Wireless telecommunications operator Banglalink Digital Communications had a mountain to climb with its debut offshore issue. Its home country, Bangladesh, had never issued an international sovereign bond, meaning there were no risk-free, let alone corporate, benchmarks to allow investors to judge relative value.
As more of Asia’s frontier markets make their marks in the global arena, Banglalink’s US$300m high-yield bond proved that the region’s leading companies can access international capital in their own rights, and do not necessarily have to wait for the sovereign to go first.
Bangladesh’s first international bond was far from straightforward. Sole bookrunner Citigroup had to work with regulators in Bangladesh to help formulate a framework for international corporate bond issuance, as well as assist Banglalink in the process of obtaining a rating, which was eventually set at B1/B+ (Moody’s/S&P).
Adding to the complications, Banglalink’s principal shareholder was a wholly owned subsidiary of Global Telecom Holding, the majority owner of which is Russia’s VimpelCom, meaning investors were exposed to volatility in two emerging markets. At the time the deal came to market, tensions between Russia and Ukraine were running high and, on the day of pricing, S&P downgraded the Russian sovereign.
Despite these disadvantages, Banglalink managed to draw an order book of US$900m from 90 accounts globally for its US$300m senior unsecured five-year non-call three notes. Funds took around 75% of the deal and, while Asian accounts booked the majority, there was strong interest from Europe, in particular. Roadshows were especially important for this deal as the lack of benchmarks meant that some investors differed in their valuation methodologies, and meetings drew early interest of US$600m.
Initial guidance of 9.000% area was tightened to price with a reoffer yield of 8.875% and a coupon of 8.625%. Fair value had been seen at a 250bp spread over VimpelCom’s bonds, but, as the yield on the parent’s bonds rose between the deal’s announcement and pricing, the spread ended up being just 200bp.
The Banglalink bonds, reoffered at 99.008, survived the post-summer selloff in emerging markets and were seen at around 104/105 at the end of the awards period, showing that pricing had been dead on, despite the lack of close comparable paper. The success of the deal for the issuer and investors alike has opened the international bond market for other names from Bangladesh to follow – not to mention corporate issuers in other emerging markets without a sovereign benchmark.
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