insurance company complained that pricings were too tight for recent new issues, citing CNPC as one example. “It is difficult for investors to find investment-grade rated bonds with 3% yield. Some have to take more risk to look for the long end of the curve, such as perps,” he said. Research firm CreditSights said Asian primary markets have recently been priced beyond “perfection” and, in many cases, inside what it saw as fair value. “Credit market valuations, increasing investor wariness over the exuberance trade, expectations of bond supply and some widening in secondaries are all contributing to some form of market ‘fatigue’. On an overall basis, we would also err slightly more on the conservative in the nearterm,” it wrote in a note. 

International Financing Review Asia June 20 2020 5

News

Trump’s partner eyes workout Restructuring Indonesia’s MNC Investama plans ahead of dollar maturity „  By DANIEL STANTON

The developer of resorts under the Trump brand in Indonesia is in talks to restructure its offshore bonds for the second

time in two years. Holding company MNC INVESTAMA is discussing a possible change in the terms with holders of its US$231m 9% senior secured notes due May

11 2021. Best known for MNC Media, which has the largest television audience in Indonesia, the group also has property and financial services divisions.

Banks circle rare Myanmar buyout Loans Acquisition of IGT telecom towers to test appetite for frontier market „  By MIRZAAN JAMWAL

The battle for control of IRRAWADDY GREEN TOWERS could lead to a rare acquisition financing in Myanmar and the country’s largest-ever syndicated loan. International banks are discussing a US$300m–$400m loan with shortlisted bidders that include private equity firm CVC Capital Partners and edotco Group, a unit of Malaysia’s Axiata Group. The preferred bidder is expected to be picked by early July. A financing of that size would be Myanmar’s largest syndicated loan and only the second leveraged buyout in the 6

country, if a financial sponsor emerges victorious. The loan will test liquidity for a market that is seldom on the radar for lenders, many of which do not have country limits for Myanmar. “Country limits will present a key challenge for the debt financing,” said a Singaporebased senior loans banker. “It might not be easy to put this together.” The sale of IGT comes in a subdued period for mergers and acquisitions in Asia Pacific as a result of the coronavirus pandemic. That could encourage lenders to add to their exposure given that an IGT financing is likely to pay

higher yields than those that are found elsewhere in Asia. This year, some borrowers from Myanmar have raised club loans totalling US$370m from half a dozen Asian banks, for property sector credits such as Kajima Myanmar Holding and conglomerate Shwe Taung Group. CORPORATE ANGLE Should edotco win the bidding for IGT, it would be able to raise a larger amount of debt to support its purchase – as is typically the case with any strategic bidder competing against a financial sponsor. The subsidiary of Malaysian telecom conglomerate Axiata

International Financing Review Asia June 20 2020

MNC Land is developing Trump International resorts, golf courses and residential properties in Bali and Lido City, south of Jakarta, with apartments set to sell for up

already owns and operates 3,150 towers across Myanmar, which would also provide comfort to potential lenders. Apart from its own banking relationships, edotco could also tap into Axiata’s balance sheet and financing arrangements to support its bid for IGT. In May, Axiata obtained a total of US$800m in syndicated multicurrency Islamic financing facilities that could be used for the acquisition, bankers familiar with the transaction said. Moreover, IGT’s loan presents banks with a chance to gain exposure to a leading player in Myanmar’s fastgrowing telecommunications infrastructure sector, according to a second Singapore-based loans banker. IGT operates over 3,000 telecom towers and has long-

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to Rp15bn (US$1.1m) each and villas for Rp30bn–Rp80bn, according to a May research note by Mirae Asset Sekuritas. Based on current performance, dividends flowing from these subsidiaries will not be enough to repay the dollar bonds when they fall due next year. On May 8 MNC Investama filed in Singapore under Section 211B of the Companies Act for a scheme of arrangement, which provides for a debt moratorium. It is thought to be the first Indonesian company to use this mechanism in a restructuring after the Companies Act was amended in 2017 to add features such as debtor-in-possession financing and cramdowns that make restructuring in Singapore a viable alternative to filing for Chapter 11 in the US. MNC Investama made its most recent coupon payment as planned on May 11, and is not in default. Its goal is to come to an agreement with bondholders by the time of the next court hearing on August 7, when the moratorium ends. This could involve an extension of the maturity and

change to the coupon, though no terms have been proposed yet. The scheme negotiations only apply to MNC Investama’s dollar bond and not to any other debt owed by group companies. “We are optimistic that we will be able to cement terms with the major holders by August 7,” said Joel Hogarth, managing director of Eliot & Luther, which is acting as financial adviser to MNC Investama in connection with the notes. “The 211B scheme provides a safe environment to engage with creditors, and if 75% of holders by value and a majority in number vote for a proposal then it is effective over everyone.”

term lease agreements with all four telecom operators in the country: Norwegian state-owned Telenor, Qatar’s Ooredoo, state-owned Myanmar Post and Telecommunications and Telecom International Myanmar Co, or MyTel. POTENTIAL LBO Should a financial sponsor win control of IGT, an LBO loan would spice up an Asian loan market that has provided few opportunities for banks to make outsized returns this year. The only LBO loan from Asia (ex-Japan, ex-Australasia) this year is a US$90m financing for TPG Capital’s buyout of Malaysia-based Paramount Corp’s K-12 education business. Sole bookrunner Deutsche Bank launched the deal into limited syndication in February, but it is not clear if the deal has

BETTER OPTION These negotiations should be less fraught than the last time MNC Investama dealt with an offshore bond maturity. In 2018, it restructured a US$365m 5.875% bond due on May 16 of that year with just two days to spare. Back then, holders of US$186m of the 2018s agreed to convert to US$174.6m of

new three-year non-call one notes, while US$115m of the outstanding issue was converted to subordinated debt. The company had originally said it would only go ahead with the exchange if US$225m of bonds were tendered, but lowered its target. Holders of US$115m of the old bonds had already agreed to exchange them for subordinated debt with an equity conversion option. Under the exchange offer, holders received 12% of their principal amount in cash and the remainder in new 2021 bonds. The company initially offered a minimum yield of 8% on the new notes, but had to raise it to 9%, add an extra US$3.50 cash payment per US$1,000 in notes exchanged, and extend the deadline twice. Around US$64m of the old notes were left outstanding, and these were redeemed with proceeds from a concurrent new money offering of US$56.4m of the 2021s and a shareholder loan. Settlement was just two days before the old bonds were due to mature. Moody’s and S&P both considered the transaction a distressed exchange

tantamount to a default. “The last exchange offer wasn’t done through a scheme and the bondholders who didn’t turn up got the best deal because they had to be paid out,” said Hogarth. S&P has been warning of MNC Investama’s growing refinancing risk, and questioned why the company had announced acquisitions last year instead of selling assets to raise cash. “As the maturity of the notes draws nearer, we believe MNC Investama has increasingly limited flexibility to find alternative funding options,” wrote S&P. “The weakened global economic conditions and weak investor sentiment, as well as MNC Investama’s weak credit standing after a distressed exchange in 2018, will exacerbate the problem.” S&P this month cut its rating on MNC Investama to CC with a negative outlook from CCC after the Singapore moratorium application, then withdrew its rating. Moody’s has a Caa1 rating with negative outlook. The bonds were bid on Monday at a cash price of around 73, according to Refinitiv data. 

closed given the turn in market conditions following the Covid19 outbreak. There is a precedent for a Myanmar LBO loan. In January last year, PE firm TPG Capital closed a US$247.4m financing for its LBO of telecommunications infrastructure firm Pan Asia Majestic Eagle. TPG’s LBO of Pamel complemented its existing Myanmar telecom tower firm Apollo Towers, with the combined business expected at the time to have more than 3,000 telecom towers in the country and an enterprise value of at least US$700m. DBS Bank, ING Bank and OCBC were the mandated lead arrangers, bookrunners and equal underwriters, while nine other Asian lenders, including six from Taiwan, joined in general syndication.

That pioneering LBO loan from Myanmar paid top-level all-in pricing of 504bp and 515bp based on margins of 455bp and 475bp over Libor and average lives of 3.4 and 4.1 years respectively for the US$177.44m Bidco and US$69.96m Opco portions. According to the annual report of minority shareholder Myanmar Investments International, Apollo Towers and Pamel would have combined revenues of approximately US$110m and Ebitda of around US$65.7m for the financial year ending March 2019 on a proforma aggregated basis. IGT’s annualised Ebitda was US$70m over the last quarter and this is expected to be around US$75m at the closing of the proposed acquisition. That means the US$300m– $400m of debt supporting an

LBO would represent leverage of around 4.0x–5.7x. According to the first Singapore-based loans banker, CVC would have to chip in with a significant equity contribution to provide comfort to potential lenders. Typically, LBO loans in Asia carry leverage of less than 5x, and in challenging situations, it can be lower than 4x. Singapore-incorporated Irrawaddy Towers Asset Holding holds 99.99% of the shares in IGT and is in turn owned by Middle East investment firm Blu Stone Management and Lebanon’s M1 Group. CVC declined to comment, while IGT did not respond to requests for comment. An edotco spokesperson said the company is always looking at potential opportunities within footprint countries. 

International Financing Review Asia June 20 2020 7

News

CPIC revives London Connect link Equities Second deal ends 12-month wait with tighter discount „  By FIONA LAU, ROBERT VENES

sealed a US$1.81bn global depositary receipt offer in London last week, ending a year-long wait for the second listing via the Shanghai-London Stock Connect trading link. Against a backdrop of mounting tensions between the US and China, the deal highlights the UK’s potential as an alternative listing venue for Chinese issuers, even at a time when UK-China relations have also become strained over issues such as the national security law in Hong Kong and Huawei’s involvement in Britain’s 5G network. CPIC priced at a much tighter discount than Huatai Securities managed in 2019, setting a more attractive benchmark for other issuers, but a large cornerstone portion and thin CHINA PACIFIC INSURANCE

trading volumes will have tempered enthusiasm for the scheme. Shanghai and Hong Kong-

last Tuesday priced the share sale at the bottom of the marketed range to secure a broad range of investors.

“Investors like the deal as CPIC is a blue-chip name in China’s insurance industry but they are also asking for a big discount to make some quick money.” listed CPIC opened books on June 12 for a deal comprising 102.8m GDRs, representing 8.2% of its outstanding A-shares, at US$17.60–$19.00 per share. The books were covered after only 90 minutes of bookbuilding. Cornerstone investor Swiss Re has agreed to buy 28.88m or 28% of the deal and will be locked up for three years. Despite the books being multiple times covered, CPIC

“Investors like the deal as CPIC is a blue-chip name in China’s insurance industry but they are also asking for a big discount to make some quick money,” said a banker on the deal. There was broad international interest in the books, with Swiss Re’s investment of just over US$500m said to have been very helpful in getting other orders. Management was

PLDT makes up for lost time Bonds Telco prints the Phillipines’ first 30-year bond after 18-year absence „  By DANIEL STANTON

broke new ground last Tuesday on its return to the offshore bond market after an 18-year absence with the first 30-year US dollar bond from the Philippines. The Baa2/BBB+/BBB rated telecom company sold US$600m of Reg S bonds in two tranches, drawing combined final orders of over US$10bn, despite tightening guidance by 60bp and 65bp. A US$300m January 2031 bond priced at 99.39 with a coupon of 2.5% to yield 2.566%, or Treasuries plus 180bp. A US$300m 3.45% 30-year tranche priced at 99.168 to yield 3.495%, or Treasuries plus 195bp. Initial guidance was announced in the 240bp and 260bp areas, respectively, later PLDT

8

revised to the 200bp and 220bp areas in a two-step pricing process by joint bookrunners Credit Suisse and UBS. PLDT, formerly Philippine Long Distance Telephone Company, was a frequent issuer of US dollar bonds in the 1990s, but made its last offshore visit in 2002. Despite that, it was able to follow a streamlined marketing process, with one day of investor calls on Monday followed by bookbuilding the next day. “We are extremely gratified by the response of the international bond market to our return,” said PLDT chairman, president and CEO Manuel V Pangilinan in a statement. “It has been 18 years since our last foray – we started our roadshow in Singapore on September 11 2001 and, if one

recalls, we were soon faced with a global crisis then, just as we are today.” Pricing was far from straightforward, as there were no outstanding dollar bonds and few recent issues from telecom companies in South-East Asia. Singapore’s Singtel was the last to issue dollar bonds, but it is rated A1/A (Moody’s/S&P), two notches higher than the expected S&P rating of BBB+ for PLDT’s issue. Singtel also benefits from its majority ownership by Temasek Holdings. Singtel’s 2030 bond was seen at 130bp. Elsewhere in emerging markets, Mexican telecom company America Movil, rated A3/BBB+/A–, had 2030 and 2049 bonds quoted at Treasuries plus 147bp and 173bp. Some investors looked to apply a spread over the

International Financing Review Asia June 20 2020

heavily involved in allocations. Excluding the cornerstone portion, about half of the remaining shares were sold to Chinese investors and the other half to international investors. The final price of US$17.60 per share represents a 10.3% discount to CPIC’s Rmb27.82 A-share close on Tuesday. Each GDR represents five A-shares. While it was not possible to walk investors up the price range, the outcome looks reasonable compared to the June 2019 listing of Huatai Securities, the only other Chinese company to list GDRs in London through Stock Connect. Huatai’s GDRs priced at a 26% discount to its A-shares, and that discount has since been completely erased. As in Huatai’s case, the GDRs will be fungible with Shanghailisted A-shares after 120 calendar days, making CPIC’s

Philippine sovereign’s dollar bonds. The sovereign’s 2030 and 2045 bonds were seen at Treasuries plus 128bp and 136bp, pointing to a spread of around 50bp over the sovereign for PLDT. That was less than the 75bp spread for Indonesian state-owned enterprises over the sovereign, even though PLDT has no state ownership. LONGEST TENOR PLDT was able to print at a longer tenor than the Philippine sovereign, which is restricted to issuing at a maximum tenor of 25 years. “It was an opportunistic deal, with rates at historic lows,” said a source close to the deal. “Some investors still remembered their last deal and they wanted to get involved again.” The telecom company’s new bonds are the only rated dollar paper from the Philippine corporate sector, adding to their rarity value.

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Hong Kong-traded H-shares less relevant as a pricing benchmark. Final pricing came at a big 29.2% premium to the Hong Kong stock, which cannot be exchanged for mainlandlisted shares. NEW BENCHMARK “Chinese companies are not allowed to sell shares overseas at a discount bigger than 10% to their A-shares. Huatai got a waiver as it was a landmark deal to kickstart the new Stock Connect link,” said a ECM banker. “Now that CPIC completed the deal at a 10% discount, it would likely become the reference for future transactions.” Shanghai-listed CHINA YANGTZE POWER is next in line. The hydropower generator is preparing to bring a GDR sale in London as early as September which will involve around 5% of the company’s share capital. Based on Yangtze Power’s market capitalisation of Rmb400bn (US$56.5bn) on

Thursday, the deal could raise about US$2.8bn. CLSA, Goldman Sachs, Huatai Financial and UBS are leading the transaction. Last December, Shanghailisted SDIC POWER HOLDINGS was ready to bring a US$700m– $800m GDR sale to London but postponed it at the last minute, citing market conditions, after investors demanded a discount of well over 10%. That deal is now expected in the fourth quarter. CPIC’s GDRs traded up on their debut last Wednesday. The stock rose to US$17.96 in early trading before quickly settling into a band of US$17.75–$17.80 for much of the day, and closed 1.1% higher at US$17.80. More than 3.8m GDRs changed hands, representing just 3.7% of the offering. There is a 10% primary greenshoe. UBS and Huatai Financial Holdings were global coordinators, and bookrunners with China International Capital Corporation, HSBC, JP Morgan and Morgan Stanley. 

Philippine banks have credit ratings, but corporate issuers such as Jollibee and SMC Global Power have been able to find adequate demand for unrated issues, often drawing on onshore private bank demand. Demand for PLDT’s issue was broad-based, with asset managers taking around 80% of each tranche. The bonds rallied in the secondary market and both tranches were bid at cash prices of 101.75 on Wednesday morning. Orders for the long 10-year were over US$5.7bn from 233 accounts, with Asia taking 78% and EMEA 22%. Asset managers booked 80%, insurers and pension funds 11%, and banks and private banks 9%. Orders for the 30-year were over US$4.5bn from 204 accounts, with Asia taking 77% and EMEA 23%. Asset managers booked 82%, insurers and pension funds 10%, and banks and private banks 8%. The company plans to use

the proceeds to repay debt due in 2020 and 2021, as well as to repay loans early and fund capital expenditure. All of its dollar bonds have matured, but it has a Ps12.4bn (US$248m) 5.225% retail bond maturing on February 6 next year. PLDT has increased its planned capex to Ps83bn for 2020, up from a record Ps72.9bn last year. Competition in the domestic market will increase when a third mobile operator, Dito Telecommunity, backed by the local Udenna Group and China Telecom, enters next year. PLDT had 70% of the fixed line and 44% of the mobile market by revenue in 2018, according to Fitch, with Globe Telecom leading in mobile revenue. Hong Kong-based investment holding company First Pacific and Japan’s NTT Group hold respective stakes of 26% and 20% in PLDT, while Philippine conglomerate JG Summit owns 11%. 



Lippo Malls reassures creditors Bonds CEO pledges to service debts in full despite Covid „  disruption By KIT YIN BOEY LIPPO MALLS INDONESIA RETAIL

will fulfil all coupon and principal payments due this year on senior and perpetual bonds, defying expectations it could skip a coupon payment on a S$120m (US$86m) 6.6% perpetual bond. “LMIR Trust has adequate financial resources and will repay the S$75 million 4.1% bond due to mature on June 22, pay the interest under our other senior debt facilities, including the coupon under the US$250m 7.25% bond due 2024,” LMIRT Management’s chief executive officer James Liew told IFR. He said the company will also set aside the necessary funds when a coupon becomes due in September on its S$140m 7% subordinated perpetuals. The trust had cash and cash equivalents of S$145.7m at the end of March, enough to cover this year’s refinancing needs and interest obligations. Liew said the company did not need to repay a S$40m revolving credit facility, drawn down in March, “at this moment”. Last Monday, the Singaporelisted trust announced it had set aside S$3.97m to pay the coupon for the 6.6% perp due on June 19. Credit and ratings analysts had expected the Indonesian retail mall owner to miss the payment in order to conserve cash after its balance sheet was strained by the shutdown of its malls from April 1. Under the terms of the perpetual bond, a coupon deferral would not breach any covenants, but it would require the trust to forego the distribution of any equity dividends. The majority of its retail malls and spaces started to resume operations this month after the government began easing TRUST

restrictions as the outbreak stabilised, said LMIRT. It added that the trust’s financial resources have improved with support from key relationship banks, including CIMB Bank Singapore and BNP Paribas. “We have seen encouraging developments with the majority of the tenants open for business...while mall footfall has recovered (to) about 50% of preCovid-19 levels,” said Liew. “We are therefore cautiously optimistic that the mall operations will continue to improve.” But lingering concerns over refinancing risks in 2021 prompted Moody’s last week to downgrade LMIRT to B1 from Ba3. The trust has two refinancings to fund next year – a S$175m syndicated term loan that matures in August and the S$140m perpetual notes that are callable in September. Moody’s said LMIRT would have to rely on the sales of the Pejaten Village and Binjai Supermall malls as well as external funding to address the 2021 maturities at a time when funding market conditions were challenging. It also noted that the trust would need to obtain waivers from lenders as lower earnings could breach the covenants of its bank loans. “Aside from bank loans, I think external financing options could be limited,” said OCBC credit analyst Wong Hong Wei. “An outright bond issuance in Singapore dollars is unlikely to attract significant demand, though there is room to raise some equity.” Nomura’s credit analysts were more optimistic in their report, arguing that liquidity is not an issue for the trust. The Nomura report said the goodwill gesture of paying the perp coupon will help keep funding channels open. 

International Financing Review Asia June 20 2020 9

News

NDB graduates with dollar debut Bonds BRICS development bank funds coronavirus recovery efforts „  By DANIEL STANTON, DAVID CHEETHAM

managed to make a successful debut in the US dollar bond market with an issue to fund coronavirus recovery efforts, even though the virus meant that it could not hold face-to-face meetings with investors. The multilateral development bank, which was established by the BRICS nations of Brazil, Russia, India, China and South Africa and is rated AA+/AA+ (Moody’s/S&P), achieved a US$1.5bn size for its first international issue despite being unable to market the deal through a traditional roadshow. Bookbuilding also coincided with deadly clashes between China and India that left 20 Indian soldiers dead at a disputed border site between the two countries in the western Himalayas. Shanghai-based NDB has NEW DEVELOPMENT BANK

previously issued three times in China’s interbank renminbi bond market, including a Rmb5bn (US$706m) three-year “coronavirus combating” Panda bond in April that raised funds for an emergency assistance loan to help China battle the virus. “All of our deals so far have been in the Chinese local currency market, so coming to the dollar market means the bank is a fully fledged multilateral and we can raise in any currency,” said Leslie Maasdorp, vice president and chief financial officer of NDB. “We were a start-up operating in growth mode, but the deal signifies that the bank is maturing to a steady state.” NDB registered a US$50bn MTN programme in December and had planned to issue its debut dollar bond earlier this year, even before the need arose for coronavirus relief funding. The original plan

was to launch the offering in February after the Lunar New Year, but the pandemic, which left some staff stranded in other countries, meant it had to delay. “Certainly we are the only one to have made our debut issue with no roadshow,” said Maasdorp. “I have probably had 35 one-on-one investor calls giving an overview of the bank, explaining its key features and strategy, and what we have done to date.” Some investors asked about the NDB’s future direction, given that it will expand its membership. The BRICS countries will keep control, with emerging market nations set to hold 80% and industrialised countries 20%. Following a week of virtual investor meetings, NDB began marketing the June 2023 note on Monday via leads Citigroup, Credit Agricole, Goldman Sachs, HSBC and JP Morgan with initial

Indonesian sukuk sets records Bonds Well-timed offering will fund virus-relief efforts „  By JIHYE HWANG

The REPUBLIC OF INDONESIA has printed a US$2.5bn three-tranche sukuk that achieved its lowestever yields in dollars for five and 10-year tenors and the lowest 30year sukuk yield globally. In a market hungry for sovereign paper paying decent returns, the Baa2/BBB/BBB rated country received combined orders of US$16.66bn for the 144A/Reg S deal, which priced 70bp inside initial guidance for all three tranches. A US$750m five-year green sukuk priced at par to yield 2.3%, inside initial guidance of 3% area. A US$1bn 10-year piece and a US$750m 30-year tranche also priced at par to yield 2.8% and 3.8%, inside initial guidance 10

of 3.5% area and 4.5% area. Investors, including ESG funds, ploughed into the deal even though the bonds priced inside Indonesia’s existing curve by as much as 25bp, according to a banker on the deal. “They considered it an opportunity to lock in yields as rates are expected to stay low for a prolonged period of time, while investors don’t expect as many sovereign issuances,” said the banker. “Sovereigns and quasisovereign names from Asia outside of China, which receive global investor demand, are also well bid at this point because trades of US comparables are super-tight and it’s hard to pass on that additional pick-up.” Indonesia’s triple-trancher was

opportunistically timed, right after the US Federal Reserve provided a breather to credit markets that were concerned by rising Covid-19 cases. The Fed said last Monday that it would start buying individual corporate bonds in its Secondary Market Corporate Credit Facility, pushing average investmentgrade spreads further down from their March peaks. Indonesia’s finance ministry said the five-year and 10year tranches printed at the lowest-ever yield across both conventional and sukuk US dollar offerings from the government, while its first 30year sukuk tranche achieved the lowest profit rate among sukuk issues globally. The 30-year bond, which was

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price thoughts of mid-swaps plus 40bp–45bp area. Books opened at 40bp area on Tuesday and grew to over US$2.1bn, which allowed the final spread to be set at 38bp. “There’s a large amount of price discovery when it comes to an inaugural issuer,” said a syndicate banker. “Recently we’ve seen SSA issuers move in the context of 3bp–4bp, so from the tight end of the [IPTs] range it’s not that dramatic a move at all.” The banker named similarly rated IDB Invest as a close comparison within the MDB community. IDB Invest’s US$1bn two-year note issued last month came at mid-swaps plus 38bp and was seen on Tuesday at plus 28bp, according to Tradeweb. Maasdorp expects NDB to price 20bp–25bp wide of Triple A rated multilateral development banks going forward, but was satisfied to see

also the largest-ever sukuk issue of that tenor from Asia, garnered the most investor demand with final orders of over US$5.53bn, including just US$395m from the leads. The lead interest in the other two tranches came in at over US$1bn. While the five-year green sukuk piece and the 10-year portion were trading flat on their first trading day last Wednesday, the 30-year tranche inched up to a cash price of 100.375. Fund managers, who took more than 70% of the 30-year piece, had money to put to work thanks to huge inflows, according to the banker on the deal. Fund and ETF investors put US$47.5bn into bond funds last month, the first net inflows in three months, on the back of the Fed’s open-ended liquidity commitment, according to Lipper. Indonesia has been nimble to

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the debut bond pay 28bp over World Bank paper, taking into account the new issue premium needed for a first-time issuer. “Now that we are established we will be able to improve on that,” said Maasdorp. A healthy 75% of the issue was sold to central banks and official institutions, while asset managers booked 14%, banks and private banks 10%, and others 1%. Asia took 56% of the bonds, EMEA 29% and the Americas 15%. NDB intends to use all of the proceeds from issues off the US$50bn EMTN programme to fund sustainable development in the BRICS countries, and in May implemented a sustainable financing policy framework. Future deals are expected to be branded as green or sustainable bonds. FUNDING PLANS It plans to sell at least another US$5bn-equivalent of bonds in the rest of the year, which could include a range of local currencies. Seventy percent of the bank’s funding is expected to be in hard currency

meet investor demand for longer tenors amid declining interest rates. It previously printed a debut 50-year conventional US$1bn note in April. MACRO HEADWINDS Investors looked past the macroeconomic headwinds facing Indonesia due to the coronavirus outbreak. S&P has revised its outlook on the country to negative from stable, citing the sharp depreciation of the rupiah, which raises the cost of servicing foreign currency debt, as well as the government’s debt burden. Around 40% of Indonesian government debt is denominated in foreign currencies, according to the rating agency, while the budget deficit is forecast to reach a multi-decade high of 4.7% of GDP this year due to stimulus measures to cushion the impact of the pandemic.

and the rest in local currencies. NDB has registered a Rmb10bn bond programme in China and expects to print a new renminbi bond next month, coinciding with its fifth anniversary. There are plans to register another Rmb20bn programme after that. The bank has also registered a R10bn (US$582m) programme in South Africa and a Rbs100bn (US$1.4bn) shelf in Russia. It is also eyeing an offshore rupee Masala bond issue off the EMTN programme, and might consider selling offshore Brazilian real bonds, said Maasdorp. Proceeds from the dollar bond issue will largely be focused on providing emergency loans to help BRICS countries combat the effects of the coronavirus outbreak on their economies and healthcare systems. The issuer aims to provide up to US$10bn of crisis-related assistance and has already approved emergency assistance programmes of Rmb7bn and US$1bn to China and India, respectively. 

The finance ministry said the latest bond issue will help the government to finance expenditure on the pandemic, although it is unlikely that it will revisit the market with a sukuk offering again this year as its financing strategy calls for a global sukuk offering once per year. The sovereign originally planned the sukuk issue in the first quarter, but postponed it due to the pandemic. Perusahaan Penerbit SBSN Indonesia III is the issuer of the bonds with the government of Indonesia, represented by the Ministry of Finance, acting as obligor. BNP Paribas, Dubai Islamic Bank, HSBC, Maybank and Standard Chartered were joint bookrunners. BNP Paribas and HSBC were also joint green structuring advisers. Danareksa and Trimegah were co-managers. 

Private trumps public for Vietnam ECM Equities Share sales have slumped since 2018 despite „  strong foreign interest By S ANURADHA

The sale of a stake in Vietnam’s third-biggest listed company has underscored both the strength of international interest and the hurdles facing public equity offerings in the South-East Asian country. A consortium of KKR and Temasek paid D15.1trn (US$650m) for 6% of VINHOMES, a valuation in line with its stock price. The vendor is Vingroup, which owned 70.9% of Vinhomes before the transaction. CK Yan, director at private equity giant KKR, said the Vinhomes deal “was anchored by the positive view on Vietnam – including a growing population and workforce.” KKR has been investing in Vietnam since 2011 and this is its first investment in Vingroup. Yan expects KKR’s investments in Vietnam “to grow meaningfully over the next few years”. Bankers are hoping some of this optimism spills over to the public equity markets, which have fallen dormant since a flurry of jumbo deals in 2018. There have been no major ECM deals so far this year, even though the local stock market has outperformed South-East Asian peers such as Singapore, Indonesia, the Philippines and Thailand. Vietnam has also handled the Covid-19 pandemic well with no deaths and only 335 cases reported by mid-June. Vinhomes’ D31trn initial equity offer in 2018, the country’s largest share sale, is also the last stock market listing from Vietnam’s private sector. Last year, the only local ECM transactions were two block trades in Vincom Retail totalling US$124m, according to Refinitiv data. Complicated trading rules and a dearth of private sector companies continue to frustrate

capital markets participants. “Vietnam is a good market only for those who invest in it early. For the rest, liquidity and safe exits are issues,” a Hong Kong-based ECM banker said. After the high-profile listings of Vincom Retail (D15trn), Vinhomes and Techcombank (D21trn) in 2017-2018, much was expected from Vietnam but with all the three companies trading below their issue prices, foreign investors have turned cagey. “With these deals not doing well, the private sector investment universe has not grown beyond Masan Group, Vingroup and Vietjet,” the ECM banker said. All three are already listed. One of the long-standing demands of investors is the reduction of the over twomonth gap between pricing and trading for a typical IPO. Bankers also said companies undertaking an IPO should impose a lock-up on existing small shareholders. Vietnamese companies typically sell shares to employees and other investors well before an IPO and at a much lower price, giving those investors an incentive to start selling as soon as the shares are listed. A Singapore-based ECM banker said Vietnam should allow companies to issue depository receipts to foreign investors at the time of the IPO. “A separately traded DR will provide some protection in case there is relentless profit-taking from local investors in the shares.” Vinhomes priced its initial equity offering at D114,700 per share. The shares ended at D76,500 on Thursday and have fallen 9.7% year to date. Credit Suisse acted as sole financial adviser to Vingroup on the Vinhomes stake sale. 

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New Zealand busts size record Bonds Relative value, RBNZ support and Covid-19 response underpin demand „  By JOHN WEAVERS

will have no difficulty meeting elevated sovereign bond issuance requirements if its latest record-busting syndicated deal is any guide. The Treasury doubled its own domestic record with last Tuesday’s NZ$7bn (US$4.5bn) sale of 0.5% May 15 2024s as an order book of over NZ$14bn enabled joint leads ANZ, Deutsche Bank, JP Morgan and Westpac to price at the tight end of guidance, 9bp over the April 15 2023s. In normal times, the skinny yield of 0.4275% would get short shrift from investors, but New Zealand (Aaa/AA+/ AA+) offers a decent pick-up over safe haven alternatives in a world of tiny or negative sovereign returns. “We have seen strong NEW ZEALAND

demand for recent issues but were still a bit surprised on the upside. The tenor chosen offered good value relative to swap and also in absolute yield terms versus US Treasuries and Australian Commonwealth

Australian and New Zealand investors bought 64% of the bonds, led by a hefty bank balance sheet bid in search of high-quality liquid assets, while there was also strong interest from local real money

“We have seen strong demand for recent issues but were still a bit surprised on the upside. The tenor chosen offered good value relative to swap and also in absolute yield terms versus US Treasuries and Australian Commonwealth government bonds.” government bonds,” said Matthew Collin, head of portfolio management at the New Zealand Treasury. Compared with the new bond’s 0.4275% clearing yield, the Australian, US, UK, Japanese and German 2024 benchmarks were returning 0.31%, 0.28%, minus 0.03%, minus 0.14% and minus 0.67%, respectively.

accounts. European and UK real money investors and central banks took up a large chunk of the 36% offshore allocation. The Reserve Bank’s NZ$60bn Large Scale Asset Purchase programme helped smooth the transaction by freeing up funds to participate in the new benchmark.

Indian banks take on more risk Bonds Liquidity returns to lower-rated paper as banks hunt for higher yields „  By KRISHNA MERCHANT

Indian banks are finally regaining their appetite for lower-rated corporate bonds, encouraged by government measures to ease financing conditions. Indian companies rated AA+ and below, including nonbank lenders, have raised a total of Rs83.32bn (US$1.1bn) in the bond market since the beginning of June as banks have rushed to invest funds from the Targeted Long-Term Repo Operations programme, according to data collected from the BSE and NSE electronic bidding platforms. “We are seeing a surge in issuances of non-AAA bonds probably because banks are deploying the last leg of TLTRO money in lower-rated bonds, 12

especially of non-banking financial companies,” said Rajeev Radhakrishnan, head of fixed income at SBI Mutual Fund. “Also, because of excess liquidity with banks and low yields for AAA rated paper, market appetite is selectively returning for lower-rated bonds.” The Reserve Bank of India announced a Rs500bn second version of its TLTRO facility on April 17, adding support to investment-grade non-bank lenders. The central bank disbursed Rs1trn under its original TLTRO facility in four tranches after it was announced on March 27, but most of the money went into Triple A bonds issued by public sector and blue-chip companies. Banks placed bids for Rs128.5bn under the Rs250bn

TLTRO2 auction on April 23 but became more reluctant to deploy money after that. Franklin Templeton’s decision on April 24 to wind up six credit funds worth a total of US$4bn caused a panic in the debt market, sped up redemptions and led to a spike in yields. More recently, though, banks have again become selective buyers of lower-rated paper as they hunt for yield, according to DCM bankers. Three-year paper from state-owned issuers trades around 5.2%, its lowest yield in over two decades, according to Refinitiv data. New lower-rated issuance has been concentrated in the three-year maturity bracket as banks can borrow up to three-year money under the TLTRO at a floating rate

International Financing Review Asia June 20 2020

The LSAP programme reduces the cost of borrowing through secondary market purchases of sovereign and local government nominal bonds. Rising liquidity has been another positive development with the maximum size for individual nominal NZGB tranches having recently been increased to NZ$18bn from NZ$12bn. Furthermore, New Zealand has finally met the size requirements to be included in Citigroup’s nominal World Government Bond Index, a prerequisite for some global investors. The trade also benefited from New Zealand’s acclaimed handling of the coronavirus pandemic, with the country having suffered just 22 deaths with no outstanding cases for 24 consecutive days, before two

linked to the policy repo rate. Moreover, investors are not seeking duration and do not want to take credit risk beyond three years except for Triple A issuers. “Given the economic conditions, overall credit matrices for corporates may remain challenging for a couple of years,” said Radhakrishnan at SBI Mutual Fund. MORE SUPPORT An estimated Rs2.5trn of debt has already been downgraded to ratings that are likely to make refinancing challenging, and those fallen angels have Rs220bn of bond repayments due over the next 12 months, said Credit Suisse in a note dated May 26. The corporate bond market will require prolonged support from the RBI and government to reduce financial stability risks, according to economists. “Such support may be necessary until the economy has revived meaningfully and

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new cases were recorded on the day the deal priced. “Although we saw no meaningful new investors in this transaction, New Zealand’s Covid-19 response and the reopening of our economy was a reassuring factor for returning offshore purchasers,” Collin said. COMING SUPPLY Alongside the results of the new bond sale, the Treasury announced a NZ$4bn increase to its 2019-20 New Zealand Government Bond Programme, to NZ$29bn. This followed May’s revised gross bond supply forecasts for the 2020-21, 2021-22, 2022-23, and 2023-24 fiscal years, which were increased massively to NZ$60bn, NZ$40bn, NZ$35bn, and NZ$30bn from NZ$10bn, NZ$8bn, NZ$8bn, and NZ$6bn previously. Funding demands may be about to ease, however, after the government lifted all of its domestic lockdown restrictions on June 15, far earlier than

previously assumed, with obvious benefits for economic growth. “We consider the baseline growth projections outlined by the RBNZ in the May Monetary Policy Statement as now far too bearish,” said Deutsche Bank economist Phil O’Donoghue in a note. “While it is too early in the recovery phase to change our expectations for policy, the risks are now skewed towards the total value of RBNZ bond purchases coming in materially below the NZ$60bn LSAP ceiling”. A revised borrowing programme is due to be revealed alongside the preelection economic and fiscal update to be published ahead of the general election scheduled for September 19. The Treasury intends to issue a new nominal NZGB by syndication between June 30 and September 30 with a syndicated tap of an existing nominal bond planned in the same quarter. 

bad loans have stabilised,” said Kaushik Das, India chief economist at Deutsche Bank. India’s recent announcement that it would use a special purpose vehicle to purchase Rs300bn of stressed assets from NBFCs with only a three-month residual maturity has fallen flat. Market participants said the scheme needs to be extended to a longer tenor of three years because the underlying problems in the credit market are unlikely to have gone away in three months. “There is a risk that downgrades and nonperforming assets may increase for weaker non-banking financial companies if the sixmonth loan moratorium leads to borrowers not paying back on time,” said Das. “Therefore, concerns regarding the financial health [and] solvency of weaker NBFCs may linger, thereby preventing an adequate narrowing of spreads in the debt market.”

The liquidity needs of nonbank financial companies would likely be addressed to a large extent by increasing the residual maturity of this programme to three years, which would reduce the perception of risk and lead to a compression of credit spreads, he added. Das also said that, in order to provide stability to the corporate bond market, the central bank will have to first drive down the term premium in the government securities market. Although the RBI has cut the repo rate by 115bp to 4% this year, the 10-year government benchmark is hovering at a yield of around 5.83% because of higher government borrowing. “The RBI may need to buy bonds at the longer end of the curve so as to ensure that the risk-free government security rate does not rise and pressurise corporate bond yields,” he said. 



Prologis finds few green fans in Japan Bonds Japanese investors unmoved by green tranches „  By TAKAHIRO OKAMOTO

Logistics property specialist PROLOGIS raised ¥41.2bn (US$385m) from an offering of global yen bonds with maturities of seven, 10, 12, 15 and 30 years. The offering, rated A+ by R&I and expected to be rated A3/A– by Moody’s/S&P, includes two green tranches, but the limited size showed that Japanese investors remain less enthusiastic about green bonds than their European counterparts. The ¥9.3bn 0.589% sevenyear tranche priced at 55bp over yen offer-side swaps, the ¥5.3bn 0.85% 10-year at 75bp, the ¥11.6bn 1.003% 12-year at 85bp, the ¥13bn 1.222% 15-year at 100bp, and the ¥2bn 1.6% 30-year at 120bp. The 10 and 15year tranches are green bonds. The issuer, Prologis Yen Finance, had also been marketing a 20-year tranche but decided to drop it. While both shortest and longest tranches were marketed at single price guidance levels of 55bp and 120bp since Tuesday, the 10, 12 and 15-year tranches landed at the wider ends of – or even outside – initial guidance. Pricing wider than initial guidance is very unusual in the yen market. Initial price guidance for those three tranches was 70bp–75bp, 80bp–85bp and 90bp–95bp. The pricing revision and coupon of over 1% made the 15year portion the most popular. Still, the total size was smaller than Prologis’s last yen offering in September 2018, a debut ¥55.1bn four-tranche deal via Mizuho, Morgan Stanley and SMBC Nikko. Some investors see the issuer as a real estate company and held back because of the uncertainty the coronavirus pandemic has created for the property market. The same three banks acted as

lead managers for the new deal. Life insurers, asset managers, and trust banks were key investors in the new issues, with foreign buyers taking about 30%. The inclusion of green tranches is a proof that there is some demand from Japanese investors for green paper, but appetite in Japan is far less than in Europe. At the start of marketing, Prologis committed only to a green 10-year tranche. The lead managers proposed that the longer-dated tranches could also be issued as green if demand was strong, and the 15-year was ultimately labelled as such. Still, demand for the two green tranches was only ¥18.3bn, far less than for the issuer’s euro green deal earlier this month. Prologis International Funding II had an order book that swelled beyond €7.5bn for the €500m 12-year deal, even though the bond priced at 165bp over mid swaps, substantially tighter than initial price thoughts in the 230bp area. However, Japanese investors cannot be blamed, bankers said. “In Europe, green bond investments are encouraged by the governments,” said Sachie Ii, head of sustainable finance office at Mizuho Securities. “I hear they are discussing the taxonomy and even lowering risk weightings for green bonds, so European investors are more motivated than Japanese.” The proceeds from the green tranches in yen will be used to finance Prologis’s portfolio of green projects. The other tranches will go towards refinancing existing eurodenominated debt, as well as for general corporate purposes. Prologis is looking to repurchase all or part of its 3% notes due 2022 and 3.375% notes due 2024 through a €350m cash tender offer. 

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TOP STORY DERIVATIVES

Collar financings in vogue in Asia

Banks look to funded collars as appetite for margin loans wanes Asian investors are increasingly turning to collar financings to monetise shareholdings, allowing them to eschew some of the risks associated with traditional share-backed financings and also providing a nice money-spinner for investment banks. The volatility in share prices and economic uncertainty following the Covid19 outbreak has led shareholders in listed companies to reconsider borrowing on margin given the risk of cascading margin calls when share prices plummet, according to bankers. Instead, borrowers are embracing funded equity collars. In these structures, a shareholder effectively uses offsetting put and call options to hedge against large fluctuations in the share price and subsequently raises financing on the back of the ‘collared’ shares. Usually associated with highly acquisitive companies such as Chinese carmaker Geely Automobile Holdings, which used an equity collar to help build a 10% stake in Germany’s Daimler, these products are becoming more widely used because of the downside protection afforded to borrowers and higher loan-to-value ratios. “Some investors are saying maybe if I’m getting into a funding arrangement where I don’t have to pay margin calls but I’m still retaining a reasonable upside up to the call strike, that’s the right thing to do in this market given that the economic impact of Covid-19 is still uncertain,” said Francesco Lavatelli, head of corporate equity and credit and debt capital markets

for emerging markets in Asia at JP Morgan. For banks as well, collar financings are often preferred because the gap risk is lower. The recent LUCKIN COFFEE scandal has underscored the risks involved with margin loans: lenders including Credit Suisse are facing heavy losses following a default on a US$518m margin loan backed by shares in the fraud-racked Chinese coffee chain. BULL MARKET In Hong Kong, much like in other jurisdictions, only large shareholders, defined as those with more than 5% of the outstanding shares, and insiders such as directors are obliged to disclose changes to their holdings so the majority of sharebacked financings are private deals. In addition, while execution is usually carried out by the equity derivatives team, the deals are often originated by either the private or the investment bank, depending on the type of client, which makes it even more difficult to obtain visibility on overall volumes. One banker IFR spoke with estimated that in a typical year collar financings would account for between 10% and 20% of all share-backed financings, with margin loans accounting for the remaining 80% or 90%. Several bankers IFR spoke with said that funded equity collar volumes this year had already surpassed last year’s total in Asia Pacific, in part due to SoftBank’s mammoth US$8.5bn financing on the back of its shareholding in Alibaba Group Holding,

which was done using a collar structure. While volumes in Asia have historically lagged those in Europe or the US, bankers reckon that, paradoxically, the economic impact of the coronavirus is encouraging more Asian borrowers to consider collar financings since they are less concerned about the upside being capped. This has previously been a concern in Asia, particularly among some of the region’s fast-growing tech companies. “Collars were less common in Asia in the past because trading liquidity is relatively low compared to other regions. Also, capping upside was considered costly given the growth in the region on top of the 12year long bull market,” said Sue Lee, co-head of equity derivatives distribution and multiasset group in Asia Pacific at Citigroup. “Collar financings and hedging are becoming more popular now because of the continuing uncertainty amidst a global pandemic and the impact it will have on economies.” OFFSETTING RISK Several bankers said that the lack of liquidity in the derivatives market in Asia compared with the US or Europe means that collar financings in this region can be more lucrative for banks. “The US and European equity derivatives markets are a lot more established than in Asia but you have to offset that against the other regional differences that make derivatives a very profitable business here,” said Nathan McMurtray, head of equity-

Who’s moving where... „ JP MORGAN has appointed Kaustubh Kulkarni (pictured) and Vineet Mishra co-heads of ASEAN investment banking. Both Kulkarni and Mishra will retain their current roles as head of investment banking coverage for India and head of investment banking coverage for Indonesia 14

and Singapore, respectively. Kulkarni has been with JP Morgan for 22 years, while Mishra joined in 2011 and has served as head of South-East Asia equity capital markets in addition to his role as head of Indonesia and Singapore investment banking coverage. International Financing Review Asia June 20 2020

„ Asian bond market veteran Ken Lee has left Natixis to join MIZUHO SECURITIES as head of debt capital markets for Asia Pacific ex-Japan. Based in Hong Kong, Lee is said to be taking over the role of John Wade, who left the Japanese bank last year along with several other former

colleagues. Lee was previously the head of primary bond markets for APAC at Natixis after joining the bank as head of APAC DCM syndicate in 2017. He has also worked at Barclays.

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linked products at CLSA. “It might be more difficult to execute deals in Asia but generally speaking the pricing transparency is lower and the competition, while intense, tends to involve fewer competitors than corporate equity derivatives in the US or Europe. These factors enhance profitability for lenders, especially when using derivative structures.” One tactic banks are increasingly adopting is to issue an exchangeable bond on the back of a funded equity collar. This allows them to recycle some of their vega risk, in other words the change in an option contract’s value as a result of changes in the volatility of the underlying shares, to institutional investors, usually hedge funds, and monetise their profits earlier. JP Morgan was an early pioneer of this approach, issuing an exchangeable bond into Ping An shares on the back of a funded equity collar, although other banks have followed suit, most recently Citigroup, which last month raised HK$2.325bn (US$300m) from a cashsettled exchangeable bond with shares of property developer Longfor Group as the underlying. “One of the big drivers in the pricing of any exchangeable bond is the credit quality of the borrower. If you look at some of the large banks, they’re generally regarded as extremely strong credits and so issuing an exchangeable bond is a good arbitrage opportunity,” said CLSA’s McMurtray. “They’ve issued a loan on the back of the collar and are able to optimise their profitability by selling some of their derivative exposure on to other institutions, usually hedge funds, as an exchangeable bond.” THOMAS BLOTT

HSBC revives plan to cut 35,000 jobs has revived a plan to axe about 35,000 jobs that it had largely put on ice following the Covid-19 outbreak. Chief executive Noel Quinn, who announced the restructuring plan in February and was confirmed as permanent CEO in March, said on Wednesday in a memo to all staff that the bank was aiming HSBC

“We could not pause the job losses indefinitely – it was always a question of ‘not if, but when’. It is now right in my view that we restart this part of our transformation” to reduce headcount to around 200,0000 from 235,0000 currently. He said the job cuts would take place over the “medium-term” but did not provide a timetable. While striking a regretful tone in the 800-word memo, Quinn said that the changes were inevitable, especially given the economic damage brought about by the virus. “You will have seen that our profits fell in the first quarter, and virtually all economic forecasts point to challenging times ahead,” he said. “The reality is that the measures and the change we announced in February are even more necessary today.” HSBC has an annual attrition rate of about 25,000 and Quinn said that it would look to redeploy staff where possible, with

the ban on external recruitment remaining in place except for roles where it was not possible to hire internally. However, he conceded that it would not be possible to redeploy all staff. He said that the bank would look to support departing staff in finding new employment through offering them support on searching for new jobs and preparing for interviews. “We could not pause the job losses indefinitely – it was always a question of ‘not if, but when’. It is now right in my view that we restart this part of our transformation and manage it well,” he said. Quinn was appointed CEO on an interim basis last year after the ousting of his predecessor John Flint, reportedly due to disagreements with chairman Mark Tucker about the pace of change required. The restructuring he announced in February includes shifting assets in the investment bank from its struggling European and US businesses to the fastergrowing and more profitable Asian and Middle Eastern operations, a reduction in annual costs by about US$4.5bn and cuts of US$100bn in risk-weighted assets in Europe and the US. The bank pushed ahead with some parts of the restructuring plan while job cuts were paused, for example combining its back and middle-office functions for its investment banking and commercial banking divisions and scrapping regional head roles in global banking and markets. The turnaround plan was met with a lukewarm response at the time, with HSBC’s London-listed shares falling 6% on the day of the announcement and many investors expressing concern that the restructuring did not go far enough. The stock has taken a battering this year, down more than a third year to date. THOMAS BLOTT

Please contact us if you have information about job moves: [email protected]

„ MSCI has hired JP Morgan’s former China head of corporate banking, Julia Wu, as head of Greater China client coverage. Wu joined the US index provider last month and reports to Jack Lin, head of client coverage for Asia Pacific. She is based in Shanghai.

Wu left JP Morgan earlier this year, where she served as president of the bank’s China unit in addition to her role as head of corporate banking in China. She also previously worked at HSBC and Deutsche Bank.

„ John Ferreira, Australia country head and general manager at SUMITOMO MITSUI BANKING CORP, is retiring on July 1 after 13 years with the Japanese bank. Hitoshi Miyake, currently general manager of structured finance at SMBC in Tokyo, will replace Ferreira.

SMBC’s Tokyobased spokesperson declined to comment. Ferreira had previously worked for three years in Singapore, where he was deputy head of Asia Pacific. SMBC established a representative office in Sydney in 1984 and obtained its banking licence in 2006.

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China revamps ChiNext listing rules China has finalised rules for a brandnew registration-based listing system on Shenzhen’s ChiNext board. The Shenzhen Stock Exchange will accept applications under a streamlined, US-style registration system from June 30. The bourse has begun to review all ChiNext IPO, refinancing, and M&A applications transferred from the China Securities Regulatory Commission from last Monday. China first introduced a registrationbased IPO system for the Nasdaq-style Star market in Shanghai, which was launched in July last year, and is planning to adopt the framework on other domestic exchanges. The new ChiNext framework will also mirror the Star market’s wider price limits. There will be no limits for the first five trading days of a newly listed stock, after which it can rise or fall up to 20%. Currently, ChiNext imposes a 44% cap on the first trading day, after which a stock can rise or fall 10%. “This rule, the 20% trading cap, may make or break the success of this reform, or affect the direction of the reform,” an investment banker said. “The new trading rule will affect all ChiNext-listed companies, not only IPOs.” The wider trading bands will apply to all companies on the day of the first new listing under the new framework, expected in August. “For existing companies, the new rule will cause their share price volatility to increase,” said the banker. “This also increases the risks facing retail investors who already trade on this board.” To protect inexperienced investors, the new rules will raise the threshold for retail participation in the reformed

ChiNext to individual traders with an average of Rmb100,000 (US$14,132) in their trading account for 20 days and at least 24 months of trading experience. Under the previous rules, retail investors with less than two years of stock trading experience could trade on ChiNext by signing a risk

China first introduced a registration-based IPO system for the Nasdaq-style Star market in Shanghai, which was launched in July last year, and is planning to adopt the framework on other domestic exchanges. disclosure letter and a special statement under which they voluntarily accepted the risks. STREAMLINED DEALS The new rules that were released on June 12 will shorten the listing process for ChiNext applicants to three months. The stock exchange will have up to two months to review an IPO and the CSRC has 15 working days to accept the IPO registration, compared with three months and 20 working days respectively in an earlier draft of the new rules. Compared with the Star market’s five listing criteria for all candidates, the reformed ChiNext has a “2 + 2 + 1” set of criteria to differentiate regular issuers, red-chips, companies with special capital structures, and pre-profit companies. Regular issuers should have had

accumulated net profits of at least Rmb50m in the past two years, or for those with a market value of Rmb1bn or more, they should have revenues of at least Rmb100m and cannot have had a net loss in the last financial year. Red-chips, or Chinese companies domiciled outside the mainland, should have a market capitalisation of at least Rmb10bn and be profitable. Alternatively, they can have a market capitalisation of at least Rmb5bn and Rmb500m or more of revenue provided they were profitable in the last financial year. For red-chips at the research stage that benefit China’s innovation-driven development strategy, the bourse will also relax requirements that they must have an annual compound growth rate of 10%–20% before listing on ChiNext. Unprofitable companies will also be considered once the reforms have been in place for a year. These companies need to have a market value of at least Rmb5bn and more than Rmb300m of revenue in the previous year. The delisting indicator for market value has been adjusted to Rmb300m for 20 consecutive trading days, from Rmb500m in the previous draft rules. The SSE has also established a list comprising 12 industries that cannot float shares on the bourse. These include agriculture, forestry, animal husbandry, fishing, mining, wine, textile, real estate, construction, and finance. The ChiNext board launched in 2009. So far, there are 816 ChiNext-listed companies with a combined market capitalisation of Rmb7.73trn as of June 17. The regulators passed the new rules after receiving more than 300 responses to a request for feedback from May 11–27. KAREN TIAN, FIONA LAU

Who’s moving where... „ AUSTRALIA & NEW ZEALAND BANKING GROUP

has appointed Nancy Wang as a director for sustainable finance in its international division. Wang, who is based in Hong Kong, has been with ANZ for 11 years and joins from loan syndications, where she was also a director. She started her new 16

role earlier this month and reports to Stella Saris Chow, the Singapore-based head of sustainable finance for the international division. ANZ has been adding headcount to its sustainable finance team within its international division since it was formed last year. International Financing Review Asia June 20 2020

„ CLSA has hired Lance Noble as head of its flagship China reality research group. Noble, a fluent Mandarin speaker, joined the Hong Kong-headquartered brokerage firm earlier this month and is based in Beijing. He was previously with independent research firm Gavekal

Dragonomics. The China reality research group provides insights on the Chinese consumer, property and materials sectors as well as the wider economy, based on grassroots research and surveys. Its previous head David Murphy left to join Credit Suisse last year.

For daily news stories visit www.ifre.com

Westpac warns of further AML charges has warned that Australia’s financial crime watchdog may add further charges of violations of antimoney laundering regulations to its lawsuit against the bank. Westpac said that the possible development followed its earlier disclosure of more potential breaches to Austrac. After the regulator announced its lawsuit in November, Westpac upgraded its systems and found additional breaches. Austrac is now requesting further information and may amend its statement of claim, Westpac said in a statement on June 12. Austrac’s initial lawsuit accuses the lender of 23 million breaches of AML rules WESTPAC BANKING CORP

including some involving payments by known child exploiters. Then Westpac chief executive Brian Hartzer stepped down following the lawsuit and chairman Lindsay Maxsted brought forward his retirement. Westpac has since appointed former Australia and New Zealand Banking Group boss John McFarlane as chairman, while former chief financial officer Peter King, who was initially given the CEO job on an interim basis, was named as Hartzer’s successor earlier this year. Last month, Westpac admitted in its defence filing that it had failed to correctly report various international transfers of funds as required by law, but denied accusations it enabled illegal payments between known child sex offenders. The bank has also set aside A$900m (US$620m) for a potential penalty, which would exceed the record A$700m fine paid by Commonwealth Bank of Australia

in 2018, also for AML breaches. The differences between Westpac and Austrac were laid bare at a court hearing last Wednesday, when the judge said that any trial was not likely to start until early next year as the two had not agreed on a set of facts. Austrac’s lawyer said the regulator would need further time to work through new issues it was investigating, as reported by Westpac on June 12. These include suspicious matters involving 272 customers. A lawyer for Westpac noted that the investigation would involve tens of thousands of documents such as customers’ account statements, some of which would need to be produced manually. The hearing was adjourned until September 18, by which time the court expects Austrac to have lodged any new allegations, and Westpac to have tabled its defence. THOMAS BLOTT

Please contact us if you have information about job moves: [email protected]

„ Franck Dubois (pictured) is moving to Hong Kong to head up securities services in Asia Pacific at BNP PARIBAS. He is due to start at the beginning of September and replaces Mostapha Tahiri, who is leaving after just over a year in the role. Dubois reports to Paul

Yang, the corporate and institutional banking CEO for Asia Pacific, and Alessandro Gioffreda, global head of territory management for BNP Paribas’ securities services unit. Dubois is currently head of securities services in France and Belgium at BNP Paribas.

„ GEMINI, the cryptocurrency exchange founded by the Winklevoss twins, has appointed former Goldman Sachs, Deutsche Bank and Morgan Stanley banker Jeremy Ng as head of Asia Pacific. Ng, who is based in Singapore in his new role, was most recently Asia CEO at

Leonteq, the Swiss structured financial products specialist. Gemini also said in a statement that it plans to apply for a licence under the newly formed Payment Services Act, which allows cryptocurrency exchanges to apply for operating licences for the first time.

International Financing Review Asia June 20 2020 17

People Markets

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iLex to launch APAC loans platform Singapore-based financial technology start-up ILEX MARKETS APAC plans to launch an electronic market platform for loan syndication and trading in October. iLex’s CEO and founder Bertrand Billon said the company has raised a couple of million US dollars in its first round of funding from strategic and fintech investors from France, Hong Kong, Singapore and the US, and a soft launch is scheduled for July. iLex declined to name the investors, citing confidentiality. iLex’s platform will be the first “all to all” electronic market and trading venue for corporate loans, the company said. It aims to offer a broader network and deeper liquidity opportunities for target clients – large financial institutions, banks, and institutional investors including asset managers and hedge funds – involved in the primary syndication and secondary market trading of corporate loans. “Currently, banks, which contribute to more than 95% of corporate lending in Asia Pacific, are not fully maximising their loan distribution to connect with smaller, less active though potentially suitable buyers,” Billon said. “The buyside, which has been driving the growth in appetite for private debt, faces restrictions in sourcing for loan

assets due to limited resources and market complexity.” iLex will provide end-to-end automation of primary syndication and secondary market workflows, as well as loan market data and analytics. The company has spent six months

“Currently, banks, which contribute to more than 95% of corporate lending in Asia Pacific, are not fully maximising their loan distribution to connect with smaller, less active though potentially suitable buyers.” working with half a dozen of the top bookrunners in Asia to develop and test the platform. It has also engaged institutional investors and buy-side FIs in the region since early 2019 to understand their specific needs, and is working towards bringing them on board during the soft launch in July, Billon told LPC, IFR’s sister publication. iLex will use a subscription model for

IN BRIEF Societe Generale New conditions on Australia licence Australia’s financial markets regulator has placed new conditions on the financial services licence of SOCIETE GENERALE’s local unit after the French bank reported that it had deposited client money into unauthorised bank accounts. The new requirements, which are designed to ensure compliance with client money regulations, mean that Societe Generale Securities Australia will have to appoint an independent expert to assess and test its controls, systems and processes with client money, the Australian Securities & Investments Commission said on Monday. The independent expert will also have to identify any deficiencies and set out any remedial action required in a report provided to both SGSAPL and ASIC. The additional conditions also require SGSAPL to provide ASIC with attestations from a qualified senior executive and a board member 18

at SGSAPL that confirm all remedial actions recommended by the independent expert have been adopted and implemented. “This agreement follows the self-reporting by SGSAPL of three matters over 2017 and 2018, relating to its operations to its securities regulator, Australian Securities & Investment Commission [sic],” a spokesperson for Societe Generale said. “SGSAPL has completed all remediation actions in relation to its operational set-up and has informed ASIC accordingly.” In March, SGSAPL was hit with criminal charges including two counts of failing to pay client money into segregated authorised bank accounts and two counts of failing to comply with requirements relating to a client money bank account. The maximum penalty for each count is A$45,000 (US$30,662).

MUFG Bank China bond settlement licence granted MUFG BANK has become the first Japanese bank

International Financing Review Asia June 20 2020

access to the platform and all its features, and transaction-based fees for participants that use its matching engine to close a deal, he said. The company has signed a memorandum of understanding with information provider IHS Markit to collaborate on connecting the platform to the latter’s products, including Debtdomain, for multibookrunner syndications. Debtdomain, an online system for loan syndications, secondary loan sales and agency, was founded in 2000 in Singapore and acquired in 2013 by bond syndication software firm Ipreo before IHS Market acquired the latter in 2018. iLex also has plans to start operations in Hong Kong and Australia for the Asia Pacific market and to expand globally. Singapore-headquartered PRIVATE EXCHANGE GROUP is also planning to launch operations later this year with what would be the first licensed online exchange in Asia for secondary loans trading. The online digital exchange is a proprietary and secure exchange providing price discovery, enhanced liquidity, and data analytics to its members, according to its website. PrivEx won a licence as a recognised market operator from the Monetary Authority of Singapore last December. MIRZAAN JAMWAL

to obtain a bond settlement licence in China’s interbank bond market. Several foreign banks already hold such a licence, which allows banks to trade, settle and provide custody services in the interbank bond market on behalf of foreign investors. The other banks are BNP Paribas, Citigroup, DBS Bank, Deutsche Bank, HSBC, JP Morgan and Standard Chartered. Last October, MUFG Bank received a licence to underwrite non-financial corporate debt in China’s interbank bond market as part of a syndicate. Citigroup and JP Morgan hold the same licence, while HSBC and StanChart are also able to act as lead underwriters on Panda bonds. BNP Paribas and Deutsche hold the much coveted type-A licence, which allows them to act as lead underwriter on all non-financial corporate bond deals. Last September, the National Association of Financial Markets Institutional Investors issued new rules allowing foreign banks to apply for a type-A licence. Under the new rules, banks must hold the more junior syndicate licence for at least a year before they can apply to act as lead underwriters.

Clarity, increased. For over 40 years, IFR has been clarifying the complex global capital markets by providing intelligence on current deals and new opportunities, along with reliable data and trusted opinions. The IFR website at www.ifre.com has been redesigned. It now features improved search capabilities, expanded navigation, powerful personalization tools and a more intuitive layout. It combines IFR’s industry-leading content from across all the global capital markets asset classes onto a single, consolidated platform. When you’re looking for clarity on the global capital markets, look to the new IFR.

ifre.com/new-ifr-website

COUNTRY REPORT

Australia 20 China 24 Hong Kong 34 India 37 Indonesia 39 Japan 40 Macau 41 Malaysia 41 New Zealand 41 Philippines 42 Singapore 43 South Korea 45 Taiwan 45 Thailand 47 Vietnam 47

›OPTUS SEEKS INVESTOR CONNECTION

AUSTRALIA DEBT CAPITAL MARKETS ›QBE SEEKS AT1 AMENDMENT CONSENT QBE INSURANCE GROUP,

Australia’s secondlargest insurer, has announced a consent solicitation for its outstanding US$400m 5.25% perpetual non-call 7.5-year (May 23 2025) Reg S Additional Tier 1 perpetual fixed-rate capital notes issued in November 2017. QBE is seeking to amend the conditions of these notes to provide for write-off rather than conversion in case of a non-viability trigger event approved by the Australian Prudential Regulation Authority. This would align the notes with the terms and conditions of the QBE Insurance Group AT1 US$500m 5.875% 144A/Reg S perpetual non-call five notes which were issued in May. The early and final voting deadlines are on June 29 and July 15, with the results to be announced on July 16. There is an earlybird consent fee of US$7.50 per US$1,000 in principal amount and an ordinary consent fee of US$2.00 per US$1,000. Citigroup, Credit Agricole CIB and HSBC are solicitation agents.

›TCORP TAPS LONG-END DEMAND rated Aaa/ AAA (Moody’s/S&P), continued the run of long-dated state-government bond issues arranged by sole lead manager Citigroup with last Monday’s A$300m (US$204m) short 22-year sale. The 2.25% May 20 2042s priced at 100.085 for a yield of 2.245%, 136bp wide of EFP (10-year futures) and 65.25bp over the May 2041 ACGB. Since April 7 Citigroup has helped raise A$2.35bn from six semi-government bonds issued by four states - New South Wales, Victoria, Queensland and Western Australia - with maturities between 2040 and 2042. A syndication manager away from these transactions suggested the bulk of supply has been bought by a single Japanese insurance company in search of long-dated high quality Australian dollar assets.

SINGTEL OPTUS,

rated A2/A– (Moody’s/S&P), through Optus Finance, has mandated ANZ, CBA and Westpac to arrange an investor call on June 22 for a potential five and 10-year Australian dollar MTN offering. Australia’s second-largest telecom company, a wholly owned subsidiary of Singapore Telecommunications, previously accessed the local bond market in August 2018 with a A$500m sale of five-year MTNs. Optus should enjoy some scarcity value given the lack of corporate bond supply this year. Blue-chip retailer Woolworths has been the only notable issuer since the coronavirus shuttered the markets with a A$1bn dual-tranche, five and 10-year MTN print on May 13.

›HERITAGE T2 NOTE RAISES A$50M priced a A$50m 10-year noncall five floating-rate Tier 2 note offering last Monday at the tight end of guidance in the three-month BBSW plus 350bp–360bp area. ANZ and NAB were joint lead managers for the subordinated notes, which are rated Baa3 (Moody’s). The only other Australian dollar Tier 2 note issue this year was Macquarie Bank’s A$750m 10-year non-call five note, rated Baa3/BBB (Moody’s/S&P), which priced 290bp wide of three-month BBSW on May 21.

GENWORTH FINANCIAL MORTGAGE INSURANCE,

rated A/A (S&P/Fitch), has launched a tender offer for its outstanding A$200m Tier 2 notes which are due to be called on July 3. In connection with the exchange offer Genworth may issue a new Australian dollar floating-rate 10-year non-call five Tier 2 note. On June 2 joint bookrunners NAB and Nomura announced initial guidance of three-month BBSW plus 500bp area for the potential subordinated note with expected ratings of BBB+ (S&P). Genworth Financial is a leading provider of lenders mortgage insurance in Australia and New Zealand.

STRUCTURED FINANCE ›LIBERTY PRICES PRIME RMBS

HERITAGE BANK

›SSA DUO GO SHORT AND LONG

NEW SOUTH WALES TREASURY CORP,

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›GENWORTH OPENS TIER 2 EXCHANGE

German government-guaranteed agency KFW (Aaa/AAA/AAA) continued to focus on its short-dated Kangaroo benchmarks with last Thursday’s A$100m tap of the 2.9% June 2022s, increasing the size of the line to A$1.8bn. The reopening, via sole lead manager Nomura, priced at 104.691 to yield 0.4775%, 31bp over asset swaps and 21.85bp wide of the July 2022 ACGB. On the same day, Norwegian local government funding agency KOMMUNALBANKEN, rated Aaa/AAA (Moody’s/ S&P), priced a A$65m 10.5-year Kangaroo bond at par with a 1.5% coupon, equivalent to 63bp and 57bp over asset swaps and the December 2030 ACGB. Natixis and TD Securities were joint lead managers for the sale and a subsequent A$10m tap that also priced 63bp wide of asset swaps. International Financing Review Asia June 20 2020

Non-bank lender LIBERTY FINANCIAL returned to the securitisation market last Wednesday with the upsized A$800m (US$548m) LIBERTY SERIES 2020-2 prime RMBS offering. The A$304m Class A1a notes with a 0.9year weighted average life priced at 100bp over one-month BBSW. The A$256m Class A1b and A$160m Class A2 notes, both with 2.9-year WALs, priced at one-month BBSW plus 165bp and 220bp. Pricing was not disclosed for the A$29.6m Class B, A$15.2m Class C, A$9.6m Class D, A$8.8m Class E and A$3.2m Class F notes, while the A$13.6m Class G notes were retained. NAB was arranger and joint lead manager with Bank of America, CBA, Deutsche Bank and Westpac. Liberty issued a dual-currency A$500m non-conforming RMBS, Liberty Series 2020-1 on May 8, including a dominant ¥26.3bn (A$359m) Japanese yen tranche. In that deal, the Australian Office of Financial Management bought the whole A$64.5m issue of Class A2 notes under its A$15bn Structured Finance Support Fund scheme. This pushed the margin down to 120bp over one-month BBSW, versus the then clearing rate around 165bp. No direct AOFM support was required this time around, though the government department has purchased over A$390m of Liberty securitisation tranches in the secondary market in recent weeks, which frees up funds that can be reinvested in new offerings.

COUNTRY REPORT AUSTRALIA

In May last year Liberty raised A$1.4bn from the Liberty Series 2019-2 prime RMBS. The 2019-2 Class A1b notes with a 2.5year WAL priced at one-month BBSW plus 138bp, 27bp tighter than the latest longer duration A1b notes. The 2019-2 Class A2s, with a 3.5-year WAL, priced 190bp wide of one-month BBSW, or 30bp inside the comparable notes that were just issued, which have a shorter 2.9-year WAL.

›REDZED PRINTS RARE CMBS Non-bank lender REDZED issued the first commercial mortgage-backed securities of the year last Thursday with the no-grow A$300m REDZED TRUST STC SERIES 2020-1. CBA was arranger and lead manager for the securitisation of mortgages over Australian residential and commercial properties originated, acquired and serviced by RedZed. The A$95m Class A1S and A$85m Class A1L notes, both with 40% credit support and respective WALs of 1.0 and 2.9 years, priced 120bp and 195bp wide of one-month BBSW. Pricing was not disclosed for the A$14.1m Class A2, A$27.6m Class B, A$29.1m Class C, A$20.4m Class D, A$11.4m Class E and A$8.4m Class F notes, while the A$5.4m G1 and A$3.6m G2 notes were retained. RedZed, which specialises in lending to self-employed people and those who self-certify their incomes, has previously

focused on non-conforming RMBS sales. The only two Australian CMBS issuers over recent years have been specialist commercial property finance company Think Tank and Liberty Financial, both of which last visited the market in October 2019. Most other large Australian commercial property companies have avoided relatively complex and expensive CMBS structures. They have instead focused on the competitive pricing available in the local loan markets, as well as the domestic and offshore bond markets for longer maturities.

›METRO REVIVES AUTO ABS has re-engaged with investors for an Australian dollar auto and equipment ABS offering, having previously held meetings before the market closed down in early March arranged by Deutsche Bank and NAB. The consumer lender achieved good traction for its second public auto and equipment prime ABS last July, Metro 20191, which was upsized to A$400m. Metro Finance previously issued the A$300m Metro 2018-2 auto ABS in November 2018 having privately placed a A$288m six-tranche prime commercial auto and equipment ABS five months earlier, the Metro Finance 2018-1 Trust. Metro Finance was established in 2011 as a commercial auto/equipment lender. METRO FINANCE

It targets prime borrowers for small-ticket auto and equipment assets in low volatility industries.

›BLUESTONE MARKETS RMBS RETURN Non-bank lender BLUESTONE has mandated CBA, Macquarie and NAB to market a potential Australian dollar RMBS offering under its Sapphire securitisation programme. Bluestone previously issued the nonconforming A$450m Bluestone Sapphire XXII Series 2019-2 Trust RMBS last September.

SYNDICATED LOANS ›VENTIA PRICES US$327M ADD-ON TLB has priced its US$327mequivalent incremental term loan B backing its planned acquisition of Broadspectrum. The borrowing comprises US$200m and A$185m (US$127m) tranches that mature alongside Ventia’s existing debt on May 21 2026. The Australian dollar tranche priced at the tight end of guidance at 550bp over BBSY with a 0% floor and an original issue discount of 97. The US dollar portion priced at 400bp over Libor with a 1% floor and a 97.5 OID – revised from guidance of 450bp–475bp over Libor and 97 OID. VENTIA FINCO

Ardent Leisure sells stake in unit „ Loans Main Event Entertainment wins covenant waiver Ardent Leisure Group has agreed to sell a stake in its US-based subsidiary, which has won a temporary covenant waiver from lenders. US investment firm RedBird Capital Partners is buying a 24.2% stake in Ardent Leisure’s subsidiary for US$80m, according to the former’s filing to the Australian Securities Exchange last Monday. Ardent Leisure’s US-based subsidiary holds 100% of MAIN EVENT ENTERTAINMENT. RedBird has been granted an option to acquire an additional 26.8% interest in Main Event from Ardent Leisure between July 2022 and July 2024. As a result of the initial stake purchase Main Event will achieve an implied enterprise value of US$424m and a EV/Ebitda multiple of 8.0x based on CY19 adjusted Ebitda, according to the filing.



The initial investment was expected to settle last Monday. Main Event has also obtained support from its lenders through a number of amendments to its credit agreement, including obtaining a waiver of its total net leverage covenant through to and covering the March 2021 quarter, the filing said. On May 1, Ardent Leisure said it had terminated its undrawn US$60m loan maturing in less than one year. The delayed draw term loan could only be drawn down to fund new centre capital growth and its termination saves about US$2m of commitment fees over the next 12 months. In March last year, Main Event closed a US$200m refinancing. UBS led the borrowing, which comprises a US$125m term loan and a US$75m delayed-draw term loan.

Pricing cleared at 650bp over Libor with a 0% floor and at an original issue discount of 98. A month earlier, Ardent Leisure and Ardent Leisure US Holdings Inc signed a US$320m-equivalent dual-currency revolving credit facility comprising one-year portions of A$66.67m and US$93.33m, as well as 1.5-year pieces for the same amounts in Australian and US dollars, according to Refinitiv LPC data. ANZ, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corp were the lenders to the club facility. Ardent Leisure owns and operates a portfolio of over 100 leisure assets across Australia, New Zealand and the United States. MARIKO ISHIKAWA

International Financing Review Asia June 20 2020 21

The Australian dollar portion was shopped at 550bp–575bp over BBSY with a 0% floor and a 97 OID. Both tranches have 101 soft call protection for 12 months. The debt will be fungible with the company’s existing senior secured term loans of approximately A$410m and US$392m. Existing lenders receive an amendment fee of 25bp. Barclays was left lead on the deal. Citigroup, Credit Suisse, JP Morgan and UBS were joint lead arrangers. On June 10, Ventia announced that Australia’s Foreign Investment Review Board had approved its acquisition of Broadspectrum (formerly Transfied Services) from Spanish infrastructure company Ferrovial and the transaction is expected to be completed on June 30. Broadspectrum operates airports and housing assets. Ventia is a joint venture between Australian infrastructure contractor CIMIC Group and private equity firm Apollo Global Management.

›STANMORE TAPS PARENT FOR LOAN Coal miner STANMORE COAL has signed a nonbinding term-sheet for a US$40m two-year

loan facility with its parent entity Golden Energy and Resources. The terms of the new facility from Singapore-listed Gear are substantially similar to the existing facilities from nonbank financiers Taurus Mining Finance Fund and Taurus Mining Finance Annex Fund, Stanmore Coal said in a filing to the Australian Securities Exchange last Thursday. The proposed new loan from Gear, maturing June 30 2022, offers an interest rate of 8% per annum on drawn funds and 2% per annum on undrawn funds, and upfront fees of 2%, the filing said. Taurus has issued a formal notice to cancel the facilities from September 16, following the change of control of Stanmore Coal. Stanmore Coal plans to refinance the Taurus bonding facility using its existing cash and/or the proposed facility from Gear. As of June 18, Stanmore utilised US$12.48m under Taurus’s bonding facility, and no amounts are outstanding under the working capital facility. No further drawdowns are available and outstanding commitments are to be repaid by cancellation date. In April, Golden Energy’s subsidiary Golden Investments (Australia), made

a takeover bid for Stanmore Coal in possession of over 31% stake in the company. In December 2018, Gear signed a A$150m (then US$106m) three-year loan with Credit Suisse to fund part of its takeover offer for Stanmore Coal.

›INVOCARE EXTENDS BY TWO YEARS ASX-listed funeral home operator INVOCARE has extended the maturity of its A$200m three-year revolving credit facility by two years to February 2023 after sounding out for a larger refinancing earlier in the year. The facility is currently undrawn and is expected to stay so in the foreseeable future, according to a filing to the Australian Securities Exchange last Friday. Grant Samuel was debt adviser for the refinancing. The company was sounding out for a refinancing of around A$350m in March. InvoCare raised around A$274m in equity in April and May to reduce debt and increase liquidity to support the business amid the coronavirus pandemic. “We are delighted to have completed a debt refinancing in what has proved to be a very challenging financial environment following the onset of Covid-19,” said chief

Six back BGH’s Healius buyout „ Loans Target raises A$570m loan for refinancing Six banks are providing a A$390m (US$268m) loan backing private equity firm BGH Capital’s proposed leveraged buyout of medical centres owned by Healius. Morgan Stanley and Natixis underwrote part of the facility, which is expected to launch into limited syndication at a later stage. National Australia Bank, ING Bank, Sumitomo Mitsui Banking Corp and Westpac Banking Corp are also providing part of the financing on a take-and-hold basis as mandated lead arrangers. The opening leverage is in the low 4x area. On June 15, Healius announced it had agreed to sell HEALIUS PRIMARY CARE, which comprises 69 large-scale medical centres, 13 Health & Co practices and 62 dental clinics, to BGH-managed funds for an enterprise value of A$500m on a cash and debt-free basis. The sale is subject to approval from the Foreign Investment Review Board. Healius will retain Day Hospitals and IVF, which currently sit within its Medical Centres division. The company will continue

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to operate its existing pathology collection centres and imaging clinics located within the medical centres under long-term leases at rents consistent with current levels. Separately, Healius has signed a A$570m 3.5-year loan to refinance an existing facility. The new loan matures in January 2024 and replaces a A$500m borrowing due in January 2021. It has the same financial covenants, according to the company’s filing to the Australian Securities Exchange on June 15. “The proceeds will strengthen the company, reducing our net debt and freeing up capital for investment, while enabling shareholders to realise the value of the Medical Centres business, which has not been reflected in our share price,” said managing director and chief executive officer Dr Malcolm Parmenter. ANZ, Commonwealth Bank of Australia, Credit Industriel et Commercial, HSBC, Industrial and Commercial Bank of China, Mizuho Bank, MUFG, SMBC and Westpac are the lenders for that facility, according to Refinitiv LPC data.

International Financing Review Asia June 20 2020

The company is confident that it will maintain its bank gearing ratio below 3.0x at June 30, prior to cash proceeds from the Medical Centres sale, through a combination of revenues, cost reductions, cash conservation and government funding, the filing said. In March, the company turned down a A$2.12bn takeover offer from private equity firm Partners Group, saying it undervalued the medical centre operator. Partners had offered A$3.40 per share in cash after buying China’s Jangho Group’s 15.9% stake in Healius. In December 2017, Healius, formerly named Primary Healthcare, completed an amendment-and-extension exercise for a A$1.125bn two-tranche loan. That revolving credit facility comprises a A$500m tranche due January 2021 and a A$625m portion maturing in January 2023. ANZ, CBA, Mizuho, MUFG, NAB, SMBC and Westpac were the lenders, according to Refinitiv LPC data. MARIKO ISHIKAWA

COUNTRY REPORT AUSTRALIA

executive officer Martin Earp. InvoCare has a A$120m five-year revolver maturing in December, according to Refinitiv LPC data. Another A$127.5m loan matured in September 2018. ANZ, Commonwealth Bank of Australia and HSBC provided the loans on a club basis.

›CARSALES.COM LIFTS LOAN TO A$650M Australian classifieds firm CARSALES.COM has increased its loan to A$650m and extended the maturity of one of the tranches by three years. Tranche A was increased to A$440m from A$335m and its maturity was extended to July 2024 from July 2021, the company said in a filing to the Australian Securities Exchange last Wednesday. No changes have been made to a A$210m tranche B maturing in July 2023. Carsales.com does not anticipate any change to its dividend policy, which targets a dividend payment equal to approximately 80% of adjusted net profit after tax. The company’s last visit to the syndicated loan market was in November 2017, when it raised a loan from relationship banks to back its W205bn (then US$164m) acquisition of the remaining stake in South Korean online auto classifieds business SK Encarsales.com. Carsales.com’s house banks were ANZ, HSBC and National Australia Bank, the company’s head of external communications said at the time. ASX-listed Carsales.com is the largest online automotive, motorcycle and marine classifieds business in Australia, according to its website. It has operations across Asia Pacific and has interests in leading online automotive classified businesses in Brazil, South Korea, Malaysia, Indonesia, Thailand and Mexico.

›PERENTI LIFTS REVOLVER TO A$400M Mining services company PERENTI GLOBAL has increased its revolving credit facility to A$400m with existing lenders to replace a smaller loan for a subsidiary. The revolver, which matures on July 1 2023, has been increased by A$130m, while credit and covenant terms for the additional funding are either consistent with, or more favourable than, those in the existing borrowing, the company said in a filing to the Australian Securities Exchange last Monday. The increased revolver will replace an undrawn A$45m revolver maturing in October for subsidiary Barminco. Perenti also has US$350m senior secured notes due on May 15 2022 and intends to refinance these when broader debt market

conditions are more open and attractive, the filing said. The company, formerly known as Ausdrill, has around A$530m in cash and undrawn revolving credit facilities. “The additional funding was established to ensure we are well-positioned to withstand the economic challenges Covid19 may present and provides the company with greater flexibility to fund growth opportunities,’’ said Perenti chief financial officer Peter Bryant. Earlier in the year, Perenti was eyeing acquisition of Downer EDI’s mining servicing arm before the latter suspended its search for a buyer in March. Perenti said it was still interested in the business but that funding the deal in the current market conditions would not be in its shareholders’ interest. In 2019, Ausdrill raised a A$300m four-year loan maturing in July 2023 from Caterpillar Finance, Deutsche Bank, Goldman Sachs, HSBC, Nedbank and Standard Chartered Bank.

›SUPER RETAIL TO REDUCE DEBT is looking to reduce its bank debt to A$655m alongside an equity raising of about A$203m. Super Retail has A$755m of loans with a range of maturities up to 2022. On completion of the equity raising, the company intends to review the requirement for an A$100m facility with ANZ, it said in an exchange filing. Pro-forma net debt at December 2019, after taking into account the equity raising, will fall to around A$54m from around A$252m, according to the filing. Pro-forma net debt/Ebitda will shrink to 0.2 times from 0.8 times and pro-forma lease adjusted net debt/Ebitdar (earnings before interest, tax, depreciation, amortisation and restructuring or rent costs) will diminish to 1.8 times from 2.1 times. SUPER RETAIL GROUP

›MMA OFFSHORE WINS WAIVERS Marine service provider MMA OFFSHORE has won temporary waivers on financial covenants and a cash sweep of a syndicated loan signed in 2017. The waiver applies to leverage ratio and coverage ratio covenants for the coming quarterly test dates of June 30 and September 30, according to the company’s filing to the Australian Securities Exchange last Wednesday. The company is expected to remain in compliance with its loan-to-value ratio covenant, the filing said. The loan also contains a biannual cash sweep for excess cash above A$70m at June

30 2020, December 31 and June 30 2021. The cash sweep is waived until December 31, and would allow MMA to retain any excess cash above A$70m to support its business. The company, formerly known as Mermaid Marine Australia, has agreed to maintain a minimum level of liquidity in the business until September 30. Failure to maintain the required liquidity would trigger a review event, subject to a 30-day remedy period. The company aims to ultimately refinance or restructure the loan before its maturity on September 30 2021. MMA owns and operates more than 30 offshore vessels in Australia, South-East Asia, India, Africa and the Middle East, according to its website. In November 2017, the company completed an equity raising of A$97m to partially repay its debt as well as a loan amendment. The amended facility offered an interest margin of 325bp–400bp over BBSY or Libor based on a leverage ratio of less than or equal to 3.0x to over 5.5x, according to the November 16 2017 filing.

›AQR TAPS EQUITY FOR DEBT REPAYMENT (AQR) is raising up to A$55m in equity to repay debt, following refinancing of a A$105m borrowing in February. Proceeds from the share sale will be used to repay debt, including that raised recently to complete the acquisitions of Coles Express Gatton and Coles Express Inverell, according a filing to the Australian Securities Exchange last Tuesday. Pro forma gearing adjusting for completed acquisitions and remaining fund-through development pipeline is expected to be approximately 23% following the placement of shares, close to the bottom of the fund’s target gearing range of 25%–40%, the filing said. AQR will have A$63m of cash and undrawn debt available following the placement, and has no debt maturities until February 2023. AQR is an ASX-listed real estate investment trust with a portfolio of service station and convenience retail assets across Australia. Its manager is APN Property Group, which had A$3.1bn in real estate investments as of December 31, according to its website. APN Funds Management is the responsible entity of each of Convenience Retail REIT No. 1, Convenience Retail REIT No. 2, and Convenience Retail REIT No. 3, together APN Convenience Retail REIT. APN CONVENIENCE RETAIL REIT

International Financing Review Asia June 20 2020 23

EQUITY CAPITAL MARKETS ›SUPER RETAIL SEEKS ONLINE SHIFT Australian retailer SUPER RETAIL GROUP has completed the institutional portion of a A$203m (US$139m) entitlement offer to expand its online business, raising A$158m. The 1-for-7 offer was strongly supported by institutional shareholders with a 95% take-up. The shortfall received demand from existing and new investors. About 22m new shares were sold at A$7.19 per share or a 7.9% discount to the pre-deal close of A$7.81 on June 12. The entire deal, including the retail portion, consists of 14.3% of outstanding or 28.2m shares. The retail bookbuild will take place from June 22 to July 3. Entities controlled by non-executive director Reg Rowe have committed to take up their full entitlement of A$59.2m. Super Retail’s brands include automotive retailer Supercheap Auto, outdoor and leisure retailers Macpac and BCF and sporting retailer Rebel Sport. The company said Covid-19 has encouraged shoppers to make online purchases. During April and May, online sales increased 162% and made up 18.2% of the group’s total sales. Proceeds will be used to fund the shift to e-commerce, simplify its business model and for working capital. Macquarie Capital and UBS are the lead managers.

›UNITI GROUP ACQUIRES OPTICOMM Australia’s UNITI GROUP has completed the institutional portion of a A$270m entitlement offer to part fund the acquisition of telecommunications infrastructure network OptiComm. The 1-for-1.68 rights offer received support from institutional shareholders. The shortfall was oversubscribed from existing and new investors. The institutional offer raised A$152m. The entire offer consists of 192.9m shares, or 59.5% of the current issued capital, at A$1.40 per share, representing a 9.1% discount to the pre-deal close of A$1.54 on June 12. The retail bookbuild will take place from June 22 to July 16 for a further A$118m. The company will use the proceeds to help purchase OptiComm for A$532m, with the remainder of the acquisition to be funded by scrip shares and a new three-year A$150m debt facility. The acquisition is expected to be completed in late September. Uniti Group is a real estate investment trust that provides wireless infrastructure 24

services for the communications industry. Bank of America and Goldman Sachs are the joint lead managers and underwriters.

CHINA DEBT CAPITAL MARKETS ›BOC HK SELLS DOLLAR DUAL-TRANCHER has raised US$1bn from a dual-tranche Reg S bond offering. A US$400m three-year floater priced at par to yield three-month Libor plus 75bp, inside initial guidance of plus 110bp area, while a US$600m five-year 1.250% note priced at 99.470 to yield 1.360% or Treasuries plus 103bp, also inside initial guidance of plus 140bp area. The senior unsecured notes have expected ratings of A1/A/A, in line with the issuer. The bonds will be drawn under Bank of China’s US$40bn MTN programme. Proceeds will be used for general corporate purposes. Bank of China, Credit Agricole, HSBC and JP Morgan were joint global coordinators. Agricultural Bank of China Hong Kong Branch, ANZ, Bank of Communications, Barclays, Bank of America, China Construction Bank (Asia), China Everbright Bank, China International Capital Corporation, China Minsheng Banking Hong Kong branch, Citigroup, Goodbody, ICBC, Standard Chartered Bank, Shanghai Pudong Development Bank Hong Kong branch, Wells Fargo Securities were joint bookrunners. Bank of China Hong Kong is the second largest banking group in Hong Kong, with ultimate parent Bank of China indirectly owning 66% of it, according to Moody’s. The rating agency revised its outlook on the bank to stable from negative in February, citing the expected resilience of the bank’s credit profile amid adverse economic conditions in the city. BANK OF CHINA HONG KONG BRANCH

›BOOKS SHRINK ON CNPC’S US$2BN DEAL drew final orders of around US$6.1bn for a US$2bn three-tranche Reg S deal, including US$2.425bn from the leads, but the book shrank from a peak of US$21bn after it priced the bonds tightly. The Chinese oil major last Tuesday priced US$600m 1.125% three-year, US$900m 1.35% five-year and US$500m 2% 10-year notes at 90bp, 103bp, and 133bp over Treasuries. The final pricing was 67bp–70bp inside initial guidance. CHINA NATIONAL PETROLEUM CORP

International Financing Review Asia June 20 2020

The deal was CNPC’s first dollar bond in more than five years. CNPC Global Capital is the issuer and the state-owned parent is the guarantor. The notes have expected ratings of A1/A+/A+, on par with the guarantor. Proceeds will be used for general corporate and refinancing purposes. Asian investors took 78% of the threeyear bonds and EMEA 22%. Banks received 53%, asset managers 28%, central banks, public institutions and pension funds 18%, and private banks and others 1%. For the five-year notes, Asian investors took 81% and those from EMEA 19%. Banks bought 59%, asset managers 28%, central banks, public institutions and pension funds 10%, and private banks and others 3%. For the 10-year, Asian investors received 71% and EMEA 29%. Asset managers bought 46%, banks 30%, central banks, public institutions and pension funds 22%, and private banks and others 2%. Citigroup, ICBC, Bank of China, JP Morgan and Societe Generale were joint global coordinators. They were also joint lead managers and joint bookrunners with Standard Chartered Bank, HSBC, Mizuho Securities, DBS Bank, Credit Agricole, China Construction Bank, UBS, China International Capital Corp, CLSA and Bank of America.

›CHANGXING COMMUNICATIONS ISSUES last Thursday issued US$110m three-year bonds at par to yield 4.1%. The company, which builds transport infrastructure and develops land in Changxing county, is rated BBB– by China Chengxin Asia Pacific, but the notes are unrated. The Changxing government owns CCIG through its transport bureau. China Industrial Securities International and Industrial Bank were joint bookrunners. Proceeds will be used to refinance debt. CHANGXING COMMUNICATIONS INVESTMENT GROUP

›CHINA BLUESTAR PRICES PERP last Wednesday priced US$500m subordinated perpetual non-call three bonds at par to yield 3.875%, inside initial guidance of 4.4% area. Final orders were over US$2.3bn from 121 accounts, with Asia taking 93% of the Reg S bonds and EMEA 7%. Asset managers and fund managers booked 81%, private banks and others 11%, and insurers 8%. Wholly owned subsidiary Bluestar Finance Holdings will issue the bonds with a guarantee from China National Bluestar (Group), rated Baa2/BBB/A–. The Reg S bonds have expected ratings of Baa3/BBB (Moody’s/Fitch).

CHINA NATIONAL BLUESTAR (GROUP)

COUNTRY REPORT CHINA

CCB prices Tier 2 at record-low coupon „ Bonds Lender maintains offshore presence despite cheaper onshore funding CHINA CONSTRUCTION BANK,

rated A1/A/A, has brought the first offshore Tier 2 bond offering from a China-incorporated bank this year with a US$2bn deal that achieved the lowest coupon for T2 bonds globally, according to IFR data. The 2.45% Basel III-compliant 10-year non-call five bonds were priced at 99.808 to yield 2.491%, equivalent to five-year Treasuries plus 215bp, inside initial guidance in the 250bp area. The transaction, which priced last Wednesday, also marked the first bank capital deal, and overall bank bond, from a Chinese bank since the Covid-19 outbreak hit global markets in March. State-owned peer BANK OF CHINA sold US$1bn of dual-tranche senior unsecured bonds via its Hong Kong branch the following day. CCB’s T2 bond issue drew final orders of over US$5.1bn from 191 accounts, including US$680m from the leads. The Reg S bonds have expected BBB+ ratings from S&P and Fitch. Some recent issuers have priced new bond sales inside their curves, but CCB offered a zero to 15bp new issuance premium - based on fair value estimates by different banks - in order to keep quality global investors in the book and not rely too much on Asian accounts. “Based on the book size, we definitely could have priced the deal even tighter,” a banker on the deal said. “As a major

If the notes are not called after three years the coupon will reset to the initial spread over three-year Treasuries, plus a 300bp step-up. There is a reset every three years thereafter. Nomura’s credit sales and trading desk put fair value at 3.7%-3.8%, based on references such as China State Construction’s sub perps callable in 2024 and rated Baa3, which were quoted at 3.67%. China Bluestar’s outstanding 2024 bonds were bid at Treasuries plus 236bp. Proceeds will be used for debt refinancing at the guarantor’s subsidiaries, working capital and general corporate purposes. BNP Paribas, BOC International and Credit Agricole were joint global coordinators. They were also joint bookrunners with CLSA, ICBC International and Mizuho. ChemChina, which is owned by the Chinese central government, holds a 79.48%

Chinese state-owned bank and as one of the global systemically important banks, CCB wants to maintain its engagement with the international community and has a diversified global investor base, so it chose to leave some room for secondary performance.” CCB last month redeemed US$2bn of 3.875% Tier 2 bonds due 2025 on their first call date. In February 2019, CCB issued US$1.85bn of 4.25% 10-year non-call five T2 bonds, equivalent to five-year Treasuries plus 188bp. With these bonds quoted at a spread of around 200bp, adding 10bp–15bp for the 1.3year extension represented fair value for the new bonds, the banker on the deal said. Research firm CreditSights and Nomura’s trading desk gave even tighter fair value estimates of 205bp and 200bp, respectively. A second banker on the deal said CCB’s final pricing was “reasonable” and “fair,” striking a balance between the issuer and investors. “The deal has achieved good reception from the international investor community, especially European accounts,” he said. OFFSHORE PRESENCE

Asian investors were allocated 77% of the bonds, EMEA 19% and offshore US 4%. Asset managers bought 47%, banks 29%, insurers 11%, public institutions and pension funds 10%, and corporates, private banks and others 3%.

stake in specialty chemicals and materials manufacturer China Bluestar.

›COSL PRICES INSIDE FAIR VALUE CHINA OILFIELD SERVICES LIMITED,

rated A3/A (Moody’s/Fitch), has priced more than 10bp inside fair value estimates for its US$800m dual-tranche Reg S bond offering. A US$500m 1.875% five-year and US$300m 2.50% 10-year priced at Treasuries plus 158bp and 190bp, respectively, 67bp and 60bp inside initial guidance of 225bp area and 250bp area. The deal was its first dollar bond issuance since its last print, a US$1bn dual-trancher in July 2015. Wholly owned subsidiary COSL Singapore Capital will issue the bonds with a guarantee from COSL, which is listed in Hong Kong and Shanghai. The bonds have expected ratings of

But despite CCB’s non-aggressive approach to pricing and the scarcity of Chinese bank T2 paper, the new bonds struggled to lift off in secondary trading and widened 1bp–2bp on their first trading day. Offshore bank capital supply from Chinese lenders has been thin over the past year as onshore markets offered lower funding costs and bigger issue sizes. CCB has unveiled plans to issue the equivalent of Rmb80bn (US$11.3bn) of T2 bonds by June 30 2021, including the latest deal. “In the onshore market, CCB can get the Rmb80bn deal done by one or two tranches. But it will be hard in the offshore market for such a big issue size,” said the first banker. However, the two bankers agreed that bigger Chinese banks will maintain their presence in the offshore market. CCB and the other big four Chinese lenders need the profile and foreign currency offered by the international market and will remain engaged with global investors, the second banker said. CCB International, China International Capital Corp, Citigroup and Deutsche Bank were joint global coordinators as well as joint lead managers and joint bookrunners with China Construction Bank (Asia), CCB Europe, JP Morgan, Credit Agricole, HSBC, CLSA and SMBC Nikko. CAROL CHAN

A3/A (Moody’s/Fitch), in line with the guarantor. Proceeds will be used to refinance debt and for general corporate purposes, including to redeem the US$500m 3.50% notes due next month. JP Morgan, Goldman Sachs and BoCom International were joint global coordinators as well as joint lead managers and joint bookrunners with BOC International, ABC International, CICC, Citigroup, CMBC Capital, ICBC International, Industrial Bank Hong Kong branch, Shanghai Pudong Development Bank Hong Kong branch and Standard Chartered.

›FOUNDER SEC MAKES THIRD TENDER on June 15 launched a third tender offer for its outstanding 6.9% guaranteed bonds due November 2020. The Chinese brokerage is offering to buy back up to US$88.71m of the bonds, FOUNDER SECURITIES

International Financing Review Asia June 20 2020 25

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COUNTRY REPORT CHINA

according to a stock exchange filing. It will pay the lowest clearing price in a range of US$950-$1,000 per US$1,000 in principal amount, plus accrued interest. The outstanding amount of the 6.9% 2020s is currently US$188.71m. The deadline for the new tender offer is June 29 and settlement will be on or around July 6. The company last month repurchased US$5.59m of bonds for 90 cents on the dollar, and completed another tender offer earlier this month, buying back US$5.7m at 95 cents. The bonds were issued by First FZ Bond in 2018 and guaranteed by Founder Securities (Hong Kong) Financial Holdings. Shanghai-listed parent company Founder Securities is the keepwell deed provider. They were bid at 95.50 on last Tuesday, according to Marketaxess prices. The latest offer is being made to improve and extend the company’s debt maturity profile as part of its liability management programme, the filing said. Founder Securities (Hong Kong) is sole dealer manager and DF King is information and tender agent.

›GOLD PRODUCER SELLS US$300M BOND Gold and copper miner CHINA GOLD INTERNATIONAL RESOURCES has raised US$300m from a Reg S bond offering for debt repayment and general corporate purpose. The 2.80% three-year bonds priced at 99.886 to yield 2.84%, or Treasuries plus 260bp, inside initial 280bp area guidance. Indirect subsidiary Skyland Mining (BVI) will issue the proposed bonds with a guarantee from China Gold International Resources and a letter of support from China National Gold Group. The bonds have an expected rating of BBB– by S&P, in line with the guarantor. China National Gold Group owns a 39.3% stake in China Gold International Resources, which is headquartered in Canada and listed in Toronto and Hong Kong. China’s central government owns China National Gold Group. Bank of China (Hong Kong) and CICC were joint global coordinators. They were also joint bookrunners with China Construction Bank (Asia), Citigroup, Guotai Junan International, Shanghai Pudong Development Bank Hong Kong branch, Silk Road International and Standard Chartered.

›GOLDEN WHEEL REPURCHASES BONDS repurchased US$17.5m of its 7% January 18 2021 senior notes in March and April using internal resources, according to a stock exchange filing. GOLDEN WHEEL TIANDI HOLDINGS



The repurchased notes were cancelled on June 17, reducing the outstanding amount to US$296.062m. The Hong Kong-listed Chinese real estate company on March 23 cancelled US$43.085m of bonds it repurchased between January and March. On January 17, it cancelled US$43.353m of the notes it had bought back through a tender offer.

›HAITONG INTL DEAL FINDS SUPPORT has raised US$400m from a senior unsecured bond offering for refinancing and general corporate purposes. The Hong Kong-listed Chinese brokerage priced the 2.125% three-year notes at 99.873 to yield 2.169%, or Treasuries plus 195bp, the tight end of final guidance of 200bp area (+/-5bp) and inside initial guidance of 235bp area. The Reg S issue has expected ratings of Baa2/BBB (Moody’s/S&P), on par with the issuer. The deal drew final orders of over US$1.3bn from 40 accounts, including US$1.05bn from the leads. Asia took 95% of the bonds and Europe 5%. Banks and financial institutions received 86%, fund managers 7%, and insurance and private banks 7%. Haitong International, Bank of Communications, HSBC and Shanghai Pudong Development Bank Hong Kong branch were joint global coordinators, as well as joint lead managers and joint bookrunners with BOSC International, China Citic Bank International, China Everbright Bank Hong Kong branch, China Minsheng Banking Corp Hong Kong branch, CMB International, CMB Wing Lung Bank, CMBC Capital, ICBC (Asia), Mizuho Securities, OCBC Bank, Orient Securities (Hong Kong), Standard Chartered Bank, SPDB International and UBS. HAITONG INTERNATIONAL SECURITIES GROUP

›HENGJIAN’S BOND DRAWS HUGE BOOK GUANGDONG HENGJIAN INVESTMENT,

rated A2/A/ A+, drew an order book of over US$5.5bn from 160 accounts at final pricing for its US$500m bond, including US$1.545bn from the leads. The 1.875% five-year senior unsecured bonds priced at 99.583 to yield 1.963% last Tuesday, or Treasuries plus 160bp, 60bp tighter than initial guidance of 220bp area. Final pricing was in line with fair value estimates from Nomura’s trading desk at 155bp–160bp wide of Treasuries. The newly priced bonds traded about 5bp tighter last Wednesday morning at a spread of 156bp/154bp. Asian investors took 96% of the bonds and EMEA 4%. Banks received 50%, asset

managers, fund managers and insurers 45%, and private banks, corporates and others 5%. Indirect wholly owned subsidiary Hengjian International Investment is the issuer, while Guangdong Hengjian Investment is providing an unconditional and irrevocable guarantee. The Reg S notes have expected ratings of A/A+ (S&P/Fitch). Proceeds will be used for debt refinancing. DBS Bank, HSBC and Bank of China were joint global coordinators as well as joint lead managers and bookrunners with China Minsheng Banking Corp Hong Kong branch, CLSA, China International Capital Corp, Haitong International, Shanghai Pudong Development Bank Hong Kong branch, TFI Securities and Futures, and ICBC (Macau). Guangdong Hengjian Investment is the largest state-owned capital investment and management company in Guangdong province with a portfolio focusing on utility, energy generation and infrastructure.

›HILONG’S EXCHANGE OFFER FALTERS HILONG HOLDING’s

US dollar bonds plunged last Wednesday after the company again extended an exchange offer for its US$165.114m 7.25% senior unsecured notes due June 22 as it failed to win enough support from bondholders. The deadline for responses has been pushed back by four days to June 19 at 4:00pm, London time, according to a stock exchange filing on June 16. The Hong Kong-listed Chinese oilfield equipment and service provider had already extended the deadline several times and sweetened the terms of the exchange offer. According to the filing, holders of 53.34% in principal amount have tendered their bonds, far below the 80% threshold for the exchange offer to proceed. Hilong’s 7.25% 2020s fell about eight points in cash price to 43/48 last Wednesday morning while its 8.25% 2022s dropped about 7.75 points to 25.25/29.75, according to trader. In the filing, Hilong warned again that if the exchange offer is not completed, bondholders are at risk of losing their money as the company “estimates that it may not have sufficient funds to repay the existing notes” upon maturity. In a June 19 filing, Hilong said that holders of 58.12% in principal amount of the notes had tendered their bonds, still short of the 80% threshold. Hilong on May 29 added a cash portion to the exchange offer in order to attract more bondholders.

International Financing Review Asia June 20 2020 27

Under the revised terms, eligible holders of the 2020s will receive US$900 in principal amount of new 1.75-year US dollar senior Reg S notes due 2022 and US$100 in cash as an upfront consideration plus US$5 in cash as an early incentive for exchanging each US$1,000 of principal. The new 2022s will have a minimum yield to maturity of 9.75%.

›JIAYUAN MARKETS 364-DAY BOND Chinese property developer JIAYUAN INTERNATIONAL GROUP, rated B2/B (Moody’s/ S&P), was marketing 364-day US dollar senior notes last Friday at final price guidance of 12.0%. The Reg S unrated issue had not yet priced at the time of writing. Proceeds will be used for debt refinancing and general corporate purposes. Guotai Junan International and CCB International are joint global coordinators as well as joint lead managers and joint bookrunners with CRIC Securities, Vision Capital International, Glory Sun Financial, Valuable Capital, Zhongrong PT Securities, Seazen Resources and Zhongtai International.

›JINGRUI MARKETS BOND DEAL Property developer JINGRUI HOLDINGS last Friday was marketing 2.25-year US dollar senior notes at final price guidance of 12%. The issuer is rated B2/B/B+ (Moody’s/S&P/ Lianhe Global) and the Reg S bonds have an expected B3 rating by Moody’s. Proceeds will be used for refinancing. Haitong International, Guotai Junan International, Vision Capital International, CCB International, China Merchants Securities (HK), BOSC International, China International Capital Corp and CRIC Securities are joint global coordinators, joint lead managers and joint bookrunners. The deal was not yet priced at the time of writing.

›NEIJIANG LGFV PRICES THREE-YEAR has priced US$95m three-year senior unsecured bonds at par to yield 7.5%, unchanged from price guidance. The local government financing vehicle of Neijiang city in China’s Sichuan province plans to use proceeds from the Reg S unrated issue for general corporate purposes. Central Wealth Securities Investment was sole global coordinator as well as joint lead manager and joint bookrunner with Haitong Bank, Zhongtai International, CLSA and Po Tai Securities (Hong Kong). NEIJIANG INVESTMENT HOLDING GROUP

28

Neijiang Investment in April priced a US$40m three-year credit-enhanced bond at par to yield 3.8%. The unrated Reg S notes came with a standby letter of credit from Zheshang Bank Chengdu branch.

›PING AN REAL ESTATE PRINTS PING AN REAL ESTATE,

rated Baa2 (stable) by Moody’s, last Tuesday priced US$500m five-year 3.25% senior unsecured bonds at 99.721 to yield 3.311%. This was equivalent to Treasuries plus 295bp, inside initial price guidance of 330bp area. The Reg S bonds will be issued by wholly owned subsidiary Fuqing Investment Management under a US$2bn guaranteed MTN programme. Another wholly owned subsidiary, Pingan Real Estate Capital, will be the guarantor. The notes will also have the benefit of a keepwell deed and a liquidity support undertaking provided by Ping An Real Estate. The notes have an expected Baa3 rating from Moody’s. Proceeds will be used for debt refinancing and general corporate purposes. China Citic Bank International, HSBC and Guotai Junan International were joint global coordinators as well as joint lead managers and joint bookrunners with Deutsche Bank, UBS, Mizuho Securities and CMB Wing Lung Bank. Ping An Real Estate is the real estate investment and asset management platform of Ping An Insurance (Group) Co of China.

›SHENGZHOU INV RAISES US$250M Local government financing vehicle SHENGZHOU INVESTMENT HOLDINGS has priced a US$250m three-year Reg S bond at par to yield 4.08%. The unrated senior unsecured notes were marketed at initial price guidance in the mid 4% area. Proceeds will be used for onshore project construction, refinancing and business development. Guosen Securities (HK), China Industrial Securities International and BOSC International were joint global coordinators as well as lead managers and bookrunners with Zhongtai International and Goldbridge Securities. Bank of China, Industrial Bank Hong Kong branch and CMBC Capital were also joint bookrunners. The issuer handles primary land development and consolidation, urban infrastructure construction, hotel services and waterworks in Shengzhou, a city in Zhejiang province. International Financing Review Asia June 20 2020

›SHUIFA SINGYES BOOSTS BUYBACK has bought back more of its dollar bonds than expected under a tender offer. It launched an offer for up to US$70m in principal amount of its US$319m bonds due December 2022, offering to pay a cash price of US$870 per US$1,000 in principal amount. Holders of around US$90.8m of the notes tendered them under the offer, and the company has agreed to accept them all. The unrated curtain wall installation and solar engineering company originally issued US$414.9m three-year bonds, which pay a cash coupon of 2% and payment-inkind interest of 4%, in December as part of a restructuring. The restructuring was conducted with help from state-owned Shuifa Group after the issuer, which at the time was called China Singyes Solar Technologies Holdings, defaulted on its offshore bonds in October 2018. Creditors received a combination of cash and new bonds under the scheme. Admiralty Harbour Capital was dealer manager for the tender offer, and Morrow Sodali was information and tender agent. The offer was financed with cash on hand. CHINA SHUIFA SINGYES ENERGY HOLDINGS

›SINO-OCEAN EYES 364-DAY NOTES has hired banks for a potential US dollar senior guaranteed note offering and has conducted investor calls since June 19. Haitong International, JP Morgan and HSBC are joint global coordinators as well as joint bookrunners and joint lead managers with Guotai Junan International, Huatai Financial Holdings (Hong Kong), China International Capital Corp, CMB Wing Lung Bank and Standard Chartered Bank. Wholly owned subsidiary Mega Wisdom Global will be the issuer of the Reg S unrated notes, which will be guaranteed by Sino-Ocean Capital and Fortune Joy Ventures. Hong Kong-listed Sino-Ocean Group Holding (formerly known as Sino-Ocean Land Holdings), rated Baa3/BBB– (Moody’s/ Fitch), will provide the keepwell deed for the notes. The issuer is focused on the issuance of 364-day notes and is seeking feedback and indications of interest from investors. An alternative asset management company, Sino-Ocean Capital has business including property and debt investment, private equity, investment advisory, and strategic investments. SinoOcean Group Holding owns 49% of SinoOcean Capital. SINO-OCEAN CAPITAL HOLDING

COUNTRY REPORT CHINA

›TAIYUAN LONGCHENG PRICES DEBUT TAIYUAN LONGCHENG DEVELOPMENT INVESTMENT

has priced US$300m debut three-year senior unsecured bonds at par to yield 3.7%, inside initial guidance of 4.2% area. Final statistics were not disclosed yet at the time of writing but orders were said to be over US$1.1bn at the time of final guidance, including US$325m from the leads. The bonds have expected ratings of Baa3/ BBB (Moody’s/Fitch), in line with the issuer. Proceeds from the Reg S issue will be used for the refinancing of onshore debt and business development. CLSA, China International Capital Corp, Bank of China and Central Wealth Securities Investment were joint global coordinators. They were also joint lead managers and joint bookrunners with Shanghai Pudong Development Bank Hong Kong branch, Industrial Bank Hong Kong branch, Shenwan Hongyuan HK, Guotai Junan International and China Minsheng Banking Hong Kong branch. The Chinese issuer is the largest city development, construction and operation arm in Taiyuan city, Shanxi province, according to Moody’s. It takes on around 90% of the city’s shantytown renovation and affordable housing construction projects. GROUP

›XIANYANG FIN GETS SBLC BACKING has printed a US$100m credit-enhanced three-year bond at par to yield 3.8%, the tight end of final guidance and inside initial guidance of 4%. The Reg S bonds are backed by a standby letter of credit from Bank of Chongqing, rated BBB– by S&P. Proceeds will be used to repay debt. Haitong International was the sole global coordinator as well as joint bookrunner and lead manager with China Citic Bank International, ICBC (Asia), Industrial Bank Hong Kong branch and Shanghai Pudong Development Bank Hong Kong branch. Xianyang Financial Holding Group is an investment company under the Xianyang municipal government in China’s Shaanxi province. Its interests include flat-panel displays, new energy vehicles, clothing and electronic raw materials. XIANYANG FINANCIAL HOLDING GROUP

›YINCHENG INTL SELLS SHORT-TERM DEBT YINCHENG INTERNATIONAL HOLDING,

rated B2/ B+ (Moody’s/Lianhe Global), has priced a US$140m 364-day 12% bond at 98.644 to yield 13.50%, inside initial guidance of 13.875% area. The unrated senior unsecured notes have certain restricted subsidiaries

incorporated outside of the PRC as subsidiary guarantors. Proceeds will be used for refinancing debt and general corporate purposes. BOC International, Guotai Junan International, Haitong International, TF International and Huatai Financial Holdings (Hong Kong) were joint global coordinators as well as joint bookrunners and joint lead managers with Central Wealth Securities Investment, Orient Securities (Hong Kong),CRIC Securities, Vision Capital International and Silk Road International. Moody’s on May 28 assigned a firsttime B2 issuer rating to the Nanjing-based residential property developer. In December last year, the company issued US$100m 12.5% senior notes due December 21 2020 at par.

›ZHONGLIANG PRINTS RATED 364-DAYS ZHONGLIANG HOLDINGS GROUP,

rated B1/B+/B+, drew final orders of over US$950m from 51 accounts for its US$250m short-dated bond offering, including US$345m from the leads. The 8.75% 364-day senior notes were priced at 99.536 to yield 9.25%, inside initial price guidance of 9.5% area. The Reg S issue has an expected B+ rating by Fitch. Asian investors bought 87% of the bonds and EMEA 13%. Asset managers and fund managers received 54%, private banks and family offices 40%, and banks and financial institutions 6%. The Hong Kong-listed Chinese real estate company plans to use the proceeds for general working capital and/or debt refinancing. UBS, BOC International, CCB International, China Citic Bank International, Credit Suisse, Deutsche Bank, Goldman Sachs, Guotai Junan International, Morgan Stanley, Nomura and Standard Chartered Bank were joint global coordinators, joint lead managers and joint bookrunners.

›FAB GOES FOR CNH FORMOSA FIRST ABU DHABI BANK,

rated Aa3/AA–/AA–, drew final orders of over Rmb1.6bn (US$225m) from 32 accounts for its Rmb1.4bn Formosa bond. The five-year senior unsecured bonds priced at par to yield 3.50%, unchanged from price guidance. Investors from Taiwan took 72% of the bonds, Asia ex-Taiwan 26% and Europe 2%. Banks were allocated 42%, insurers 36%, fund managers 20%, and private banks 2%. The offshore renminbi bonds, to be issued off a US$15bn MTN programme, will

be listed on the London Stock Exchange and Taipei Exchange. The Reg S Formosa bonds have an expected Aa3 rating by Moody’s. Proceeds will be used for general corporate purposes. Credit Agricole Taipei branch, HSBC Bank (Taiwan) and Standard Chartered Bank (Taiwan) were lead managers.

›CREDIT AGRICOLE PLANS 2ND PANDA CREDIT AGRICOLE SA,

rated AAA/Aa3/A+/A+ (China Chengxin/Moody’s/S&P/Fitch), has hired banks for its second Panda offering. Bank of China is lead bookrunner and lead underwriter. Agricultural Bank of China, China Construction Bank, Credit Agricole Corporate and Investment Bank (China), Industrial and Commercial Bank of China, Citic Securities, China International Capital Corp and China Merchants Bank are joint bookrunners and joint lead underwriters. The planned senior preferred bond offering in China’s interbank market will be issued under a Rmb5bn issuance programme the French bank registered with Chinese financial regulators. It held a global fixed income call for Asian investors on June 18. The bonds will be offered to onshore and offshore investors via Bond Connect. Credit Agricole in December last year issued Rmb1bn three-year Panda bonds at 3.4%, which was the first Panda bond offering from a French bank and also the first from one of Europe’s global systemically important financial institutions. As with the latest deal, the bonds are senior preferred obligations, as opposed to the senior non-preferred instruments designed specifically to meet total lossabsorbing capacity rules. Senior preferred debt is not included in a bank’s TLAC ratio.

›EVERBRIGHT GREENTECH PRICES PANDA priced Rmb1bn Panda bonds in China’s interbank market after raising the upper end of price guidance, switching to a single-tranche format and extending the bookbuilding period. The Hong Kong-listed, Cayman Islandsincorporated issuer priced five-year non-put three notes at 3.68%, near the top end of a revised price range of 2%–3.8%. The company originally planned to issue a Rmb500m five-year non-put three tranche and a Rmb500m five-year tranche at 2%–3.5% and 2.5%–4% but later increased the top end of guidance by 30bp for both tranches. Bookbuilding was extended to CHINA EVERBRIGHT GREENTECH

International Financing Review Asia June 20 2020 29

June 12 at 11am from June 11 at 5pm. The issuer and underwriters had said they might adjust the size of the tranches after bookbuilding. The deal was the first batch of a Rmb3.5bn quota registered with Chinese financial regulators. The issuer is rated AAA by Lianhe and focuses on biomass and hazardous waste treatment as well as solar energy and wind power. Proceeds from the bond offering will be used for working capital and to repay bank loans. Everbright Securities was lead underwriter and bookrunner. ICBC was joint lead underwriter.

SYNDICATED LOANS ›SPDB SNARES 58.COM LOAN MANDATE Shanghai Pudong Development Bank has won the mandate on a debt package of up to US$3.5bn to back the proposed take-private buyout of Nasdaq-listed 58.COM. The arranger group for the financing is expected to be expanded as the buying consortium for 58.com is in talks with some Chinese relationship banks. On Monday, 58.com, China’s largest online marketplace for classifieds, said it would be taken private in a deal valued at about US$8.7bn. Shareholders of 58.com are offered US$56 in cash per ADS, a premium of nearly 20% over the share price at the time the company first received a take-private proposal in late April. The consortium comprises private equity firms Warburg Pincus Asia, General Atlantic Singapore Fund, Ocean Link Partners, Jinbo Yao, chairman and CEO of 58.com, and Internet Opportunity Fund, an entity controlled by Yao. The consortium plans to fund the deal through a combination of cash, rollover equity contributions from certain shareholders and the US$3.5bn term loan from banks. The delisting is expected to close in the second half. In July 2015, 58.com obtained a US$400m five-month senior loan from Ohio River Investment, according to Refinitiv LPC data.

›LEYOU TAKEOVER LOAN IN PLAY Shenzhen-listed ZHEJIANG CENTURY HUATONG GROUP is sounding the market for a loan of around US$300m–$400m to back its proposed takeover of video-game developer Leyou Technologies Holdings. The suitor is in preliminary talks with 30

potential lenders for the financing, and details of the borrowing are yet to be determined. Leyou said on May 4 in a stock exchange filing that Zhejiang Century Huatong and Leyou’s controlling shareholder, Charles Yuk, signed a memorandum of understanding on the possible sale of shares. Century Huatong agreed to pay a sum of US$80m as earnest money after the execution of the MOU. The parties aim to enter into a formal deal within 90 days of the MOU should they agree to proceed. The move follows a failed takeover attempt from Tencent-backed Chinese game company iDreamSky Technology Holdings, which had been in talks with Leyou’s Yuk and other selling holders since late last year. iDreamSky sought a US$400m loan backing the proposed takeover of Leyou, but the deal was cancelled after the potential buyers failed to negotiate down the acquisition price. Leyou reported a net loss of US$8.4m for the year ended December 31 2019, as the sales of its flagship free-shooting game Warframe declined primarily because of market competition and a fall in the number of new console players, according to its 2019 financial results announced on March 25. Century Huatong is principally engaged in the development and operation of internet games. The company is also engaged in the research, development, manufacturing and sales of various types of automobile parts and related moulds.

›MINTH GROUP DEBUTS WITH US$150M Hong Kong-listed MINTH GROUP is selfarranging a US$150m three-year term borrowing, making its debut in the offshore loan market. Citigroup is the coordinator of the transaction, which offers an interest margin of 118.5bp over Libor and has an average life of 2.8 years. Mandated lead arrangers and bookrunners committing US$40m or more earn a top-level all-in pricing of 140bp via a participation fee of 60bp. MLAs joining with US$25m–$39m receive an all-in of 136bp via a fee of 50bp, while lead arrangers participating with US$10m– $24m earn an all-in of 133bp via a fee of 40bp. Proceeds will be for refinancing and general corporate purposes. Founded in 1992 and headquartered in Ningbo, Minth is mainly engaged in the auto parts businesses, including the International Financing Review Asia June 20 2020

design, manufacture and sale of auto trims, decorative parts, body structural parts and other related auto parts, such as roof racks and electric sliding door systems. The company has operations in Asia Pacific, Europe and North America.

›JIANGXI GANNENG POWERS UP FOR LOAN Electric power generator JIANGXI GANNENG has obtained a Rmb5bn (US$705m) 18year loan from four Chinese banks, the company said in a filing to the Shenzhen Stock Exchange. Export-Import Bank of China and China Citic Bank were the mandated lead arrangers of the loan, which offers an interest margin of over 5bp above the five-year loan prime rate, which is currently 4.65%. Proceeds will be used for the construction of a power plant in Fengcheng county, Jiangxi province. Jiangxi Provincial Investment Group, the borrower’s controlling shareholder, is providing a letter of support for the loan. Jiangxi Ganneng is mainly engaged in thermal and hydro power generation. For full allocations, see www.ifre.com.

›JIANGSU FANGYANG CLOSES LOAN State-owned JIANGSU FANGYANG GROUP has obtained a Rmb1.95bn 13-year loan to back the development of logistics facilities in China’s Jiangsu province. Agricultural Development Bank of China was the mandated lead arranger on the deal, which attracted two other banks. Proceeds will be used for a 96-hectare logistics complex development in the Xuwei New District in Lianyungang City. For full allocations, see www.ifre.com.

RESTRUCTURING ›QPIG CREDITORS SEEK WORKOUT said it was informed on June 16 that some of its creditors have submitted an application to the Xining Intermediate People’s Court to restructure the issuer after it was unable to repay maturing debt. The aluminium producer, in which the Qinghai provincial government owns a 69.3% stake, said 16 of its subsidiaries had also received similar notices from their respective creditors. If the court accepts the restructuring application it will appoint an administrator, which will draft a restructuring plan with the issuer and submit it to creditors for approval. If QPIG can execute a restructuring plan

QINGHAI PROVINCIAL INVESTMENT GROUP

COUNTRY REPORT CHINA

that is acceptable to the court and creditors within a specified time limit, it will be wound up. In the offshore market, QPIG has US$131.669m 7.25% February 2020, US$166.75m 7.875% March 2021 and US$92.14m 6.4% July 2021 bonds outstanding, according to MarketAxess data. It failed to pay a coupon due on the 6.4% notes in January, leading to a cross-default across all of its dollar bonds, which then totalled US$850m in principal amount. In February, an entity called Qinghai Provincial Investment and Development announced an offer to repurchase QPIG’s dollar bonds for cash at a steep discount of up to 63%, through subsidiary Guozhen International Trade Consulting. Holders of more than half of the outstanding bonds submitted them under the tender, though a minority group of Hong Kong retail investors protested against the offer.

EQUITY CAPITAL MARKETS ›WUMART TECH PLANS HK IPO WUMART TECHNOLOGY GROUP,

a Beijing-based retail giant, is planning to raise about US$1bn–$2bn from a Hong Kong IPO in 2021, according to people familiar with the situation. The company two weeks ago invited potential advisers to pitch for the arranger roles for the proposed float, said the people. Wumart Tech operates Wumart Stores, which was listed in Hong Kong before the parent took it private in 2016. Wumart Tech completed the acquisition of German wholesaler Metro’s Chinese arm last month in a deal valuing the unit at €1.9bn (US$2.1bn). The German group owns a 20% stake in Metro Wumart China, a joint venture with Wumart. Similar to other large retailers in China, Wumart Tech has been rapidly expanding its e-commerce business in the past few years through its own online marketplace Dmall, which also offers digital services to other Chinese small and medium-sized retailers. According to Wumart’s website, it operates more than 1,000 stores in China with annual sales over Rmb100bn (US$14.1bn) and assets of over Rmb50bn.

›HUAZHU EXPLORES HK FLOAT Nasdaq-listed Chinese hotel chain operator HUAZHU GROUP is considering a secondary listing in Hong Kong, joining a growing queue of US-listed Chinese companies

seeking to list closer to home amid rising US-China tensions. The company is working with financial advisers to explore a potential share sale in the city, which could happen as early as the end of the year, according to people with knowledge of the matter. Huazhu has not decided how much to raise as yet, said one of the people. At current valuation, a 5%–10% float in Hong Kong would raise about US$500m–$1bn. As of last Wednesday’s close, Huazhu’s shares were down 15% this year at US$34.13, giving it a market capitalisation of US$10.1bn. Huazhu is joining a number of US-listed Chinese companies that see Hong Kong as an alternative funding venue. NetEase raised HK$24.2bn (US$3.1bn) from a Hong Kong share sale this month. JD.com raised HK$30bn from a Hong Kong secondary listing and saw its shares closed up 3.5% at HK$234 on their debut last Thursday. New York-listed YUM CHINA is also working with Goldman Sachs as it prepares a Hong Kong float for later this year. The company is now in the process of adding more banks to the deal. A spokesperson for Huazhu declined to comment. Affected by the coronavirus pandemic, Huazhu in April said it expected to record a 45%–50% drop in organic revenue and 15%–20% fall in group revenue for the first quarter of 2020. Huazhu, formerly China Lodging Group, operates, manages and franchises more than 5,800 hotels under multiple brands, according to March 31 data.

›AUTOBIO PLANS FOLLOW-ON plans to raise Rmb3.28bn from a proposed private share placement. The company will sell up to 43.1m shares, equivalent to 10% of current shares, to up to 35 investors. Proceeds will be used to expand production of in-vitro diagnostics products, fund its R&D centre, and for marketing and working capital. The proposal still needs approval from shareholders and regulators. AUTOBIO DIAGNOSTICS

›BARRICK PRICES SHANDONG GOLD BLOCK Barrick Gold Corp has raised HK$1.63bn from a block trade in Hong Kong-listed SHANDONG GOLD MINING, after pricing the deal in the lower half of the marketed price range. The block of 79.3m shares, or 15.9% of total shares outstanding, was priced at HK$20.50 per share, versus the indicative price range of HK$20.35–$21.00, representing a 7% discount to the pre-deal close of HK$22.05.

Toronto-listed Barrick Gold held a 17.92% stake in Shandong Gold before the deal, according to Refinitiv data. It has agreed to a 90-day lock-up on its remaining shares in the company. Morgan Stanley is the sole placing agent.

›BLUECITY SETS UP US DATE BLUECITY HOLDINGS,

China’s largest dating app for the LGBTQ community, has filed to the US Securities and Exchange Commission for a Nasdaq IPO that could raise about US$50m. Founded in 2011, BlueCity allows users to connect, socialise and access family planning and health services via the Blued mobile app. It says it has 49 million users in more than 210 countries, of which 6 million are monthly active users and about 49% are outside China. In the first quarter, BlueCity posted a loss of Rmb7.6m, down 71% from Rmb26.4m the year before. It had an annual loss of Rmb53m in 2019. Proceeds will be used for market expansion to attract more users to the Blued app, as well as investment in artificial intelligence and big data. In March 2018, BlueCity announced that it had sealed a US$100m private round led by CDH Investments. AMTD, CLSA, Loop Capital Markets and Tiger Brokers are the joint bookrunners. BlueCity is not the only LGBTQ community dating app looking at a listing. Chinese gaming company Beijing Kunlun Tech said last July it planned to list US-based Grindr on an overseas stock exchange, though it did not specify the timing of the listing or the fundraising size.

›BYD SEMICON INTRODUCES INVESTORS has brought in 30 strategic investors for a combined investment of about Rmb800m ahead of a planned IPO. According to an announcement from Hong Kong and Shenzhen-listed parent company BYD, investors including Korean conglomerate SK Group’s China unit, funds backed by smartphone maker Xiaomi, Lenovo Group and property developer Country Garden have taken up a combined 7.84% stake in BYD Semiconductor. The investment values the semiconductor producing unit around Rmb10.2bn. As BYD Semiconductor has now completed an internal restructuring and the introduction of strategic investors, it will actively promote its listing-related work, said the announcement. BYD SEMICONDUCTOR

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›C-MER EYE CARE COMPLETES PLACEMENT has raised HK$394m from a top-up share placement for working capital and potential acquisitions. It sold 68m shares, or about 5.9% of the enlarged share capital, at HK$5.80 each. The shares were marketed in a HK$5.71– $5.94 price range and eventually priced at a discount of 11.6% to the pre-deal close of HK$6.56 on June 18. The company did not exercise an upsize option of up to about 20m secondary shares. There is a 90-day lock-up period. HSBC is the sole bookrunner. C-MER EYE CARE

›CRCC SPIN-OFF FILES FOR STAR IPO CHINA RAILWAY CONSTRUCTION HEAVY INDUSTRY,

a spin-off of Hong Kong-listed China Railway Construction Corporation, has filed to the Shanghai Stock Exchange for a Rmb7.79bn Star IPO. The IPO is set to be the third biggest on the new board, behind those of Semiconductor Manufacturing International (Rmb20bn) and China Railway Signal and Communication (Rmb10.5bn). CRCHI plans to offer 1.29bn A-shares, or 25% of the enlarged capital. There is a 15% greenshoe. The company is a manufacturer of tunnelling machines and rail transportation and special professional equipment. It will use Rmb3.41bn of the proceeds to fund nine research and development projects, Rmb1.38bn for five production projects, and the rest for working capital. The company posted a 2019 net profit of Rmb1.53bn on revenue of Rmb7.28bn. CRCC won approval from the Stock Exchange of Hong Kong to spin off its subsidiary in February. CICC is the sponsor and joint bookrunner with Citic Securities and Morgan Stanley Huaxin Securities.

›DUO TO PRE-MARKET FLOATS is planning to start premarketing as early as Tuesday for a Hong Kong IPO of about US$2bn, said people close to the deal. The national joint-stock commercial bank, which counts Standard Chartered as its second-largest shareholder, plans to open the books in the week of June 29. CHINA BOHAI BANK

ABC International, CCB International, CLSA and Haitong International are the joint sponsors. StanChart owns a 19.99% stake in Bohai Bank. The Chinese lender posted a net profit of Rmb6.5bn for the nine months ended September 30, up 16% year on year. Its total assets stood at Rmb1.1trn as of September 30, while its non-performing loan ratio and core Tier 1 capital adequacy ratio were 1.77% and 8.17%, respectively. OCUMENSION THERAPEUTICS, meanwhile, plans to start pre-marketing a Hong Kong IPO of about US$250m–$300m last Monday, according to people close to the deal. Goldman Sachs and Morgan Stanley are joint sponsors. Ocumension specialises in the treatment of eye disorders and has 16 drug assets in its portfolio, three of which are at the commercial stage and four are in clinical trials. It posted a loss of Rmb1.32bn for the year ended December 31 2019, more than six times its loss of Rmb209m in the previous year.

›EBANG LAUNCHES NASDAQ IPO EBANG INTERNATIONAL,

a Chinese bitcoinmining equipment maker, has launched a Nasdaq IPO that could raise up to US$125.6m. It is offering 19.3m primary shares in an indicative price range of US$4.50–$6.50 each. There is a 15% greenshoe. Proceeds will be used for the expansion of overseas and new businesses, the development of new mining machines, branding and marketing, and generate corporate purposes. The deal will price on June 25 and the shares are expected to start trading on June 26. Ebang and two rival bitcoin-mining gear makers, Canaan and Bitmain Technologies, had applied to list in Hong Kong but let their applications lapse last year. People close to the deals said tight regulatory scrutiny in Hong Kong made it difficult to proceed there. Canaan was the first to turn to the US, raising US$90m from a Nasdaq IPO in November. That stock closed at US$1.92 last Thursday, down 70% from its IPO price of US$9 per share.

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International Financing Review Asia June 20 2020

Bitcoin was trading around US$9,346 last Friday, up 30% this year. AMTD and Loop Capital Markets are bookrunners.

›GUANGDONG FANGYUAN PLANS STAR IPO GUANGDONG FANGYUAN ENVIRONMENT,

a lithium battery producer, has filed to the Shanghai Stock Exchange for a proposed Rmb1.05bn Star IPO. The company plans to offer 80m A-shares, or 10% of the enlarged capital. Proceeds will be used to fund a lithium battery project for new energy vehicles. Panasonic was the company’s largest client in the past two years, accounting for 63% and 80.4% of revenue in 2018 and 2019. CICC is the sponsor.

›FINANCIAL STREET SET FOR HK LISTING Chinese property management company FINANCIAL STREET PROPERTY CO has launched a Hong Kong IPO to raise up to HK$680m. It is offering 90m shares in an indicative price range of HK$7.16–$7.56, representing a forecast 2020 P/E of 17.4 times to 18.4 times. There is a 15% greenshoe. Proceeds will be used for strategic acquisition opportunities, opening new and subsidiary offices for business expansion, upgrading artificial intelligence and related technology systems, and for working capital and other general corporate purposes. Financial Street Group held 47.5% of the company before the IPO through investment subsidiary Huarong Zonghe, according to the prospectus. The deal will price on June 24 and the shares are due to be listed on July 6. Guotai Junan International is the sole sponsor.

›FOUR START PRE-MARKETING SMOORE INTERNATIONAL, SHENZHEN HEPALINK PHARMACEUTICAL, REDSUN SERVICES

and ZHENRO started pre-marketing last Monday for Hong Kong IPOs of a combined US$1.5bn. Smoore, one of the world’s largest e-cigarette makers, is planning to raise about US$600m–$900m. CLSA is the sponsor. SERVICES GROUP

COUNTRY REPORT CHINA

Smoore posted profit and total comprehensive income of Rmb921m for the first half of 2019, more than five times the Rmb181m it earned in the same period of 2018. Its clients include Japan Tobacco, Reynolds Asia-Pacific, British American Tobacco, RELX and NJOY. Shenzhen-listed Hepalink is planning a US$300m–$400m listing. The company has a portfolio of drugs to treat blood clots and immune system disorders. Goldman Sachs and Morgan Stanley are sponsors. Chinese property management company Redsun intends to raise US$70m–$80m. The company is owned by Zeng Huansha, the chairman of Hong Kong-listed Redsun Properties. ABC International is the sponsor. Zhenro, another Chinese property management company, plans to raise about US$150m. CCB International is the sponsor. The company provides services to Hong Kong-listed Zhenro Properties Group. Zonrong Ou, the controlling shareholder of Zhenro Properties Group, owns 87.3% of Zhenro Services.

›GAN & LEE PHARMA COMPLETES IPO has raised Rmb2.54bn from its Shanghai IPO. The biopharmaceutical company sold 40.2m A-shares or 10% of the enlarged capital at Rmb63.32, equivalent to a 2019 P/E of 22.99. The retail tranche was subscribed more than 7,720 times, leading to a clawback of 24m shares from the institutional portion to the retail tranche. The company eventually sold 90% of the deal to retail investors and 10% to institutional investors, compared with the original 30%/70% split. The insulin manufacturer will use the proceeds for mass production, research, marketing and working capital, to register insulin products in the US and to build an R&D centre. It posted a 2019 net profit of Rmb1.17bn on revenue of Rmb2.89bn. Citic Securities was the sponsor and joint bookrunner with Orient Securities. GAN & LEE PHARMACEUTICALS

›GEELY AUTOMOBILE PLANS STAR IPO Hong Kong-listed GEELY AUTOMOBILE has secured board approval for an IPO on the Shanghai Star market that could raise as much as Rmb20bn, based on its Hong Kong stock price. The carmaker said it would issue new renminbi-denominated shares equal to up to 15% of its enlarged capital, implying an offering of about 1.73bn shares. Geely’s market capitalisation jumped to

HK$123.8bn (US$15.97bn, Rmb113bn) after the announcement as its Hong Kong shares gained 6% on the morning of June 18 to HK$12.62. It is the latest overseas Chinese red-chip to consider a domestic listing, following a relaxation in A-share listing rules for innovative companies on April 30. Hong Kong-listed Semiconductor Manufacturing International has already applied for a Rmb20bn Star board float and will attend an IPO hearing on June 19. Geely will use the proceeds for business development and working capital. The plan still needs approval from shareholders and regulators.

›GENETRON PRICES IPO ABOVE RANGE has priced its US$256m Nasdaq IPO above range at US$16 per share, after increasing the number of American depositary shares on offer in the last day of bookbuilding last Thursday. The Beijing-based cancer diagnostics company said last Thursday it would sell 16m ADSs rather than 13m while keeping the price range unchanged at US$11.50– $13.50. According to people close to the deal, the float was priced at US$16 per share. Genetron posted a loss of Rmb115m (US$16.2m) for the three months to March 31 from a loss of Rmb131m in 2019. Credit Suisse and CICC are bookrunners. Genetron is the third Nasdaq listing from China’s healthcare industry this month after Burning Rock Biotech (US$223m) and Legend Biotech (US$424m). As of last Thursday, the former was up 61% from its IPO price while the latter 71%. GENETRON

›GREENTOWN MGMT MARKETS HK IPO GREENTOWN MANAGEMENT,

a subsidiary of Hong Kong-listed Greentown China, has started pre-marketing for a Hong Kong IPO. IFR reported in March that the float could raise about US$250m. The property management company is planning bookbuilding and a management roadshow from June 26 to July 3 before pricing the deal on July 3. The shares are expected to be listed on the Hong Kong bourse on July 10. Proceeds will be used for scaling up the company’s business, the development of commercial projects, repaying debt of about Rmb540m (US$76m) and for working capital and other general corporate purposes. Greentown posted a net profit of Rmb296m for the nine months ended September 30 2019, up 25% from the same

period in 2018. As of September 30, the company had 262 projects under management in the PRC and one city in Cambodia, with a total gross floor area under management of 68.5 million square metres. Greentown China said Greentown Management will remain a subsidiary of the company after the IPO. Credit Suisse and Deutsche Bank are sponsors.

›HUAAN SEC PLANS RMB4BN RIGHTS Shanghai-listed HUAAN SECURITIES plans to raise Rmb4bn from a rights issue. The brokerage aims to sell 1.09bn shares on a 3-for-10 basis. Proceeds will be used for capital and working capital. Huaan Securities posted a net profit of Rmb1.21bn in 2019 on revenue of Rmb3.23bn. Revenue from investment banking was Rmb191m. Its shares were down 6% at Rmb6.53 on June 18. The proposal still needs approval from shareholders and regulators.

›KANGJI MEDICAL LAUNCHES IPO Chinese medical equipment maker KANGJI MEDICAL has opened the books for a Hong Kong IPO of up to HK$3.1bn. The company is selling 225m shares, or 18% of the enlarged share capital, in an indicative range of HK$12.36–$13.88 per share, valuing the company at US$2bn– $2.25bn. Seven cornerstone investors are in with a total investment of US$165m. They are FMR (US$45m), BlackRock (US$35m), Lake Bleu (US$25m), Hillhouse (US$15m), Cormorant (US$15m), Orbimed (US$15m) and Oaktree (US$15m). The deal was scheduled to price on June 19 and the shares will start trading on June 29. Bank of America, CLSA and Goldman Sachs are sponsors. Kangji, which makes equipment for minimally invasive surgery, posted a net profit of Rmb327m for 2019, up 46% from 2018.

›NETEASE EXERCISES GREENSHOE has fully exercised the greenshoe of its Hong Kong secondary listing, taking the fundraising size to HK$24.2bn. The Nasdaq-listed Chinese online gaming and entertainment company sold 25.7m shares, or 15% of the base deal, at the issue price of HK$123 per share to raise HK$3.16bn. NETEASE

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The Hong Kong shares of NetEase touched a high of HK$135.20 on their trading debut on June 11. CICC, Credit Suisse and JP Morgan were sponsors.

›ZENSUN FILES FOR RMB1.5BN STAR IPO Biopharmaceutical company ZENSUN (SHANGHAI) SCI & TECH is bidding to be the latest loss-making company to go public on China’s technology-focused Star market. Zensun, which focuses on treatments for heart failure, has filed to the Shanghai Stock Exchange for a proposed Rmb1.5bn Star IPO. The company will offer up to 60.7m shares for a 25% free float. Proceeds will be used for research into new drugs and working capital. The company’s net loss widened to Rmb163m in 2019 from Rmb148m a year earlier, while revenues slid to Rmb144,600 from Rmb1.37m. Huajin Securities is the sponsor.

›ZHESHANG SEC FOLLOW-ON HURDLE has received approval for a proposed Rmb10bn private share placement from the Zhejiang bureau of the State-owned Assets Supervison and Administration Commission of the State Council. The brokerage will sell shares to up to 35 investors at a floor price equal to 80% of the 20-day average before the pricing day. Proceeds will be used for capital expenditure, working capital and debt repayment. The proposal still needs approval from the China Securities Regulatory Commission. ZHESHANG SECURITIES

›TRIO TAP EQUITY-LINKED MARKET Chinese biotechnology company 3SBIO has raised €320m (US$360m) from a five-year put three convertible bond. The zero-coupon CB was priced at a yield to maturity of 1.5% and a conversion premium of 25%. The top 10 investors took more than 60% of the allocation. Deutsche Bank and JP Morgan led the deal. Concurrently, the company offered to buy back a five-year put three €300m CB due 2022. As of last Wednesday, the company had received commitments from holders of the existing CB to sell about €150m of the deal. FAR EAST HORIZON has raised US$300m from a convertible bond. The five-year put-three CB came with a same-day upsize option of US$100m but it was not exercised. The deal was marketed at a coupon and yield-to-put/maturity of 34

2%–2.5% and priced at the top of the range. The deal was launched with a fixed conversion premium of 21.6%. The financial leasing company will use the proceeds for working capital and general corporate purposes. Citigroup, HSBC and UBS were bookrunners. China Mengniu Dairy has raised US$100m from an exchangeable bond, with shares of CHINA MODERN DAIRY as the underlying. There was a same-day upsize option of US$20m that was not exercised. The three-year-put-two EB priced at a coupon and a yield-to-put/maturity of 1.5% and an exchange premium of 25%. Mengniu Dairy will use the proceeds to refinance debt. BOC International was global coordinator, and bookrunner with Guotai Junan International.

›RISEN ENERGY PLANS RMB3.3BN CB ChiNext-listed RISEN ENERGY is preparing a Rmb3.3bn six-year convertible bond. Proceeds will be used to fund two highefficiency solar power module projects and build an innovation centre. The proposal still needs approval from shareholders and regulators.

›ZHEJIANG CENTURY HUATONG PLANS CB Shenzhen-listed ZHEJIANG CENTURY HUATONG GROUP plans to raise Rmb5.7bn from a sixyear convertible bond. The company will use Rmb4bn of the proceeds to acquire another 10% of Shanghai Long Rui Information Technology, an internet data centre company founded in 2019, raising its stake to 55.9%, and the rest to repay loans and replenish working capital. Zhejiang Century Huatong Group posted a net profit of Rmb2.73bn in 2019 on revenue of Rmb14.7bn. The proposal still needs approval from shareholders and regulators.

HONG KONG DEBT CAPITAL MARKETS ›NWD PERP DRAWS CROWD Hong Kong property developer NEW WORLD DEVELOPMENT last Tuesday priced US$650m senior perpetual bonds callable after six years at par to yield 5.25%, inside initial guidance of 5.75% area. International Financing Review Asia June 20 2020

Books were over US$3bn from more than 130 accounts, including US$100m from the leads. Asia took 91% of the Reg S bonds and Europe 9%. Private banks booked 50%, fund managers 47%, banks 2% and corporates 1%. NWD Finance (BVI) will issue the unrated notes with a guarantee from New World Development. If the perps are not called after six years, the coupon will reset to the initial spread over Treasuries. The coupon will then step up by 300bp over the five-year Treasury spread five years later. There is also a 300bp step-up if there is a change of control and the issuer does not redeem the notes. Distributions can be deferred but are cumulative and compounding. HSBC, UBS, Mizuho and JP Morgan were joint global coordinators and bookrunners. They were also joint lead managers with Heungkong Financial.

SYNDICATED LOANS ›BEST PACIFIC RAISES HK$1.8BN CLUB Hong Kong-listed BEST PACIFIC INTERNATIONAL HOLDINGS signed a HK$1.8bn-equivalent loan with eight banks last Monday. The 3.5-year multi-currency facility is equally split between a term loan and a revolving credit, and can be drawn in euros, Hong Kong dollars and US dollars. Hang Seng Bank was the coordinator of the club transaction, which offers an interest margin of 220bp over Hibor, Libor or Euribor, and a fee of 140bp. The other lenders are Bank of China Hong Kong, Bank of Communications Hong Kong branch, Bank of East Asia, CTBC Bank, Fubon Bank Hong Kong, Taishin International Bank Hong Kong branch and United Overseas Bank Hong Kong branch. Proceeds are for refinancing HK$790m outstanding of an existing syndicated loan, and for capital expenditure. Best Pacific is guaranteeing the loan, while six of its wholly owned subsidiaries incorporated in Hong Kong or the British Virgin Islands are the borrowers. The Hong Kong-listed guarantor makes materials used for lingerie manufacturing. For full allocations, see www.ifre. com.HK-LD-04

›CANVEST ENVIRONMENTAL IN DEBUT Hong Kong-listed CANVEST ENVIRONMENTAL PROTECTION GROUP is in the market for a debut HK$1.95bn (US$252m) three-year loan. Standard Chartered is the mandated

COUNTRY REPORT HONG KONG

lead arranger and bookrunner of the transaction, which offers an interest margin of 230bp over Hibor and has an average life of 2.86 years. MLAs joining with HK$350m or above will earn a top-level all-in pricing of 260bp based on a 85.8bp fee, while lead arrangers taking HK$250m–$340m receive an all-in of 250bp based on a 57.2bp fee. Arrangers taking HK$150m–$240m receive an all-in of 246bp based on a 45.76bp fee. Proceeds will be for general corporate purposes. A conference call for prospective lenders is expected to be held in early July. Canvest Environmental designs, builds and operates waste-to-energy plants. The company currently has 30 such plants in China, with a combined daily municipal solid waste processing capacity of 45,640 tonnes.

›BEIJING GAS BLUE SKY TAPS DEBUT LOAN Hong Kong-listed natural gas distributor BEIJING GAS BLUE SKY HOLDINGS has launched a

debut HK$800m-equivalent three-year loan into syndication. Natixis is the mandated lead arranger and bookrunner of the transaction, which offers an interest margin of 210bp over Hibor and has an average life of 2.6 years. MLAs committing HK$240m-equivalent or above will earn a top-level all-in pricing of 242.69bp based on a 85bp fee, and lead arrangers taking HK$120m–$239mequivalent will receive an all-in pricing of 227.31bp based on a 45bp fee. BG Blue Sky’s largest single shareholder, Beijing Gas Group, and its state-owned parent company, Beijing Enterprises Holdings, are providing letters of comfort for the loan. Proceeds will be for refinancing and general corporate purposes. A conference call with prospective lenders has been scheduled for June 23 and commitments are due by July 24. BG Blue Sky focuses on the mid to downstream parts of the natural gas industry value chain and owns equity

interests in the Hainan Haikou LNG receiving terminal, according to its website.

›COSCO-HIT RAISES HK$1.8BN CLUB has raised a HK$1.8bn five-year club loan from three banks, returning to the market after five years. Bank of China (Hong Kong), Hang Seng Bank and Industrial & Commercial Bank of China (Asia) are the lenders. Funds are for refinancing purposes. The borrower’s previous visit to the loan market was in June 2015, when it raised a HK$2bn five-year club deal with the same three lenders, according to Refinitiv LPC data. COSCO-HIT Terminals (Hong Kong) is a joint-venture between China Ocean Shipping (Group) and HIT Holdings, an indirectly wholly owned subsidiary of Hutchison Port Holdings Trust. It manages two berths at Terminal 8 East in Kwai Chung in Hong Kong. COSCO-HIT TERMINALS (HONG KONG)

Castle Peak Power transitions further „ Bonds Investors see merit in developing transition bond framework Hong Kong coal-fired power station operator CASTLE PEAK POWER last week sold a second transition bond, signalling its commitment to reducing its carbon footprint and securing a positive response from investors. The US$350m 2.2% 10-year Reg S bond priced at 99.138 to yield 2.297% or Treasuries plus 162.5bp, the tight end of final guidance and well inside initial guidance in the 210bp area. The issuer’s defensive credit profile attracted final orders of US$1.7bn from 93 accounts. Castle Peak did not go for a bigger size for internal reasons, choosing instead to tighten pricing further, said a banker on the deal. He said a minimal new issue concession was paid. Comparables such as Hong Kong Electric’s 2030s were quoted around Treasuries plus 170bp, while Castle Peak Power’s 2027s were seen in the plus 150bp area on the day of pricing, according to an investor note. Proceeds will be used to build an offshore liquefied natural gas receiving terminal as well as an associated subsea pipeline and gas receiving station. Natural gas is considered to be a more environmentally friendly source of energy than coal as it emits around half as much carbon. LNG is still a fossil fuel that causes carbon emissions, though, which explains why the



“transition” bond label was used rather than the green bond designation that is used for financing renewable energy projects. Still, transition bonds can play a role in helping countries meet their Paris Agreement commitments if the uses of proceeds are clearly identified and verified, according to Paul Lukaszewski, head of corporate debt for Asia and Australia at Aberdeen Standard Investments. “We therefore see significant merit to developing a strong transition bond framework that provides a robust structure to certify credible projects,” he said. An ESG banker also said Hong Kong has space constraints limiting its use of renewable energy, which makes natural gas the best alternative to coal power. “Due to the scarcity of land for renewable energy projects, natural gas has a role to play to phase down coal-fired electricity,” the banker said. Castle Peak introduced the transition bond concept to Asia in 2017 with a US$500m deal to help fund its shift from coal to natural gas. The Hong Kong government plans to cut carbon emissions by 26%–36% by 2030 from 2005 levels. Local electricity generation is the biggest contributor to carbon emissions, according to official data.

Insurers bought 25% of the bonds, the public sector 9%, fund managers 49%, banks 15%, and private banks on 2%. Asia took 97% and the rest went to Europe. The bonds tightened in secondary trading, reaching a spread of around 156bp over Treasuries. This was mainly because of the small issue size, said another banker on the deal. Castle Peak Power Finance Company is the issuer and Castle Peak Power Company is the guarantor. The senior unsecured notes have expected ratings of A1/AA– (Moody’s/S&P), in line with the guarantor. The bonds will be drawn off the issuer’s guaranteed US$2bn MTN programme. ANZ, BNP Paribas and Credit Agricole CIB were joint lead managers as well as joint bookrunners with HSBC and Standard Chartered Bank. HSBC is the structuring adviser for the energy transition bonds being issued under CLP’s climate action finance framework. DNV GL is the second-party opinion provider. Castle Peak Power is 70%-owned by CLP Power Hong Kong and 30% by China Southern Power Grid International (HK). JIHYE HWANG

International Financing Review Asia June 20 2020 35

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COUNTRY REPORT INDIA

INDIA DEBT CAPITAL MARKETS ›EXIM INDIA CUTS FUNDING COST has raised Rs7.4bn (US$97m) from five-year bonds at 5.62%. The rate was the lowest in the past decade for Exim India, said DCM bankers. The issuer was planning to raise up to Rs10bn, having targeted Rs3.5bn plus a greenshoe of Rs6.5bn. Crisil and Icra have assigned a AAA rating to the bonds. EXPORT IMPORT BANK OF INDIA

›GRASIM SELLS THREE-YEAR BONDS has raised Rs5bn three-year bonds at 5.9%, according to a market source. The conglomerate, part of Aditya Birla Group, was targeting Rs2bn plus a greenshoe of Rs3bn. Crisil has assigned a AAA rating to the bonds. GRASIM INDUSTRIES

›HDB FINANCIAL SELLS OCT 2023 NOTES HDB FINANCIAL SERVICES

raised Rs8.75bn from

bonds maturing on October 26 2023 at 6.6835%. The non-bank lender was targeting Rs4.5bn plus a greenshoe option of the same amount. Care and Crisil have assigned a AAA rating to the notes. HDFC Bank is the arranger for the bond offering. On May 26, HDB Financial Services sold Rs20bn two-part bonds.

›IRB INFRA SELLS BONDS TO ANAHERA has raised Rs7.5bn from three-year 10-day bonds at 10%, according to a filing on the BSE. The bonds were privately placed with Singapore-based Anahera Investment. They were secured by a portion of IRB’s units held in IRB Infrastructure Trust. The issuer has an option to redeem 25% of the outstanding debentures at any time within 18 months of the date of the allotment. A week earlier, it sold Rs3bn five-year bonds, rated A+ by India Ratings, at 9.55%. Separately, the issuer has taken a Rs66bn loan from state-owned banks to acquire tolling rights for an expressway between Mumbai and Pune, according to local news reports. IRB INFRASTRUCTURE DEVELOPERS

›MUTHOOT GROUP MISSES TARGET has raised Rs1.25bn from five-year bonds at 9.50%, lower than the targeted Rs5bn. It was planning to raise Rs250m plus a greenshoe option of Rs4.75bn. Crisil and Icra have assigned a AA rating to the bonds. HDFC Bank is said to be the arranger for the deal. On June 1, Muthoot Finance raised Rs5bn from three-year bonds at 9.05%. Muthoot Homefin India, rated AA by Crisil, issued Rs250m compared to a target of Rs500m from three-year bonds at 8.5%. Separately, Fedbank Financial Services, rated AA– by Care, raised Rs1.88bn from three-year bonds at 9.0%. MUTHOOT FINANCE

›NUVOCO VISTAS SEALS 2021 PRINT Indian building materials producer NUVOCO VISTAS CORP has raised Rs6.5bn from one-year 21-day floating rate bonds. It has fixed the floating-rate coupons at 8.50% until December 11 2020, 8.75% from December 12 2020 to March 11 2021 and 9.75% from March 12 2021 to July 9 2021, the maturity date. Crisil has assigned a AA rating to the bonds.

Fitch revises India’s rating outlook „ Bonds Action follows Moody’s recent downgrade but market reaction is muted Fitch has revised India’s sovereign outlook to negative from stable as the coronavirus pandemic significantly weakened the country’s growth outlook and exposed challenges associated with a high publicdebt burden. The REPUBLIC OF INDIA’s long-term foreigncurrency issuer default rating was affirmed at BBB–. The revision comes on the heels of a rating cut by Moody’s on June 2. Moody’s downgraded India to Baa3, a notch above junk, from Baa2, citing prolonged slow growth, rising debt and persistent stress in parts of the financial system. It maintained a negative outlook on the lowered rating, citing worsening government finances as the coronavirus continues to hurt the economy. S&P also rates India one notch above junk but is the only agency among the trio to still assign a stable outlook. Debt bankers said Fitch’s outlook change was expected after Moody’s rating cut. The



yield on India’s 10-year government security remained unchanged at 5.84%, according to Refinitiv data. Some economists said that the outlook change by Moody’s and Fitch were warning bells. “While rating agencies are cutting the economy some slack for the next six months or so, 2021 remains a crucial year for India to either disprove or affirm these concerns. We see potential for the next rating action to occur as early as the end of 2020 or the start of 2021,” Nomura Global Markets Research said in a note on June 18. Fitch forecasts the economy to contract by 5% in the current financial year due to the country’s lockdown since March 25, before a 9.5% rebound in the financial year beginning next April. Fiscal metrics have deteriorated significantly. General government debt is estimated to rise to 84.5% of GDP in FY21 from 71% in FY20. “The medium-term fiscal outlook is of particular importance from a rating

perspective but is subject to great uncertainty and will depend on the level of GDP growth and the government’s policy intentions,” Fitch said. India’s medium-term growth outlook may be negatively affected by renewed assetquality challenges in banks and liquidity issues at non-bank lenders. “A renewed rise in NPLs and the need for further financial government support now seem inevitable despite regulatory measures announced by the Reserve Bank of India,” Fitch said. India has announced measures such as an extension of the 90-day moratorium on recognition of impaired loans to 180 days and several relaxations in bank lending limits. “These moves will put a heavy onus particularly on public-sector banks to bail out the affected sectors and extend impairedloan recognition, heightening solvency risks if not met by adequate and timely capital support,” Fitch said. KRISHNA MERCHANT

International Financing Review Asia June 20 2020 37

The coupon will step up by 25bp if there is a one-notch rating downgrade to A+. If the rating falls to A+ or below, debenture holders have an option to accelerate repayment by giving a 30-day notice. On June 11, Nuvoco Vistas raised Rs8bn from 13-month bonds at 8.50%.

›TATA GROUP NBFCS SELL BONDS Non-banking financial companies under the Tata group have raised a total of Rs6.75bn from bonds. TATA HOUSING DEVELOPMENT raised Rs3bn from two-tranche bonds. The housing finance company fixed the yields at 8.75% on both a Rs2bn secured tranche and a Rs1bn unsecured portion. Both tranches mature on December 17 2021. Care has assigned a AA rating to the bonds. Standard Chartered Bank was the arranger. The notes have a call option if the rating is upgraded to AAA and a put option if the rating is downgraded below A. Separately, TATA CAPITAL FINANCIAL SERVICES sold Rs3.75bn two-tranche bonds. The non-bank lender issued Rs2.25bn zero-coupon bonds maturing on August 27 2021, and Rs1.5bn 6.85% notes maturing on September 23 2022. Icra has assigned a AAA rating to the bonds.

›TWO NBFCS PLAN BONDS is targeting Rs3.5bn from 18-month bonds at 8.75%, according to a market source. The non-bank finance company, which mainly lends against gold jewellery and ornaments, plans to issue Rs250m plus a greenshoe amount of Rs3.25bn. The bonds are rated AA by Crisil. Separately, TATA CLEANTECH CAPITAL, rated AAA by Crisil is targeting Rs1.3bn from two-year bonds at 7.00%. Both issuers have asked investors to place bids on the electronic platform on June 22. The non-bank lenders are yet to make an official announcement on the planned sale. MANAPPURAM FINANCE

SYNDICATED LOANS ›IRB INFRA RAISES RS66.1BN FOR TOLLWAY IRB Infrastructure Developers has reached financial close on a Rs66.1bn (US$868m) loan for a tollway operating concession. State Bank of India committed Rs50bn, while Union Bank of India provided the rest, 38

sources said. The 10-year financing pays an interest rate of 8%–8.5%. The borrower is project vehicle IRB MP EXPRESSWAY, which will collect tolls, operate and maintain a total of 205.4km, including the Mumbai-Pune Expressway and a section of NH-48, the old highway linking the two cities. IRB has to pay Rs82.6bn in fees to the Maharashtra State Road Development Corporation for the 10-year concession. It paid the first tranche of Rs65bn on Thursday, according to a company disclosure. The Mumbai-based roads developer will make the rest of the staggered fee payments in the second, third and fourth year of the concession.

EQUITY CAPITAL MARKETS ›PNB HOUSING MAY OPT FOR RIGHTS ISSUE may consider raising up to Rs17bn (US$224m) through a rights issue instead of the qualified institutional placement it had previously planned, people with knowledge of the transaction said. The company is yet to make a final decision but may change its plan in order to attract investors, as an issuer can currently only give a discount of up to 5% over the floor price in a QIP, while there is no limit in a rights issue. State-owned Punjab National Bank owns a 32.65% stake in the company and Carlyle Group 32.22%. PNB Housing shares are down 53% year to date. JM Financial and Kotak are the banks on the transaction. PNB Housing reported a net loss of Rs2.4bn in the fourth quarter that ended March 31, compared with a net profit of Rs3.8bn in the same period of 2019. The Covid-19 pandemic has adversely affected the company’s business. PNB HOUSING FINANCE

›SHRIRAM TRANSPORT TO RAISE CAPITAL plans to raise primary capital of up to Rs40bn. The commercial vehicle financier said in a stock exchange disclosure it will raise up to Rs15bn through a rights issue and up to Rs25bn through equity-linked instruments such as convertible bonds or warrants. The equity-linked instruments will be sold through a qualified institutional placement, follow-on offering or rights offer. Shriram Transport will seek shareholder approval for the capital raising plan on August 19. SHRIRAM TRANSPORT FINANCE

International Financing Review Asia June 20 2020

It is raising funds to strengthen its balance sheet amid the Covid-19 pandemic and India’s nationwide lockdown since March. ICICI Securities is working on the transaction and other banks are likely to join. The company last raised Rs5.84bn through a qualified institutional placement in 2010. Shriram Transport shares are down 43% year to date.

›ADITYA BIRLA FASHION HIRES FOR RIGHTS has hired Axis, BNP Paribas, CLSA, ICICI Securities and SBI Capital Markets to work on its rights issue of up to Rs10bn, people with knowledge of the transaction said. The rights issue is planned for this year and details on the entitlement and price will be decided soon. The company is raising the funds to repay debt and strengthen its balance sheet. Birla Group Holdings, which holds a 22.29% stake in the company, and Aditya Birla Group (17.49%) will subscribe to their entitlements and any unsold part of the rights issue. Shares of the fashion retailer are down 40% year to date. ABFR owns 4,363 stores in India. ADITYA BIRLA FASHION AND RETAIL

›UTI AMC MOVES CLOSER TO IPO has appointed Imtaiyazur Rahman as CEO and moved closer to the launch of a planned Rs40bn IPO. Rahman had been acting CEO for nearly two years since Leo Puri vacated the post in 2018, and his appointment removes one of the hurdles to the asset manager’s float. The IPO, comprising shares equivalent to 30.75% of the current capital, was originally slated for the first quarter but has been delayed as the AMC is awaiting approval from the Securities and Exchange Board of India. It is targeting a launch this year, subject to the evolution of the Covid-19 pandemic. State Bank of India, Life Insurance Corporation of India and Bank of Baroda will each sell 10.5m shares in the IPO while Punjab National Bank and T Rowe Price International will each sell 3.8m shares. The four Indian financial institutions each own 18.24% of UTI AMC, while T Rowe Price is the biggest shareholder with 26%. UTI AMC, India’s seventh-largest asset management company, reported revenues of Rs4.74bn in the six months ended September 30 2019, down from Rs5.07bn a year earlier. Profit after tax rose to Rs2.09bn from Rs1.32bn. UTI ASSET MANAGEMENT COMPANY

COUNTRY REPORT INDONESIA

Domestic assets under management stood at Rs118bn in the quarter ended March 31 2020, down from Rs151bn a year earlier. Axis, Bank of America, Citigroup, ICICI Securities, JM Financial, Kotak and SBI Capital Markets are the banks on the transaction. HDFC AMC and Nippon Life India AMC are India’s only listed mutual funds.

› STANDARD LIFE UPSIZES HDFC AMC DEAL Standard Life Investments will exercise the upsize option of its offer for sale of HDFC ASSET MANAGEMENT COMPANY shares, taking the deal size to Rs29bn. The transaction comprises 6m shares in the base deal and 6m in the upsize, adding up to 5.6% of the current capital. The clearing price has been set at Rs2,386.10 per share, a 1% premium to the floor price of Rs2,362, according to a stock exchange disclosure. At the clearing price the transaction will total Rs29bn. The entire offer was subscribed 1.15x. The floor price is a 7% discount to the pre-deal close of Rs2,539.95. HDFC AMC shares ended at Rs2,425.55 on Thursday. Standard Life will face a 12-week lockup on its remaining stake of 21.3% after completion of the deal. The shares are being sold to meet the minimum 25% free float regulatory requirement. Bank of America is sole bookrunner.

INDONESIA DEBT CAPITAL MARKETS › INDONESIA SUKUK GOES LONG A US$2.5bn three-tranche sukuk from the REPUBLIC OF INDONESIA (Baa2/BBB/BBB) was covered almost seven times, receiving final orders of US$16.66bn. Each tranche of the new 144A/Reg S offering was more than five times covered. A US$750m five-year green sukuk received final orders from 196 accounts totalling over US$5.53bn, including US$1.05bn from the leads. Asia, excluding Indonesia, took 40%, Indonesia 5%, Middle East and Islamic investors 32%, Europe 11%, and the US 12%. Fund managers bought 54%, banks 27%, central banks and sovereign wealth funds 15%, insurers and pension funds 3%, and private banks and others 1%. A US$1bn 10-year note received final orders of over US$5.6bn, including US$1.16bn from the leads, from 190 accounts. Asia, excluding Indonesia, took 34%, Indonesia 5%, Middle East and Islamic investors 31%, Europe 12%, and the US 18%. Fund managers bought 54%, banks 38%, insurers, pension funds and sovereign investors 6%, and private banks and others 2%.

A US$750m 30-year sukuk received final orders of over US$5.53bn, including US$395m from the leads, from 207 accounts. Asia, excluding Indonesia, took 44%, Indonesia 5%, Middle East and Islamic investors 10%, Europe 33%, and the US 8%. Fund managers bought 73%, banks 15%, insurers and pension funds 9%, and private banks and others 3%. The five-year green portion priced at par to yield 2.3%, inside initial guidance in the 3% area. The 10-year and 30-year tranches also priced at par to yield 2.8% and 3.8% respectively, inside initial guidance in the 3.5% and 4.5% areas. Perusahaan Penerbit SBSN Indonesia III is the issuer of the sukuk offering with Indonesia’s Ministry of Finance acting as obligor. BNP Paribas, Dubai Islamic Bank, HSBC, Maybank and Standard Chartered are joint bookrunners. BNP Paribas and HSBC are also joint green structuring advisers. Danareksa and Trimegah are co-managers.

› INDOMOBIL FINANCE EYES BONDS INDOMOBIL FINANCE INDONESIA plans to raise up to Rp1.5trn (US$106m) from three-tranche bonds with tenors of one, three and five years, according to a source close to the plans. The borrower, controlled by the Indomobil Group, provides motor vehicle and heavy-duty equipment financing services.

Pan Brothers to revive refi discussions „ Loans Garment manufacturer posts healthy first quarter earnings Indonesia garment manufacturer PAN is reviving discussions with relationship lenders on the refinancing of a US$138.5m loan due early next year after posting healthy first quarter earnings. Revenue for Pan Brothers rose 8% year on year to US$122m, while gross profit increased 16% in the first quarter to US$17.6m. However, Pan Brothers’ financial profile remains moderately weak, with a continuation of higher-than-expected working capital outflows, according to a Lucror Analytics report on June 9. Pan Brothers reported debt-to-Ebitda of 5x. “The company’s earnings could be impacted by a decline in apparel demand due to the ongoing Covid-19 crisis,” said Leonard Law, credit analyst at Lucror Analytics. “Moreover, working capital could be further impacted by rising receivables and inventories, as a result of the lockdowns.

BROTHERS

“Even though the company has pivoted towards producing masks and medical suits, it is unclear if sales from these new products can offset the decline at its core segments,” Law added. Earlier this year, the borrower was seeking a new three-year loan of up to US$320m primarily for refinancing, but it was put on hold. In mid-April, Pan Brothers suffered a downgrade to its credit rating to B1 from B2 from Moody’s, which highlighted increasing refinancing risk in the coming months and a narrowing of the company’s liquidity headroom. Pan Brothers last tapped the markets in December 2018 when it increased a loan it had closed in April that year to US$138.5m from a base size of US$110m via an accordion. ANZ, HSBC and ING Bank were the

International Financing Review Asia June 20 2020

mandated lead arrangers, bookrunners and underwriters of the three-year loan, which originally closed in April 2018 comprising a US$95m revolving credit facility tranche A and a US$15m revolver tranche B, as well as an accordion feature of up to US$40m. The deal paid a top-level all-in pricing of 189.1bp (offshore) or 239.1bp (onshore) based on interest margins of 175bp (offshore) or 225bp (onshore) over Libor, and remaining life of 2.83 years. The loan matures in February 2021. Eight lenders joined the deal in general syndication, according to Refinitiv LPC data, fewer than the 10 banks reported at the time. Pan Brothers is the borrower of the facility along with 12 subsidiaries. The Jakarta-listed borrower is a supplier to global clothing brands, including Nike, Adidas, Hugo Boss, Calvin Klein and H&M. CHIEN MI WONG

39

The tentative offering period is July 20-21. CIMB Niaga, Danareksa, DBS Vickers, Indo Premier, Mandiri and RHB Sekuritas are said to be the lead arrangers. The funds will be used for financing activities. The issuer is yet to make an official announcement on the planned bond sale.

› INDONESIA EXIMBANK EYES A TRILLION INDONESIA EXIMBANK plans to raise Rp1trn from a bond offering that will include a Rp100bn sukuk, according to the offer document. It has announced indicative yield ranges of 6.5%–7.5% for a 370-day tranche for traditional and sukuk mudaraba notes and 7.5%–8.5% for three-year traditional bonds. The books opened on June 12 and close on June 22. The funds will be used to meet financing requirements. Pefindo has assigned a AAA rating to the bonds. CIMB Niaga, Danareksa and Mandiri Sekuritas are said to be the arrangers.

› SMI TO PRINT BONDS AS BI CUTS RATE is planning to raise up to Rp1trn from a three-tranche bond issue, according to an offer document. The Indonesian infrastructure financing company has set indicative yields in the range of 6.25%–7.5% for a 370-day piece, 7.15%–8.4% for a three-year tranche and 7.5%–8.75% for a five-year piece. Books opened on June 18 and close on 26 July. The funds will be used for financing infrastructure projects. The bonds are rated AAA by Pefindo. Mandiri Sekuritas is the lead arranger. Bank Indonesia cut its key policy rate by 25bp to 4.25% on June 18. The central bank also lowered the deposit and lending facility rates by 25bp each to 3.5% and 5%, respectively. The bond market response was muted, with short-end Indonesian bond yields trading 3bp–5bp lower, said analysts. Indonesia’s 10-year government

SARANA MULTI INFRASTRUKTUR

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benchmark yield is down to 7.17% from its March peak of 8.3%. BI’s priority is to keep debt markets and yields steady by capping financing costs as the borrowing programme to fund the revised deficit gets underway, said DBS in a note today. BI has been actively buying government bonds from the primary and secondary market to stabilise yields, part of its quantitative easing measures.

to renew a facility it closed last year, the Tokyo Stock Exchange-listed real estate investment trust said last Thursday. Mizuho Bank, MUFG and Sumitomo Mitsui Trust Bank are the arrangers, with the first two banks also acting as facility agents. The trio also arranged the existing oneyear facility of the same size in June last year. The borrower invests in diversified real estate assets in Japan.

› EMERGENCY FUNDING FOR JR FREIGHT

JAPAN SYNDICATED LOANS › MITSUBISHI RAISES HYBRID FOR REFI Japanese trading firm MITSUBISHI is raising ¥160bn (US$1.49bn) via a 60-year subordinated loan to refinance bonds issued in June 2015, according to reports from rating agencies. Signing is slated for Thursday. The deal is split into a ¥111bn term loan A and a ¥49bn term loan B and can be repaid after five years. The loan carries a 25bp step-up in the interest margin after 10 years and a 75bp step-up after 25 years. The initial margin is undisclosed. Rating & Investment Information and S&P have assigned A and BBB+ ratings, respectively, to the loan and are treating it as 50% equity. 4HEûBORROWERûISûRATEDû!!¦!û2)30  The borrowing is Mitsubishi’s third hybrid loan after a ¥100bn 60-year debut deal in July 2015 and a ¥100bn 60-year subordinated loan in November 2016.

› SKYLARK LIFTS COMMITMENT LINE SKYLARK HOLDINGS has increased its existing one-year commitment line to ¥100bn from ¥40bn to deal with the impact of the coronavirus pandemic, the Tokyo Stock Exchange-listed restaurant chain operator said in a statement last Thursday. The facility was originally signed on March 31. Norinchukin Bank and Sumitomo Mitsui Trust Bank joined the original lending group. Mizuho Bank was the arranger and agent, while MUFG and Sumitomo Mitsui Banking Corp were the lenders. Funds are for working capital purposes.

› UNITED URBAN TO RENEW ¥24BN LINE UNITED URBAN INVESTMENT is set to sign a ¥24bn one-year commitment line on June 26

International Financing Review Asia June 20 2020

signed a ¥21bn oneyear commitment line for emergency funding, the Tokyo-based company said in a statement on June 12. Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corp are providing the financing, which can be drawn during times of emergency such as natural disasters and the coronavirus pandemic. The borrower last tapped the syndicated loan market in March when it raised a ¥8bn 10-year loan, according to Refinitiv LPC data. SMBC was the arranger.

JAPAN FREIGHT RAILWAY

› MATSUYA TAPS BILATERAL FACILITIES has signed one-year commitment lines totalling ¥12bn to deal with the impact of the coronavirus pandemic, the Tokyo-listed department store said in a statement on Monday. MUFG, Sumitomo Mitsui Banking Corp and Yamanashi Chuo Bank are providing the facilities as bilaterals. The borrower last tapped the syndicated loan market in February 2017 when it raised a ¥9.5bn 10-year loan, according to Refinitiv LPC data. MUFG was the arranger.

MATSUYA

EQUITY CAPITAL MARKETS › NORITSU KOKI SELLS JMDC BLOCK Diversified manufacturer Noritsu Koki raised ¥15.9bn (US$149m) through a block trade in TSE-listed subsidiary JMDC last Thursday. The block, comprising 2.59m shares in the Japanese medical data company or 10% of outstanding, was sold at ¥6,150 each, near the top of the indicative price range of ¥6,030–¥6,164. The final price represented an 8.2% discount to the pre-deal close of ¥6,700 on June 17. The book was multiple times oversubscribed with long-only funds and hedge funds participating. Allocations were heavily skewed, with the top 10 investors taking 85% of the offering. There is a 90-day lock up for the vendor.

COUNTRY REPORT NEW ZEALAND

The sale takes Noritsu Koki’s stake in the company to 52.94% from 62.94%. Macquarie was the sole placing agent.

property project for M$1.1bn. MRCB has no outstanding bonds, according to Refinitiv data.

› PTP ANCHORS TRIPLE-TRANCHER

MACAU DEBT CAPITAL MARKETS › WYNN MACAU FAILS TO TIGHTEN Casino operator WYNN MACAU on June 12 priced a US$750m 5.5-year non-call two bond offering at par to yield 5.5%, unchanged from initial price talk. The 144A/Reg S bonds are expected to be rated B1/BB– (Moody’s/S&P). Deutsche Bank was sole global coordinator and lead left bookrunners. Banco Nacional Ultramarino, Bank of China Macau branch, Bank of Communications Macau, BNP Paribas, BOC International, Bank of America, DBS, ICBC (Macau), JP Morgan, Scotia Bank, SMBC Nikko and UOB were the other bookrunners.

„ CORRECTION The S&P rating of Wynn Macau was misstated in the story “MGM adds to casino comeback” published in last week’s edition of IFR Asia. The correct rating is BB–

PELABUHAN TANJUNG PELEPAS last Thursday settled five, seven and 10-year sukuk to raise a combined M$900m. The M$270m five-year tranche was priced at par to yield 3.74%, the M$360m sevenyear tranche was priced at 3.95% and the M$270m 10-year tranche at 4.05%. The notes were issued off a M$1.9bn sukuk murabaha programme. Proceeds will be used to repay or refinance the PTP group’s debt. RHB Investment Bank was sole lead manager for the deal, rated AA– by Marc. PTP provides port and harbour operation services in the Malaysian state of Johor.

› TROPICANA SECURES SUKUK Malaysian property developer TROPICANA plans to sell three and five-year sukuk to raise up to M$589m. The bonds will be secured against certain

plots of land with a combined value of over M$1.4bn and against certain designated accounts. CIMB, Hong Leong Investment Bank, HSBC Amanah Malaysia and Maybank are joint lead managers for the deal, which may launch as early as this week. The sukuk will be issued off a M$1.5bn sukuk programme, rated A+ by Marc. HSBC Amanah Malaysia is sole principal adviser and lead arranger for the programme. The company raised M$200m from a seven-year secured sukuk offering in midMay at 5.8% via HSBC Amanah.

NEW ZEALAND DEBT CAPITAL MARKETS › KAURI MARKET PICKS UP THE SLACK The Kauri market continues to pick up speed as SSA issuers tap pent up demand following an historically quiet first two

SkyCity seeks funding „ Loans Gaming company taps equity and debt

MALAYSIA DEBT CAPITAL MARKETS › MRCB SETS UP PERPETUAL PROGRAMME MALAYSIAN RESOURCES (MRCB) will establish a sukuk murabaha programme for up to M$5bn (US$1.17bn). The property and construction company plans to use the proceeds to fund business growth and meet future financing requirements. The programme, rated AA by Marc, will be valid in perpetuity. HSBC Amanah Malaysia and Maybank are joint principal advisers, joint lead arrangers and joint lead managers. MRCB enjoys strong support from its major shareholder, the Employees Provident Fund, which has helped finance some of its projects. MRCB’s group borrowings fell to M$1.8bn at the end of 2019 from M$3.4bn in 2015 after the company sold the Eastern Dispersal Link Expressway for M$1.3bn and an 80% stake in the Bukit Jalil Sentral

SKYCITY ENTERTAINMENT GROUP is looking to raise NZ$560m (US$362m) from equity and debt to boost its liquidity amid the coronavirus pandemic. The gaming and entertainment company is seeking an equity raising of NZ$230m, new bilateral loans totalling NZ$160m and an extension of NZ$170m of its existing debt, according to filings to the New Zealand Exchange and the Australian Securities Exchange on Wednesday. The new NZ$160m borrowing comprises a NZ$100m bridge loan from Commonwealth Bank of Australia available for up to 18 months and a NZ$60m facility from an unnamed bank due in June 2022. The new loans are subject to SkyCity raising NZ$200m in new equity, net of fees, the filings said. SkyCity has also won covenant waivers from existing banks and US private placement noteholders for the December 31 and June 30 2021 testing periods. Future dividend payments will be suspended for this period. The company said pro-forma adjusted liquidity of NZ$586m will be available following the equity raising to meet future funding obligations. It will redeem NZ$125m

International Financing Review Asia June 20 2020

of bonds in September. SkyCity re-opened its New Zealand properties, excluding the Wharf Casino, on May 14. Adelaide Casino in Australia is also expected to re-open in late June. All of the company’s properties in New Zealand and Australia, including restaurants, bars, hotels and casinos, had closed in late March. SkyCity is also operator of the NZ$703m New Zealand International Convention Centre project, one of the largest construction projects in the country. In May, SkyCity and the New Zealand government declared the coronavirus outbreak as a force majeure event for the development of the project. The casino operator warned earlier that construction work for the project would not be possible because of country-wide lockdown to curb the spread of the virus. The convention centre had already faced delays late last year after a fire ripped through the complex. SkyCity now has until January 2025 to complete the project. Fletcher Building, the country’s largest construction firm, is building the convention centre. MARIKO ISHIKAWA

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months of the year and investors look to put over NZ$3bn (US$1.9bn) of June redemptions back to work. “We have not seen bank issuance since February and the Local Government Funding Agency has seen some tightening under the Reserve Bank’s Large Scale Asset Purchases programme,” said Glen Sorensen, syndication manager at ANZ Bank New Zealand. “I think these factors have contributed to a window of opportunity for SSA issuers to meet institutional investor demand in New Zealand dollars.” Norwegian agency KOMMUNALBANKEN, rated Aaa/AAA (Moody’s/S&P), raised NZ$500m last Friday from a 10-year Kauri bond sale arranged by sole lead ANZ. The 1.25% July 2 2030s, which had an indicative minimum issue size of just NZ$50m, priced at 98.586352 for a yield of 1.402%, in line with mid-swaps plus 71bp guidance and 64.4bp over the April 2029 NZGB. “The KBN 10-year provided a tenor we rarely see in public Kauri issuance, and investors took the opportunity to pick up the yield on offer at a healthy spread to NZGBs, with new and diverse investors in the book,” Sorensen noted. On the same day INTER-AMERICAN DEVELOPMENT BANK, rated Aaa/AAA (Moody’s/

S&P), issued a NZ$200m a five-year Kauri bond via CBA. The 0.75% July 3 2025s priced at 99.86784 to yield 0.777%, 43bp wide of mid-swaps, equivalent to 38.3bp over the April 2025 NZGB. These deals took year-to-date Kauri issuance up to NZ$3.065bn from seven SSAs over 10 transactions. This compares with NZ$3.325bn of Kauri supply from nine transactions in the whole of 2019, which was well down from 2018’s issuance total of NZ$6.15bn. The annual record of NZ$6.3bn was set in 2014 and repeated in 2015.

The casino company is also raising NZ$50m from retail shareholders through a share purchase plan. Following the placement, SkyCity will have pro-forma adjusted liquidity of NZ$586m. SkyCity has sought covenant waivers from existing lenders for the December 2020 and June 2021 testing periods. The company has also decided to redeem NZ$125m of bonds in September, two years ahead of schedule. It expects to keep its BBB– rating from S&P. Credit Suisse, Jarden Partners and UBS are the joint lead managers.

EQUITY CAPITAL MARKETS › SKYCITY STRENGTHENS BALANCE SHEET SKYCITY ENTERTAINMENT GROUP has raised NZ$180m (US$115m) through a placement to strengthen its balance sheet in response to the impact of Covid-19. About 72m shares were sold at a fixed price of NZ$2.50 each, or a 6.4% discount to the pre-deal close of NZ$2.67 on June 16. The placement was strongly supported by existing institutional shareholders as well as attracting demand from other investors.

PHILIPPINES DEBT CAPITAL MARKETS › AYALA LAND TO SELL RETAIL BONDS Property developer AYALA LAND has fixed the yield at 3%, payable quarterly, for Ps10bn (US$199m) of two-year retail bonds, according to a filing on the Philippine Stock Exchange. It is targeting Ps6bn plus a greenshoe

Jollibee brushes off uncertainties „ Bonds Philippine fast-food chain re-visits bond market amid revenue declines Jollibee Worldwide, a subsidiary of Philippine fast-food company JOLLIBEE FOODS, has raised US$600m from a Reg S dual-tranche bond that was covered almost three times, despite heavy revenue declines due to Covid-19. A US$300m 4.125% long five-year portion due January 2026 priced at 99.996 to yield 4.125%, inside initial guidance of 4.375% area. A US$300m 10-year piece priced at par to yield 4.75%, inside initial guidance of 5% area. The senior unsecured notes received final combined orders of over US$1.6bn from 84 accounts. The bonds priced around fair value, referencing other Philippine issuers such as International Container Terminal Services, according to a banker on the deal. The port operator’s 2025s and 2030s were bid at a cash price of 107.125 to yield 4.34% and 100.625 to yield 4.671%, respectively, last Thursday when Jollibee’s new bonds were priced.

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On the other hand, Jollibee’s new unrated notes priced much wider than those of Philippine telecom company PLDT, rated Baa2/BBB+/BBB, earlier last week. Investors still want a pick-up for weaker credits, said another banker away from the deal. Both new tranches from Jollibee traded slightly up in secondary on their first trading day last Friday at a cash price of 100.3. The bond offering, the company’s second this year, came as the fast-food giant saw revenue decline by 2% year on year in the first quarter, contributing to a net loss of Ps1.7bn (US$34m). Losses are expected to accelerate due to the coronavirus lockdown measures, while analysts said Jollibee’s funding needs will remain high because the company’s business model relies on new shop expansion that involves high fixed costs. “For investors who plan to have a longerterm investment horizon on Jollibee Foods Corp bonds, we see potential widening pressure on its yield levels going forward

International Financing Review Asia June 20 2020

because of its deteriorating credit profile and continued US dollar bond supply risk,” said Nomura credit analyst Eric Liu. Jollibee in January issued a US$600m guaranteed senior perpetual non-call five bond, its first in US dollars, which priced at par to yield 3.9%. Asia took 89% of the new long five-year portion and the rest went to EMEA. Asset managers and fund managers bought 47%, banks 44% and private banks and others 9%. Asian investors also took the bulk of the new 10-year piece, buying 81%, while the rest went to EMEA. Asset managers and fund managers took 51%, banks 29% and private banks and others 20%. Proceeds will be used for general corporate purposes. Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley were joint global coordinators as well as joint lead managers and joint bookrunners with BPI Capital, Credit Suisse and UBS. JIHYE HWANG

COUNTRY REPORT SINGAPORE

amount of Ps4bn. The books opened on June 15 and closed on June 19. BDO Capital & Investment Corp and China Bank Capital Corp are the lead arrangers for the bond offering. The proceeds will be used for capital expenditure on areas such as residential development and its leasing business. The notes will be allotted on June 26.

› BPI TO SELL COVID-19 BONDS plans to issue the first Covid-19 response bonds in the Philippines to support corporates that have been hit hard by the pandemic, according to an exchange filing. Issuers in Asia are leading the way in selling social bonds to help businesses meet needs arising from the coronavirus crisis. In February, Bank of China’s Macau branch sold a US$638m-equivalent senior bond that was the first social bond issue in the international market with an explicit Covid-19 theme. The proceeds funded loans to small and medium-sized enterprises in Macau that were affected by the fallout from the virus. The BPI issue qualifies as a social bond under the ASEAN Social Bonds Standards in the Philippines. The proceeds will be used to finance eligible micro, small and medium enterprises under the bank’s recently established Sustainable Funding Framework. The loans to small enterprises are aimed at helping generate employment. “MSMEs account for a relatively small percentage of total bank borrowings but a very large percentage of total nationwide employment,” said Cezar P Consing, BPI president and CEO. The planned offering supplements BPI’s efforts to support the recovery of MSMEs which include a loan payment deferral programme and a waiver of fees for online fund transfers. The bank is yet to announce the details of the bond offering. The Philippine economy will likely contract by 1.9% this year because of the impact of the pandemic and a local volcanic eruption earlier this year, the World Bank said on June 9.

launched in 2019 as part of a diversification strategy. The final terms will depend on market conditions ahead of the launch. In April, RCBC managed to increase the size of a domestic bond offering despite a lockdown in Metro Manila and the rest of Luzon island. The bank sold Ps7.0543bn two-year notes at a coupon of 4.848%. The issue size was increased from a minimum of Ps3bn because of strong demand.

BANK OF THE PHILIPPINE ISLANDS

› RCBC TO ISSUE FIFTH TRANCHE RIZAL COMMERCIAL BANKING CORP is planning to issue the fifth tranche of fixed-rate peso bonds under its Ps100bn bond and commercial paper programme, according to a filing on the Philippine Stock Exchange. The bank has raised a total of Ps37.6bn under the programme since it was

SINGAPORE DEBT CAPITAL MARKETS › FIRST SPONSOR REPURCHASES NOTES has repurchased 22% of a S$100m (US$72m) 3.25% bond due 2025, four months after issuing the notes. The Singaporean property company said it paid S$22.253m for the S$22m of bonds in a privately negotiated deal with unrelated third parties. The bonds were seen at 98.646 on June 11, the day of the buyback. The purchase was funded via bank credit facilities that are cheaper than the cost of the bonds, the company said. The notes will be held by the group, which means that the outstanding amount of the 2025s remains at S$100m. First Sponsor, which has real estate assets in China and Europe, sold the 2025s in midFebruary.

FIRST SPONSOR GROUP

› HDB BUILDS HIGHER Singapore’s HOUSING AND DEVELOPMENT BOARD, rated Aaa by Moody’s, last Tuesday raised S$800m from a 10-year bond priced at par to yield 1.265%. The issue size was increased from a targeted S$500m, suggesting demand for long-dated bonds was healthy despite a tight spread of around 32bp–34bp over Singapore dollar SOR. DBS and UOB were joint lead managers and bookrunners for the deal, which will be drawn from a S$32bn multi-currency MTN programme. Settlement is on June 24, with proceeds to be used for public housing programmes, working capital needs and debt refinancing. The public housing agency last sold S$600m of 10-year notes in July last year at 2.27% with a spread of around 34bp over SOR. Its last foray was in February when it raised S$700m in 1.76% sevenyear notes. International Financing Review Asia June 20 2020

› OUE CT SELLS FIVERS last Monday raised S$100m in five-year bonds priced at par to yield 4% with a spread of 340.7bp over Singapore dollar SOR. Pricing was flat to final price guidance and in line with fair value using outstanding bonds of the OUE group as references, said online credit research company iFast. Parent company OUE has a 3.55% note due May 2023 that was quoted yesterday at 3.7% with 2.9 years to maturity. The Singapore-listed property trust held investor calls on June 9 but a launch was impeded by volatile markets that week. OUE CT Treasury is the issuer of the notes, which are guaranteed by DBS Trustee in its capacity as the REIT’s trustee. Settlement is on June 24, with proceeds to be used to refinance debt. OCBC and Standard Chartered Bank were joint lead managers.

OUE COMMERCIAL REIT TRUST

SYNDICATED LOANS › VITOL RETURNS FOR SMALLER REFI Energy trader Vitol is reaching out to its relationship lenders for its annual loan market visit, seeking a smaller borrowing of around US$900m–$1bn than the loan it is refinancing. The borrower is self-arranging the oneyear facility, which will close as a club. Vitol is seeking commitments of US$125m–$150m from banks this year as MLABs, slightly smaller than the US$150m it obtained at that level on its previous visit last year. Proceeds from the latest loan will refinance a US$2.17bn 364-day revolving credit facility completed in July last year for VITOL ASIA with 21 lenders. Pricing is said to be higher than what the Singapore unit paid on its borrowings in the last two years. The July 2019 loan paid the same interest margin of 55bp over Libor that was offered on a US$1.855bn 364-day revolver from July 2018. The top-level all-in pricing on the July 2018 loan was 70bp.

› OLAM RAISES US$250M SLL Singapore-headquartered food and agribusiness OLAM INTERNATIONAL has signed a US$250m sustainability-linked loan, the third such deal the company has agreed in two years. The revolving credit facility comprises a US$50m one-year tranche, a US$100m two-year tranche and a US$100m three-year tranche. 43

CapitaLand introduces Sora-linked loan „ Loans Borrower first to use interest rate benchmark in Singapore CAPITALAND has broken new ground with a S$150m (US$108m) three-year loan based on the Singapore Overnight Rate Average, the first such borrowing in Singapore. The Sora-referenced borrowing is part of a S$300m sustainability-linked loan from OCBC, according to a press release from CapitaLand on Tuesday. The deal is a milestone in the transition from the Singapore dollar swap offer rate to an alternative interest rate benchmark ahead of the expected discontinuation of the US dollar Libor on which SOR is based. Libor will be phased out by the end of 2021. “CapitaLand’s pioneer adoption of the Sora-based loan enables us to contribute to how Sora will be understood, structured and priced, in the process preparing the groundwork for mainstream adoption in the future,” said Andrew Lim, group chief financial officer of CapitaLand. The Sora-linked loan’s interest rate comprises two components – a compounded average of daily Sora rates

Interest margins on the financing are tied to the achievement of certain sustainability key performance indicators. The KPIs are aligned with three purpose outcomes of Olam’s sustainability strategy: prosperous farmers and food systems; thriving communities; and regeneration of the living world. KPIs will be tracked and reported by Olam’s corporate responsibility and sustainability team. Ernst & Young will independently assess the achievement of the KPIs. ANZ, DBS Bank and Standard Chartered were senior mandated lead arrangers and joint sustainability coordinators on the financing while Rabobank was mandated lead arranger. Standard Chartered is facility agent. Olam agreed Asia’s first SLL in March 2018 with a US$500m club loan with an interest margin tied to the company’s performance on environmental, social and governance metrics. The company also agreed a US$525m SSL in September 2019 through its wholly owned subsidiary Olam Treasury, after agreeing the world’s first digital loan in April 2019 a US$350m facility with pricing linked to the company’s progress towards digital transformation. 44

and an applicable margin. Unlike the application of SOR, where the interest rate is determined at the start of the interest period, Sora is a backward-looking average rate of unsecured overnight interbank Singapore dollar transactions. In a Sora-referenced loan, the daily Sora rates are compounded in arrears and the interest rate is calculated by the end of the relevant interest period. The compounded average Sora on CapitaLand’s loan will be calculated in arrears using a five-business day backwardshifted observation period methodology, the company added. In August 2019, the Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee identified Sora as the most suitable interest rate benchmark to replace the SOR. “The deal will provide guidance for the development of Sora-pegged loans, pave the way for greater market acceptance and help such loans gain traction in the market,” said

MIRZAAN JAMWAL

› SINGAPORE AIR REPAYS S$2BN BRIDGE

RESTRUCTURING

has repaid S$2bn (US$1.44bn) of a bridge loan obtained in March from the proceeds of a jumbo rights issue, according to a company announcement on Tuesday. An additional S$200m from the S$8.8bn rights issue which closed on June 5 will go towards funding the carrier’s operating expenses, the announcement said. Singapore government investment arm Temasek Holdings, an existing shareholder in Singapore Airlines, backed the rights issue. In March, Singapore Airlines obtained a S$4bn bridge loan from DBS Bank to support its near-term liquidity requirements. Earlier this month, the airline announced it had raised S$900m through loans secured by its aircraft. It had also arranged new lines of credit and a short-term loan with several banks for further liquidity of more than S$500m. The total of all fundraisings for Singapore Airlines is among the largest for any carrier since the coronavirus outbreak, which has caused liquidity issues at several airlines reeling from restrictions on travel, according to Reuters on June 8.

SINGAPORE AIRLINES

International Financing Review Asia June 20 2020

Elaine Lam, OCBC’s head of global corporate banking. The S$300m SLL also marks a quick return to the loan markets for CapitaLand, which raised a S$500m bilateral SLL from United Overseas Bank in May. The real estate developer and its investment trusts have raised over S$2.72bn in less than two years through sustainable financings, the company said. Headquartered and listed in Singapore, CapitaLand’s global portfolio was valued at over S$131.9bn as at December 31 2019. It manages seven listed REITs and business trusts as well as over 20 private funds, with a portfolio that spans commercial, retail, business parks, industrial and logistics, integrated development, urban development, and residential properties. The group focuses on Singapore and China as its core markets and continues to expand in markets such as India, Vietnam, Australia, Europe and the United States.

› FALCON GETS EXTENSIONS FALCON ENERGY GROUP has obtained approval from the Singapore High Court to extend the deadline for the submission of a restructuring plan to July 9. The court on June 11 also granted the extension of a moratorium against legal proceedings to July 20 from June 18. The cash-strapped Singaporean oil and gas services company was instructed to file an affidavit to show updated letters of support by July 9. The court-sanctioned restructuring plan was to have been filed by June 5, but the company asked for a four-week extension. The plan had to be revised because of the collapse in US crude oil prices and the Covid-19 pandemic. Falcon Energy is restructuring debt including S$50m (US$36.7m) of bonds due on September 19. Under the current plan, bondholders have been asked to swap half of their investments for equity and convert the other half into convertible bonds. Rajah & Tann Singapore is Falcon’s legal adviser and KPMG Services is the independent financial adviser.

COUNTRY REPORT TAIWAN

› HYFLUX EXEMPTION HEARING SET FOR JULY The Singapore High Court will hold a hearing on July 27 on applications from HYFLUX creditors to be exempted from a moratorium against legal proceedings. A group of bank lenders, referred to as the unsecured working group (USG), is seeking court approval to pursue proceedings that will place the cashstrapped Singaporean water treatment company under judicial management. The court also said it will hear any application for exemption from RBC Investors Services Trust Singapore, as trustee of ESR-REIT, and/or HSBC Institutional Trust Services Singapore as trustee of Ascendas REIT. The two REITs are claiming certain amounts on various properties that Hyflux leases from them. The moratorium expires on July 30. Hyflux is restructuring S$2.8bn of debt, including S$900m of subordinated preference shares and perpetual securities and S$265m of senior unsecured bonds. It is seeking new strategic investors even as it continues talks with United Arab Emiratesbased Utico. The Singapore water treatment company said a S$400m restructuring agreement with Utico lapsed on May 26 as there was no agreement to extend it. Utico has extended a deadline to June 30 for Hyflux to accept a revised offer that was changed from a combination of cash and stock to an all-stock payment. Hyflux had sought clarification from Utico on the revised offer, and to remind the company that the agreement had “ipso facto” ceased, unless a written acceptance of the revised offer emerged. In its response, the UAE water services company insisted that the restructuring agreement remained in effect as it had extended the deadline for the revised terms. But it also appeared to have made a slight change to the all-stock offer. Utico said small investors holding perpetual bonds and preference shares might get cash payments of up to S$10,000, an offer it had made under the restructuring agreement. It gave no further details.

The company is also proposing to swap 45% of its S$139m senior secured zero coupon bonds due 2024 into shares, with the maturity of the remaining 55% to be extended to 2025. A scheme meeting is expected to be held in July or August at which unsecured creditors can vote on the proposals. Holders of the zero-coupon notes will vote separately in August. KrisEnergy is restructuring a total of S$569.7m of debt, including a fully-drawn US$200m revolving credit facility owed to DBS Bank. The company has not made principal and interest obligations on all of the debt, except for partial repayments on the RCF. The second attempt at restructuring the bonds comes more than three and a half years after the company won consent in December 2016 from bondholders of more than S$330m to extend the maturities of two bonds by five years and reduce the coupons. The Singapore High Court last Thursday granted an extension of the moratorium against legal proceedings to August 27.

› SWIBER SEEKS LONGER JM Cash-strapped SWIBER HOLDINGS and subsidiary SWIBER OFFSHORE CONSTRUCTION have applied to the Singapore High Court to extend their respective judicial management periods to December 31 from June 30. A hearing on the applications will be held on June 26. An extension to the end of the year would give the beleaguered marine services company time to hammer out a definitive agreement with strategic investor Rawabi Holding. The Saudi company signed a binding term-sheet earlier this month for a US$200m investment to rescue Swiber.

SOUTH KOREA DEBT CAPITAL MARKETS

› KRISENERGY PLANS EQUITY SWAP

› HYUNDAI CAPITAL SELLS GREEN SWISSIE

KRISENERGY has proposed swapping all of its unsecured debt of US$270.2m into equity as part of a second restructuring exercise. The unsecured debt comprises unsecured term loans of US$34.4m, S$130m 4% senior bonds due 2022 and S$200m 4% senior bonds due 2023. The proposed conversion to equity would give the unsecured creditors a combined 35% stake in the cash-strapped Singaporean oil exploration and production company after the restructuring.

HYUNDAI CAPITAL SERVICES,

rated Baa1/BBB+/ BBB+, has printed a SFr300m (US$302m) three-year green bond at par to yield 0.7525% or mid-swaps plus 135bp. This was at the wide end of 130bp–135bp guidance. The bonds are rated BBB+ by S&P and KPMG provided the green attestation letter. Swiss investors took all the bonds. Asset managers bought 61%, banks and private banks 24%, treasuries 9%, insurers 4%, and pension funds 2%. International Financing Review Asia June 20 2020

UBS was the lead manager. The new bonds are the second Swiss franc offering from the South Korean consumer financial services provider this year.

TAIWAN DEBT CAPITAL MARKETS › CHAILEASE HIRES FOR BOND OFFERING has hired Mizuho Securities, HSBC and SMBC Nikko as joint global coordinators, joint bookrunners and joint lead managers for a proposed Reg S offering of US dollar senior guaranteed notes. The Taiwanese leasing company held investor conference calls last week. The proposed bonds will be issued by Chailease International Finance Corp and guaranteed by Chailease Holding under a US$500m MTN programme. The notes have an expected BBB– rating by Fitch, on par with the guarantor.

CHAILEASE HOLDING

SYNDICATED LOANS › INVENTEC LAUNCHES US$480M REFI Taiwan-listed notebook computer maker INVENTEC has launched a US$480m loan into general syndication. Bank of Taiwan and Hua Nan Commercial Bank are the mandated lead arrangers and bookrunners of the bullet loan, which has a tenor of two years, with a three-year extension option at the end of the second year. The unsecured loan offers an interest margin of 80bp over Libor and commitment and extension fees of 10bp each. The borrower will pay any excess interest rate beyond a 40bp difference between TAIFX and Libor. Co-arrangers with commitments of US$40m or more earn an upfront fee of 5bp and participants with US$20m–$39m receive a fee of 3bp. Responses are due by July 24. Proceeds of the latest loan will refinance a US$480m three-year bullet loan signed in October 2015 that carries a two-year extension option at the end of the third year with a 12bp fee. Hua Nan was the sole MLAB and facility agent of that loan, which offers a margin of 110bp over Libor. The borrower would pay any excess interest rate beyond a 38bp difference between TAIFX and Libor. 45

IBK sells Korea’s second Covid-19 bond „ Bonds ESG investors put in around a fifth of orders for US$500m deal INDUSTRIAL BANK OF KOREA, rated Aa2/AA–/ AA–, last Monday raised US$500m from the country’s second Covid-19 response bond. The five-year senior unsecured social bonds priced at par to yield 1.04% or Treasuries plus 72.5bp, inside initial guidance in the 115bp area. There was no new issue concession, according to a banker on the deal. The 2025s of Korea’s state policy banks, such as Export-Import Bank of Korea and Korea Development Bank, were trading at a spread of around 73bp over Treasuries on the day of pricing. These policy banks are rated the same as IBK by Moody’s and Fitch but a notch higher by S&P. The 144A/Reg S notes have expected ratings of Aa2/AA– (Moody’s/Fitch) and received final orders of US$1.4bn after books peaked at over US$3bn. The banker said the initial price guidance was set at a wider range as a means to attract more investors.

› WISDOM MARINE SIGNS US$96M REFI Taiwan-listed WISDOM MARINE LINES has signed a US$96m three-year refinancing after attracting six lenders in general syndication. Mega International Commercial Bank was the mandated lead arranger and bookrunner of the transaction, which pays an interest margin of 215bp over Libor. The borrower will pay any excess interest rate beyond a 35bp difference between Libor and TAIFX. Signing took place on June 17. Banks were invited to join at three ticket levels when the deal was launched in February. Co-arrangers with commitments of US$20m or above earned an upfront fee of 60bp, managers with tickets of US$15m– $20m received 40bp, while participants with US$10m–$15m received 20bp. The borrower’s property and equipment serve as security, while its chairman, Lan Chun-sheng, is the guarantor. Funds are to refinance a US$120m threeyear term loan signed in March 2017. First Commercial Bank led that borrowing, which pays an interest margin of of 230bp over Libor. The borrower will pay any excess interest rate beyond a 35bp difference between Libor and TAIFX.

Asia took 62% of the deal, EMEA 29% and the rest went to the US. Public sector investors bought 34%, banks 26%, fund managers 19%, insurers 16% and private banks and others 5%. The strong interest from real money managers was driven by investor demand for defensive names and was given an additional boost by the social bond labelling. “We saw a noticeable inflow of ESG investors who took at least around 20%-30% of the deal,” said an IBK funding official. The official added that IBK wanted to print the bonds before corporates start announcing half-year results that could dampen sentiment, while the market is also usually quieter during the July to August period. This was the second Covid-19 response bond offering from South Korea after Kookmin Bank sold US$500m of notes in April.

Proceeds will be used to finance or refinance new or existing loans extended to entities that fall within eligible social categories in IBK’s social, green and sustainability bond framework. Support will be aimed at small and medium-sized enterprises, companies creating jobs and start-ups affected by the pandemic. The new bonds were seen around their initial pricing levels in their first couple of days of secondary trading. Bank of America, Credit Agricole CIB, Citigroup, HSBC, JP Morgan and Societe Generale were joint bookrunners and IBK Securities was a co-manager. IBK mainly provides SME financing. The government indirectly owns a majority stake in the bank through the finance ministry, Korea Development Bank and the ExportImport Bank of Korea. JIHYE HWANG

For full allocations, see www.ifre.com.

› KUNG SING SUCCEEDS ON SECOND TRY Public project construction services provider KUNG SING ENGINEERING CORP has finally signed a NT$4bn (US$135m) five-year guarantee facility on its second attempt after first venturing into the market 18 months ago. Taipei Fubon Commercial Bank was the mandated lead arranger and bookrunner on the deal, which attracted eight banks in general syndication. The borrowing comprises a NT$625m guarantee tranche A, NT$2.92bn guarantee tranche B and a NT$455m revolving credit tranche C. Tranches A and B pay annual guarantee fees of 105bp, while tranche C offers an interest margin of 130bp over Taibor. The loan was restructured and relaunched into syndication in March this year after an earlier launch in January 2019 failed to attract interest. The relaunch saw changes to the titles and fee levels for commitments, and guarantors to the deal. MLAs with commitments of NT$625.5m or more were offered an upfront fee of 25bp,

www.ifre.com 46

International Financing Review Asia June 20 2020

while managers with tickets of NT$417m– $625.4m received 20bp and participants taking NT$208.5m–$416m 10bp. At the time of launch in January last year, Taipei Fubon had invited banks as coarrangers with NT$625.5m or above for a fee of 20bp and managers with NT$417m– $625.4m for 15bp. One of the guarantors to the loan has changed from the borrower’s chairman, Chen Huang-ming, to the president, Pan Chun-jung. The other guarantee from CEO Chiang Chi-ching remains unchanged. Funds are to provide a guarantee for its construction of the Tamkang Bridge project in New Taipei City’s Tamsui district and for working capital. Signing took place on June 15. The borrower’s previous loan was a NT$2.0704bn 2.5-year facility signed in December 2017. Land Bank of Taiwan led that deal, which offered a margin of 150bp over Taibor and a 100bp guarantee fee, according to LPC data. For full allocations, see www.ifre.com.

› INA ENERGY FUNDS SOLAR POWER PLANT Ina Energy has launched a NT$3.5bn financing backing the construction of

COUNTRY REPORT VIETNAM

a solar power plant in its debut in the syndicated loan market. Hua Nan Commercial Bank is the sole mandated lead arranger and bookrunner of the transaction, which comprises a NT$3.5bn 2.5-year term loan tranche A and a NT$3.5bn five-year term loan tranche B. Tranches A and B cannot exceed NT$3.5bn in total. Tranches A and B offer interest margins of 70bp over the one-year post office savings rate, with the after-tax interest rate floor set at 1.84%. Banks are invited to join as MLAs with commitments of NT$900m or more for an upfront fee of 22bp, or as participants with commitments of NT$600m–$899m for 15bp and with NT$300m–$599m for 10bp. Responses are due by July 31. Banks committing by July 17 will receive a 3bp early-bird fee. Funds are to back the construction of a solar power plant in Pingtung county in southern Taiwan. The total cost of the project is NT$5bn. CITY DEVELOPMENT, a subsidiary of Ina Energy, is the borrower. Established in 2018, Ina Energy’s largest shareholder is Pau Jar Group, a New Taipei City-based residential property developer.

› VEDAN WRAPS UP NT$7BN REFI Food and beverage company VEDAN ENTERPRISE has obtained a NT$7bn seven-year loan after attracting nine banks in general syndication. Land Bank of Taiwan was the mandated lead arranger and bookrunner of the deal, which was split into four tranches for two borrowers. Vedan was the borrower on tranches A1 and A2, which offer interest margins of 69bp and 71bp over the average of the oneyear savings rates of Bank of Taiwan, Chang Hwa Commercial Bank, First Commercial Bank, Hua Nan Commercial Bank, LBoT and Taiwan Cooperative Commercial Bank. FENG LE REAL ESTATE, Vedan’s subsidiary, was the borrower on tranches B1 and B2, both of which offer 102bp over the average of the one-year savings rates of the abovenamed banks. The facilities have a pre-tax interest rate floor set at 1.7%. Signing took place on Wednesday. Funds are to refinance two seven-year loans – a NT$2.4bn facility signed in December 2015 and a NT$3.5bn financing completed in September 2018 – as well as for working capital purposes. LBoT led both the deals. The 2015 loan offers a margin of 75bp over the same base rate as the one for the latest borrowing, while the 2018 facility pays a margin of 70bp. CORP

For full allocations, see www.ifre.com.

THAILAND DEBT CAPITAL MARKETS › MINOR PLANS BANK-BACKED PERP Thailand’s MINOR INTERNATIONAL has mandated HSBC as sole global coordinator and joint bookrunner with ANZ, Bank of America and Standard Chartered for a proposed US dollar bond offering, and held investor calls last Thursday and Friday. A proposed Reg S offering of US dollar senior perpetual non-call three securities may follow, subject to market conditions. The issue size is expected to be up to US$300m, according to a note sent to investors. BANGKOK BANK, acting through its Hong Kong branch, will provide an irrevocable and unconditional guarantee for the proposed notes. It will also purchase them if the issuer goes bankrupt or does not exercise the call, meaning that the effective tenor for bondholders is three years. The guarantor is rated Baa1/BBB+/BBB and the bonds are expected to be rated Baa2/BBB (Moody’s/Fitch). Minor International owns hotels and restaurants in dozens of countries and distributes retail brands including Brooks Brothers.

The transaction price implies a yield of 7%. The shares, representing 2.8% of the capital, were marketed in a Bt14.50–Bt14.80 range. Books were multiple times covered with demand coming from existing shareholders, long-only institutions and hedge funds. The top 10 shareholders were allocated two-thirds of the deal. The final price is at a 5.2% discount to the pre-deal close of Bt15.50. DTI Fund shares closed at Bt15.20 on Thursday. There is a 60-day lock-up on True’s remaining stake of 26.1%. Credit Suisse and Siam Commercial Bank were the bookrunners.

VIETNAM SYNDICATED LOANS › VPBANK IN TALKS TO RAISE US$150M VIETNAM PROSPERITY JOINT STOCK COMMERCIAL BANK

True has raised Bt4.4bn (US$142m) through the sale of 300m shares in DIGITAL TELECOMMUNICATIONS INFRASTRUCTURE FUND at Bt14.70 each, according to a person with knowledge of the transaction.

is seeking a loan of up to US$150m from the International Finance Corp and other lenders. The proposed financing consists of a one-year renewable senior loan of up to US$100m from IFC’s own account and a syndicated portion of up to US$50m that includes a greenshoe option, according to an IFC investment disclosure on Tuesday. Proceeds raised will be used for working capital purposes and traderelated lending to enterprises in Vietnam, including small-to-medium sized enterprises affected by the Covid-19 pandemic. A performance-based incentive of up to 0.2% of the US$150m total is expected to encourage on-lending to women and women-owned or women-led enterprises. The Women Entrepreneurs Opportunity Facility will provide the subsidy, which will only be paid out upon achievement of the pre-defined gender target. In January, VPBank obtained a US$212.5m five-year loan from IFC and six other lenders, including a portion qualifying as a green loan. China’s Bank of Communications, Germany’s Deutsche Investitionsund Entwicklungsgesellschaft (DEG), Industrial and Commercial Bank of China, multilateral International Investment Bank, KEB Hana Bank and Thailand’s Kiatnakin Bank were the lenders on US$125m of the loan.

International Financing Review Asia June 20 2020

47

› WHA MARKETS IN THREES Thai property company WHA, rated A– by Tris, will offer three tranches of bonds at the end of the month to institutional and high-net-worth investors to raise up to Bt4.8bn (US$154.3m). A three-year tranche has been priced at par to yield 3.3%, a four-year tranche at 3.75% and a five-year tranche at 4.2%. Final sizes will be determined after a three-day subscription, which begins on June 30. Kasikornbank, Siam Commercial Bank and UOB Thai are joint lead managers.

EQUITY CAPITAL MARKETS › TRUE SELLS DTI FUND BLOCK

ASIA DATA LAST WEEK’S ECM DEALS Stock

Country

Date

Amount

Price

HDFC AMC

India

16/06/2020

Rs29bn

Rs2,386.10

Deal type

Bookrunner(s)

Follow-on (Secondary)

Bank of America

Follow-on (Secondary)

Credit Suisse, Siam Commercial Bank

Digital Telecommunications Infrastructure Fund

Thailand

17/06/2020

Bt4.4bn

Bt14.70

C-Mer Eye Care

China

19/06/2020

HK$394m

HK$5.80

Genetron

China

19/06/2020

US$256m

JMDC

Japan

18/06/2020

SkyCity Entertainment Group

New Zealand

18/06/2020

Shandong Gold Mining

China

17/06/2020

HK$1.63bn

HK$20.50

Uniti Group

Australia

16/06/2020

A$270m

A$1.40

Follow-on (primary)

Bank of America, Goldman Sachs

Super Retail Group

Australia

16/06/2020

A$203m

A$7.19

Follow-on (primary)

Macquarie and UBS

Follow-on (primary)

HSBC

US$16

IPO (primary)

Credit Suisse, CICC

¥15.9bn

¥6,150

Follow-on (Secondary)

Macquarie

NZ$180m

NZ$2.50

Follow-on (primary)

Credit Suisse, Jarden Partners, UBS

Follow-on (Secondary)

Morgan Stanley

Source: IFR Asia

LAST WEEK’S EQUITY-LINKED ISSUANCE Issuer

Country

Date

Amount

Maturity

Coupon/YTM %

Premium (%)

3SBio

China

18/6/2020

€320m

Greenshoe

5 years

0/1.5%

25%

Bookrunner Deutsche Bank, JP Morgan

Far East Horizon

China

18/6/2020

US$300m

5 years

2.5%

21.6%

Citigroup, HSBC, UBS

China Mengniu Dairy

China

18/6/2020

US$100m

3 years

1.5%

25%

BOC International, Guotai Junan International

Source: IFR Asia

ASIAN SYNDICATED LOAN PIPELINE UPDATES WEEK OF 16 JUNE Company

Currency

Size (m)

Margin (All-in)

Tenor (mths)

Facility

Arrangers

Taiwan Inventec Corp

US$

480

80

24

Revolver/Term Loan

Bank of Taiwan, Hua Nan Commercial Bank

US$

150

118.5 (140)

36

Term Loan

0

A$

400

37

Revolver/Line >= 1 Yr.

0

Hong Kong Minth Group Australia Perenti Global [ex-Ausdrill] Source: Refinitiv data LPC

MERRILL LYNCH ASIAN DOLLAR INDEX Index

Description

Index level

1 week total return

ADIG

Asian-dollar high-grade index

450.811

–0.070

1 month total return 3 months total return 2.391

5.170

211

ADHY

Asian-dollar high-yield index

664.266

0.085

6.208

12.280

905

AGIG

Asian-dollar government high-grade index

426.420

–0.093

2.356

6.492

182

AGHY

Asian-dollar government high-yield index

673.499

–0.463

20.913

–2.022

1201

ACIG

Asian-dollar corporate high-grade index

477.707

–0.063

2.413

4.727

222

ACHY

Asian-dollar corporate high-yield index

556.328

0.149

4.715

14.214

870

Source: Merrill Lynch

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International Financing Review Asia June 20 2020

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