MALAYSIA BOND HOUSE
With the return of liquidity to the Malaysian bond market after a volatile 2009, banks had to respond to investor demand for assets. For delivering innovative solutions to the market, perfectly matching the demands of investors and issuers, CIMB Investment Bank is IFR Asia’s Malaysia Bond House of the Year.
The Malaysian bond market was back in action in 2010 in terms of liquidity, but it was the range of innovative structures, new issuers and a growing international flavour that really defined the year.
CIMB was again in the thick of the action and stood out, having extended its structuring, distribution and balance sheet capabilities.
The debt capital markets group is set up to offer Islamic or conventional structures in ringgit or other currencies. This includes the G3 market, where the bank helped many Malaysian issuers set global benchmarks in 2010. A cross-regional analysis precedes any recommendation of product or currency to ensure its clients get the best funding solution.
CIMB’s commitment to Malaysia’s local market was again unparalleled.
Among other notable and well-received issues, CIMB and Citigroup, as joint bookrunners, brought to market the M$1bn Islamic medium-term notes due 2020 for Malaysia Airports. The issue was a debut offering and attracted a whopping book of M$10bn from 55 local investors. The deal was priced in the middle of the guidance at 4.55%, a tight level for 10-year paper.
The bank also completed one of the largest unrated Islamic deals, with a M$4.2bn 15-year sukuk for Celcom Transmission in August. Maybank was the other joint bookrunner.
In a year when the formalisation of the Basel III proposals dominated the financial institution market, CIMB executed some notable subordinated deals. The bank sole-led a M$750m subordinated note for parent CIMB Group Holdings in April. The 50-year non-call 10 tranche A pays a coupon of 6.35%, and the 50-year non-call five tranche B pays 5.30%. Pricing was fixed at the tighter end of the guidance.
In August, CIMB, with Hong Leong Investment Bank, executed a unique Tier 2 M$1.7bn fundraising for Hong Leong Bank. The 10-year non-call five notes paid a coupon of 4.85%. The notes qualified as long-term capital – thanks to a callable structure without a coupon step-up, a feature introduced to comply with the Basel III norms. After educating investors on the new structure, CIMB built a book that was over eight times covered, with more than 40 accounts participating.
It used its distribution skills to bring to market new issuers like Gamuda, which raised M$320m from an Islamic CP programme, or Toyota Capital, which raised M$50m from a MTN programme.
The bank also led the way for Malaysian issuers like Khazanah to tap other Asian markets, helping develop a growing regional cross-border market in South-East Asia. Khazanah priced its inaugural dual-tranche S$1.5bn (US$1bn) Singapore dollar sukuk in August. It was the largest Islamic deal in the Singapore market.
CIMB comfortably topped the league table of bookrunners of all bond issues for Malaysian entities, regardless of currency, for the review period, executing 40 deals worth a total of M$471bn for a market share of nearly 28%. The total volume of the market during the period was M$1.69trn from 69 deals.
It also showcased its ability to execute in the international market, as evident in deals such as Axiata’s US$300m guaranteed 2020 offering in April.
The deal was announced on April 16 after a two-day roadshow with an initial guidance of around 170bp over US Treasuries, before being priced at 163bp over after the order book grew to US$1.4bn within an hour. The deal was marketed to offshore investors via conference calls as flights to Europe were grounded due to volcanic ash from an Icelandic eruption. CIMB, Goldman Sachs and Morgan Stanley were joint bookrunners.
CIMB quickly followed with another successful US dollar deal for the Malaysian Government. The sukuk was the sovereign’s first Islamic offering in the international market after eight years. The five-year deal was launched on May 27 after week-long global roadshows in eight cities.
The deal was completed within a 12-hour window to limit market and execution risk, but was still increased in size to US$1.25bn after the order book reached US$6bn from diverse 270 accounts. CIMB was again a joint lead manager and bookrunner, this time alongside Barclays Capital and HSBC.
The bank also provided value-added services, such as asset and liability management advice, to help issuers optimise their capital structures, improve credit ratings and for tax efficiencies through instruments like hybrids or equity-based products.
Manju Dalal