Singapore bond house

Some alternative definitions for the themes of the year. To see the digital version of this report, please click here. Glossary Glossary  Additional Tier 1: Bank capital instrument that investors buy because it looks like a bond. No, wait, it’s equity. No, hang on, it might only become equity in the future. Heck, who knows why anyone buys the stuff. Alibaba: 1. A folk tale in which a slave does most of the hard work for the hero and gets very little in return;   2. A fabled IPO in which… never mind. Anonymous Analytics: Hedge-fund plaything that promotes short selling as a form of social justice. Not to be confused with another AA that actually helps people. Anti-mar: Mysterious chemical designed to leave no trace of fingerprints on your smartphone – or, possibly, on your balance sheet. Bank capital: Financial safety net. Something Asian lenders thought they had plenty of before Basel III. Basel III compliant: In Asia, any bank capital security that gives regulators the power to blow up their country’s financial system. Block trade: Preferred route for banks looking to make a sizable amount of money from the equity capital markets overnight, unless that deal involves CIC and Noble Group. Bookbuild: Public order-taking process that only starts once a deal is already covered. Cornerstone: Absolutely anyone willing to be named as a buyer of an IPO. Frontier market: Country where the government pays 5% for 10-year US dollar debt. G3: The world’s three major funding currencies. The US dollar, renminbi and Australian dollar. Global connectivity: A phrase used to take credit for other people’s work. Especially popular among Asian bankers, describing US financings, for example, “This deal really showcased the firm’s global connectivity.” High yield: Over 3%. Mid-cap: Singapore bond issuer Modify: verb. To take an optimistic view of terrible companies, solely because the country has a good prime minister. Myanmar: 1. A country in which no reputable bank should do any business (2012);   2. A country in which every reputable bank should be doing business (2014). Occupy Hong Kong: 1. Something that bankers should never voice their opinion on;   2. Reason for HSBC to cover its ground floor space with scaffolding. Ping An: New expletive at Credit Suisse and Goldman Sachs. PONV: Point of Non-Viability. In Asian banking, the point at which regulators admit that their state-owned banks need to be, err, state owned. Premier League: A place where Asian tycoons pay millions for the chance to lose all of their management credibility. Princeling: Former banker. Rebate: In private banking, a replacement for credit analysis. Relationship lender: A banker who volunteers for a jog with an Indonesian finance official in freezing temperatures in Tokyo. (See also: Quantitative easing: A method central banks use to create jobs (in investment banks). Qingdao: Chinese city famous for beer, seafood, and for making commodities disappear. RBI: Restricter of Bond Innovation. Signing: In loans parlance, an excuse to travel far outside your own country, for example, to sing Bollywood songs in Turkey. Sovereign wealth funds: Institutions established to preserve the long-term wealth of their countries through investments in exactly the same securities as mutual funds, but three months later. Sponsor: In Hong Kong IPOs, the can carrier. Umbrella revolution: Anti-social walking style. Weekends: Time not spent working – a new concept this year among Goldman Sachs juniors. WH Group: In Hong Kong IPOs, proof that the wrong price is still the wrong price even if you hire 29 banks to say otherwise.

DBS held on to its leadership position in Singapore loans in 2014 on a variety of borrowings involving the commodities sector, as well as a sprinkling of event-driven financings and debut facilities. It was the top bookrunner during IFR’s review period with a 16% share of the US$22bn market, according to Thomson Reuters LPC data. The achievement had the help of the smooth interplay of its loan and bond operations in a year when the capital markets provided strong competition. DBS, the largest bank in South-East Asia in asset terms, struck homeruns with loans backing shareholder recapitalisations and jumbo deals. At the start of the review period, the bank successfully syndicated a S$1.15bn (US$884m) recapitalisation loan for Universal Group Holdings, attracting eight other lenders when it closed in December 2013. DBS followed up with another recapitalisation in September, when it closed a S$1.62bn sole-underwritten financing for Central Boulevard Development, the operator of the Marina Bay Financial Centre Tower 3 – now DBS’s head office. In August, the bank was global co-ordinator and original mandated lead arranger and bookrunner on a S$5.1bn amendment-and-extension facility for casino resort operator Marina Bay Sands. The bank’s full debt capabilities were evident in event-driven financings, such as Gallant Venture’s acquisition of a controlling stake in Jakarta-listed Indomobil Sukses Internasional and Amtek Engineering’s acquisition of Interplex Industries in the US. In both cases, DBS underwrote acquisition loans refinanced in the bond market. In August, DBS jointly funded bridge and take-out facilities totalling US$288m backing Halcyon Agri Corp’s acquisition of Indonesia’s Lee Rubber, as well as a S$125m bond. DBS also scored with a joint lead and underwriter role on a US$845m Term loan B facility backing KKR’s leveraged buyout of packaging company Goodpack, Asia’s first TLB outside Australia. The bank was also first among peers in lending to commodity trading companies, with active bookrunner roles on nine of the 12 deals signed in the review period. DBS rallied lenders to deals for troubled commodities firms including oil trading company Gunvor, which tried to shrug off its Russian roots as sanctions loomed with a change of ownership and Mercuria, which had US$44m worth of alumina stuck in China’s Qingdao port. Both loans were oversubscribed and increased. It also introduced first-time borrowers to the region, as sole Asian bookrunner and Asian roadshow co-ordinator on the US$435m three-year unsecured revolver for Ireland-based commercial aircraft-leasing firm AWAS Aviation Capital. It also held an inaugural Asian non-deal roadshow for New York-listed aircraft leasing company Aircastle in April. To see the digital version of this report, please click here.

South Korea’s equity capital markets started 2014 in poor shape. Prospects for new listings had become so bad, in fact, that the country’s regulators felt it necessary to step in to make it easier and faster to launch deals. Samsung SDS changed all that. Not only was the IT services provider’s W1.16trn (US$1.1bn) global offering easily Korea’s largest IPO of the year, but its massively oversubscribed order book also single-handedly reignited the country’s new issue market, making it the most important equity issue of 2014. Bankers had a big responsibility to get the deal right. For its scale alone, the Samsung conglomerate is one of the most important banking clients in South Korea, but the chaebol’s plans to restructure its ownership and list a number of other units gave the SDS float an even greater significance. “It was important to do it right because this IPO paves the way and sets the tone for Samsung Group transactions to come,” said David Chung, co-head of Korea investment banking at Goldman Sachs. “If it traded poorly it would have had a real tangible impact on the deals that followed.” In the end, the weight of demand for a rare equity offering from the Samsung network left the deal flooded with orders, and the stock’s performance lifted the mood across the equity markets. Although the leads were able to catch investors’ attention for the household name, their expertise in framing the company’s equity story was going to be key to securing the right valuation. In a series of comprehensive research meetings, Goldman Sachs, JP Morgan and Korea Investment & Securities highlighted the potential for growth in the company’s BPO business, as well as delivering SDS’s key position within the Samsung Group. The message worked. Of the 49 one-on-one meetings, 80% of the attendees signed up to buy SDS shares even though the P/E ratios that the W150,000–W190,000 price range reflected was higher than those for its domestic and international comparables. “Getting this kind of premium is only possible because the talented management and the solid fundamental drivers of the business are what will allow it to grow over time,” said Chung. The deal priced on October 31 at W190,000, at the top end of the indicative range, after SDS amassed an order book that was 651 times oversubscribed across the domestic and international tranches. The shares soared 72% on their November 14 trading debut, setting the tone for more IPOs to come, including Samsung’s de facto holding company, Cheil Industries, which began marketing only two weeks later. It also paved the way for equity offerings beyond the group, with other high-profile listings from the likes of Hyundai Innocean on the cards for 2015. To see the digital version of this report, please click here.

In a year of pulled transactions and weak listings in Singapore, Frasers Hospitality Trust’s S$400m (US$306m) Singapore IPO bucked the trend, winning investors’ full support and reopening the equity capital markets. Frasers began marketing its float in June, ending a lull of about two months in the Singapore IPO market. It offered exposure to international assets and its success helped open up the market for the second half of the year, making the city’s exchange one of the more active markets in South-East Asia. Singapore maintained its dominance of Asia’s yield-driven equity market in 2014. Selling such products, however, was far from an open-and-shut case, as many investors were wary of rising interest rates. Uncertainty over the US Federal Reserve’s interest-rate policy during 2014 meant issuers in Asia had to wait for the right window to launch their real estate investment trust and business trust IPOs. Frasers’ float, however, managed to generate interest from investors, thanks to its reputable sponsors and high-quality assets. It was the first global hotel and serviced residence trust to be listed on the Singapore Exchange, with properties located far beyond the city state. The trust’s portfolio included 12 assets in Asia, Australia and the UK. The geographical spread allowed investors to get exposure to an international portfolio of hospitality assets backed with strong management. Traditionally, Singapore investors have been wary of REITs and business trusts with overseas assets, and have demanded a higher yield in return. In the case of Frasers, these concerns were alleviated because of the solid reputation of the sponsors – Frasers Centrepoint and its parent TCC Group, both of which Thai tycoon Charoen Sirivadhanabhakdi owns. The S$368m IPO with a greenshoe option of up to S$31.5m was launched at a fixed price of S$0.88, implying a yield of 7%. Singapore-listed hospitality REITs traded at yields of 5.8%–7.6% at the time. Private banking clients and retail investors lapped up the IPO, and was covered on the first day of bookbuilding. Cornerstone commitments totalling US$205m also meant there were fewer shares available for other investors. Fortress Capital bought S$40m, Sing Haiyi S$30m, Meren S$20m, DBS Private Bank S$40m, DBS Treasury S$25m and Wealthy Foundation S$50m. Wealthy Foundation is under the control of Tong Jinquan, the founder of China’s Summit Group and a regular investor in Singapore REITs. In the end, the placement tranche of S$122.9m was 20.7x covered and the public offer of S$40m was 1.5x subscribed. DBS was the sole global co-ordinator and the bookrunner with Morgan Stanley, Standard Chartered and UOB. To see the digital version of this report, please click here.

The Philippines’ largest IPO of 2014 was also one of the most textbook examples in the region. High-end retailer SSI Group attracted a high valuation – in a week when two other deals in the region were downsized, no less – and performed well, highlighting the successful execution of the Ps7.5bn (US$166m) IPO. SSI came to market in October, when things had turned edgy on concerns over the global economy and the outbreak of the Ebola virus. During the week that SSI was on the road, two other high-profile equity issues in South-East Asia were having a rough time, with both taxi operator Blue Bird and internet service provider Link Net being forced to scale back their IPOs. Against such a backdrop, SSI’s success in pricing at the top of its target range was a clear example of the IPO’s appeal. It was covered on the first day of bookbuilding and was priced at the top of the Ps7.00–Ps7.50 indicative range, translating into a 2015 price-to-earnings multiple of 20.2. The final price represents a tight discount of around 4% to the average forecast earnings of three closest listed comparables, but marketing efforts helped position SSI as a leading consumer play in a country that is enjoying strong economic growth. Scarcity value proved another attraction, as the IPO was launched during a quieter year for major Philippines listings. SSI’s eye-catching line-up of brands had immediately drawn investors’ attention to the IPO, even though the company did not belong to any of the traditional big business families in the Philippines. SSI is the leading specialty retailer of international brands in Philippines and has a network of 655 stores and 103 brands, including Hermes, Gucci and Zara. The Tantoco family, founders of the Rustan’s department store chain, owns the company. The fact that the SSI float managed to firm up cornerstone commitments from high-quality investors also helped drive momentum. Around 39% of the base offer went to six cornerstone investors, namely Capital Research, Macquarie Funds, BPI Asset Management, Government Service Insurance System, Havenport Asset Management and York Capital. Among them, local institutions BPI and GSIS were participating as cornerstone investors for the first time. SSI’s trading debut did not disappoint, as its shares closed 6.54% above the IPO price. As of November 28, the stock was 16% above the issue price. The SSI float comprised 864.2m shares, of which 695.7m were primary and 168.5m secondary. There was a greenshoe option of 129.6m shares, which was fully exercised. BPI Capital, Credit Suisse and HSBC were the joint global co-ordinators. To see the digital version of this report, please click here.

When US-based Tyco started the sales process for security services provider ADT Korea in November 2013, few could have predicted that the financing would play such an important part in determining the outcome. Carlyle Group emerged victorious months later due to a gutsy, underwritten W1.35bn (US$1.21bn) leveraged buyout financing that included the largest mezzanine loan on record in Asia, excluding Japan. With a price tag of around US$1.93bn, the acquisition was Korea’s largest LBO and the largest M&A transaction in Asia’s security service industry. It was also Carlyle’s first significant buyout in the country. None of that would have been possible without the conviction of UBS, which put its balance sheet on the line as the sole underwriter of a W360bn mezzanine loan. Along with a senior loan of W985bn, the combined buyout financing helped Carlyle to comfortably outbid its rivals. The opening leverage of around 7.5x earnings, which consisted of around 5.5x in senior debt leverage and nearly 2x in junior debt, gave Carlyle’s bid terms that competitors could not match. Other financial sponsors were bidding for ADT, but, with debt for only around 6.0x–6.2x, they were unable to match Carlyle’s offer. Mezzanine debt is rare in Asia’s bank-dominated loan market, and UBS made a bold call that it would be able to sell down the position. There was only one precedent in Korea – the W1.14trn LBO financing backing the acquisition of Oriental Brewery in June 2009. The 61-month mezzanine tranche carried interest of 9.5%, split between a 2% coupon and 7.5% was payment in kind (PIK), a feature that was also last seen in Asia on Oriental Brewery’s LBO. The senior debt was equally eye-catching. The portion comprised a W940bn five-year term loan and a W45bn five-year revolver, both of which, like the mezzanine tranche, had bullet maturities – also unique for an Asian LBO loan. Carlyle negotiated the senior and junior tranches separately, before lenders thrashed out a complex inter-creditor agreement. The private-equity firm also insisted on full documentation within an unprecedented timeframe of two weeks, allowing it to show Tyco that it was serious about its offer. The senior and junior debts received good responses from the market. UBS sold the mezzanine tranche to seven other institutional investors, including a European debt specialist fund. One of the non-bank financial institutions also participated in the senior debt, along with 15 other lenders. Korea Exchange Bank initially underwrote the senior portion, and Industrial Bank of Korea, Kookmin Bank and Korea Investment & Securities joined as mandated lead arrangers and bookrunners.

In a market where share placements depend so heavily on domestic investors, Credit Suisse was hardly the obvious choice for Malaysian companies looking to list their equity or top up their capital. The bank, however, used its local network and international expertise in 2014 to offer new options to its clients and challenge the dominance of the local arrangers. Credit Suisse featured on the two largest Malaysian IPOs during IFR’s review period, as well as the biggest follow-on offering and two of the three biggest rights issues. Since 2012, when Malaysia made its name in the global IPO market with mega IPOs of Felda Global Ventures, IHH Healthcare and Astro Malaysia, Credit Suisse has been steadily increasing its share in the business. While overall volume in the Malaysian IPO market fell this year, Credit Suisse had a particularly fruitful year, surpassing other foreign banks and giving the local lenders a good run for their money. It managed the M$1.2bn (US$345m) float of Boustead Plantation and the M$1.1bn IPO of Icon Offshore. Credit Suisse’s Boustead mandate was particularly remarkable, as the bank managed to secure a joint global co-ordinator role for an IPO that was sold only to domestic investors, underlining its significant local visibility. The Icon Offshore IPO, on the other hand, showcased Credit Suisse’s ability, as an international bank, to add value to local issuers. Cornerstone investors took up 54% of the float, while the Swiss bank brought in the sole foreign investor on board. These mandates are no accident: Credit Suisse has been present in Malaysia for the last 15 years, and its strong equity research and stock-broking franchise have helped grow its equity capital markets footprint. Its book of business was also not limited to IPOs. Credit Suisse was joint bookrunner in CIMB’s M$3.6bn primary placement at the start of 2014, the largest equity deal from Malaysia during the review period and the country’s largest since Maybank’s US$1.2bn offer in October 2012. It was also a bookrunner on Malaysia Airports’ US$299m placement and a US$201m Bumi Armada block that was linked to a separate rights issue. Bumi Armada shareholder Objectif Bersatu was selling the shares to fund its rights entitlement for the M$1.98bn Bumi Armada rights offer, on which Credit Suisse was a joint global co-ordinator. The bank was also joint underwriter on Affin Holdings’ M$1.2bn rights offer. The deal was sold at the tightest discount of 20% to the theoretical ex-rights price since January 2008 for a rights issue greater than US$300m. Affin was a repeat client for Credit Suisse, having worked on the IPO of parent company Boustead Plantations. To see the digital version of this report, please click here.

Taiwanese banks faced a series of challenges in 2014 as foreign currency liquidity turned volatile and fears for China’s economy triggered a review of their exposure. CTBC Bank, however, outperformed its peers at home and did more than its rivals to bring international borrowers to Taiwan. Exposure to China’s private sector was a particular focus for Taiwanese banks during the year, with defaults rising and Taiwanese authorities warning that loans were close to infringing regulatory limits. CTBC relied on comprehensive due diligence to keep clear of Chinese loan defaults, while its landmark acquisition of Japan-based Tokyo Star Bank lifted its asset base and reduced the ratio of its China exposure to total net assets – a metric that regulators monitor – giving it greater flexibility to lend to mainland companies. The lender showed its expertise in modelling structured transactions to arrange several notable private-equity deals, including a US$405.5m dual-tranche loan for Carlyle Group-owned Ta Chong Bank. CTBC showed its leadership and negotiating skills as a mandated lead arranger, bookrunner, underwriter and security agent on the deal. Despite a high loan-to-value ratio, the deal was oversubscribed due to a well-crafted deal structure and a targeted syndication strategy. CTBC was the only common arranger and underwriter of two separate financings related to the buyout of cable TV operator China Network Systems from PE firm MBK Partners – a NT$52bn (US$1.67bn) facility for Taiwan’s Ting Hsin International Group and a seven-year loan of up to NT$48bn for Taiwan’s Far EasTone Telecommunications and Morgan Stanley Private Equity Asia. Both deals are pending approvals from Taiwan’s National Communications Commission. The bank also brought top-tier Chinese borrowers to Taiwan, offering local lenders some welcome diversity and better returns. CTBC was one of two arrangers on a loan that recapitalised Carlyle’s investment in China’s Haier Electronics Group. Five Taiwan banks joined the HK$1.067bn (US$137.6m) loan, which was secured against convertible bonds. CTBC was the only Taiwanese bank to lead a US$350m three-year onshore term loan for ICBC Financial Leasing, a wholly owned subsidiary of Industrial & Commercial Bank of China. Compared with its peers, CTBC also took a leading role and made strong commitments in a handful of international deals for South-East Asian companies. CTBC was the sole Taiwanese bookrunner on the renminbi tranche of a US$1.73bn refinancing for commodity trading giant Trafigura, which was the first commodity loan to include a renminbi tranche in regional syndication. CTBC also arranged an increased US$475m five-year loan for Petron Corp, alongside five other international banks. To see the digital version of this report, please click here.

Siam Commercial Bank guided issuers through the upheaval of Thailand’s military coup, showing strong leadership and a thorough understanding of the market. Thailand grabbed headlines in 2014 for all the wrong reasons, as political gridlock and protests on the streets of Bangkok culminated in a military coup on May 22. However, as offshore funds rushed out, onshore funds moved in to fill the vacuum, and SCB was among the first to spot an opportunity to revive capital markets issuance. Barely seven days after the coup, SCB opened books on a new issue from state-backed oil-and-gas company PTT Exploration & Production. PTTEP was looking to raise a target of Bt17bn (US$517m), a large size even at the best of times, and SCB had to meet that target on its own as sole arranger, an unusual mandate from the issuer. SCB had brought the deal to PTTEP a few weeks earlier as a way to pre-fund future investments in a low interest-rate environment, and that call underlined the bank’s ability to read the markets accurately as the offering saw strong oversubscription. PTTEP ended up increasing the dual-tranche bond of five and 15 years to a total of Bt19.6bn, at fairly attractive spreads of 78bp and 98bp, respectively. SCB’s ability to pull off the deal looked even sweeter against the simultaneous delay to a US dollar perpetual bond from PTTEP. That offshore deal was launched once SCB had tied up the onshore issue. “We are not about chasing deals, we are about understanding the market mechanics, such as market absorption, timing, investor requirements, and about deliverance,” said Sirote Vichayabhai, executive vice president and head of capital markets. SCB has been a consistent performer in Thailand’s domestic bond markets, and it topped the league table again this year with an 18.7% share of the market from 28 issues in the period under review, according to Thomson Reuters data. SCB is the largest commercial bank in Thailand with Bt2.6trn in total assets, but Sirote insists that the debt capital markets team does not rely heavily on its balance sheet. “If we do, then we have failed as an investment bank,” said Sirote. Instead, the bank markets itself on its ability to meet the needs of both issuers and investors, and on its flexibility to react quickly to changing market conditions. In the process, it ensures that it captures efficient pricing for the issuer, and introduces innovative products to allow investors to diversify their portfolios. It showed off those skills on a variety of deals during the year, including Italian-Thai Development’s Bt6bn bond, rated BBB–, Indorama Ventures’ Bt15bn subordinated hybrid and a debut Bt1.5bn three-year issue for Nawarat Patanakarn. To see the digital version of this report, please click here.

Although competition was intense in the ringgit bond market in 2014, CIMB managed to keep rivals at bay with innovative and integrated solutions to keep clients knocking on its doors. CIMB comfortably topped the bookrunner tables for IFR’s review period, with 56 issues under its belt and a 39.4% market share, according to data from Thomson Reuters. The bank had nine sole mandates during the year under review, a high number in a market with mainly joint lead manager roles, signalling the strength of its debt capital markets franchise. Far from resting on its achievements, however, CIMB also worked on improving its client offering to combine the project-finance department into the DCM business. With Malaysia well ahead of the curve in channelling infrastructure investments through the capital markets, the move has allowed CIMB to provide a one-stop shop for issuers looking to manage funding or liability-management requirements. The DCM team now covers structured finance, fixed income and the loan syndicate businesses. CIMB underscored its prowess in distribution and execution in BGSM Management’s M$10bn (US$3bn) Islamic MTN programme and M$5.75bn sukuk in December 2013. As sole adviser, lead arranger and manager on the issuance, CIMB helped the client avoid a rating downgrade through the migration of existing bondholders to a new issue that ringfenced cash flows from the company’s core asset, Maxis. Also, it offered a wide range of funding products over the year, as well as post-market support and hedging services. “We have been successful in giving our clients a complementary suite of financing services to meet their funding needs,” said Nor Masliza Sulaiman, senior managing director and head of debt markets. Such solutions have brought in more business. The bank’s most telling transaction was the Senai-Desaru Expressway debt restructuring, the project’s second in four years. Bondholders pressured CIMB to represent them as adviser and to come out with viable and permanent solutions, even though an existing restructuring agent was already engaged. CIMB restarted the entire process from scratch, remodelling cash flows and the debt-repayment profile and, at the same time, managing rating agency Marc’s expectations. As a result, Marc gave a BBB– rating to SDE’s new Islamic bonds of up to M$1.89bn, higher than the BB– it assigned to the previous issue. CIMB also expanded beyond its Kuala Lumpur base in 2014, snaring a handful of mandates in the offshore renminbi and US dollar markets. It is not stopping there as the bank is also becoming a force to be reckoned with in the Thai, Indonesian and Singaporean bond markets. To see the digital version of this report, please click here.

Foreign funds flowed out of Thailand when the army took control on May 22, but even the uncertainty over the military government’s plans for state-owned enterprises failed to get in the way of the country’s first public offering of Basel III-compliant bank capital. Barely a month after the coup, government-owned Krung Thai Bank sold a US$700m 10.5-year non-call 5.5 Tier 2 bond to a resounding reception. The issue introduced investors to Thailand’s version of the Basel III loss-absorption rules that force bondholders to share the pain if the bank fails, setting a benchmark for others to follow. In KTB’s case, bondholders are required to write down the notes if the local regulators decide the bank is no longer viable. However, KTB also introduced an investor-friendly feature in the write-down process, allowing for a partial write-down on a sequential basis as Additional Tier 1 holders have to absorb losses before it flows down to T2 holders. In order for any write-down to happen, there must first be a government injection of funds into the bank. Investors had mixed reactions to this as critics said it meant any government injection could be considered a non-viability trigger, while proponents said it was investor friendly as the government would have to show its commitment to the bank before investors were hit. In the end, the response proved the critics wrong. The issue attracted a high-quality book of US$4bn, allowing KTB to squeeze guidance from a yield of 5.5% to price at 5.2% and increase the size from US$500m to US$700m. The bonds outperformed in secondary trading the next day, tightening 13bp in the morning to a spread of 340bp from the reoffer spread of 353bp. The deal was not without its challenges. KTB had been exploring a US dollar T2 issue since February, but took a hit from months of political tension that froze all government activities. Once it became clear the coup would release that gridlock and, with markets holding steady despite the intervention, KTB moved quickly with a three-day roadshow in Asia and London to update investors on the political situation and market its deal. The roadshow coincided with the US Federal Reserve’s signals for a continuing accommodative stance. US Treasuries rallied and joint leads Goldman Sachs and HSBC were quick to take advantage of the positive sentiment to launch the deal. Ultimately, the bank overcame concerns over the political climate and shaky US dollar primary markets to sell an issue that was priced competitively against its implied secondary market curve and market comparables. It was also a landmark deal for the country’s financial sector, with the first domestic Basel III offering following two weeks later. To see the digital version of this report, please click here.

The Indonesian Government seized on the low yields in the European market in the run-up to the country’s finely balanced presidential election to diversify its funding sources with the country’s first euro-denominated sovereign bond. A week before the poll, and six months after doing a record US$4bn print in the US dollar market, Indonesia turned to euro investors, knowing that either an electoral stalemate or the need for new approvals could mean delays for its funding plans. An early lead in the polls for outsider Joko Widodo, perceived as the most business-friendly choice, had evaporated and a close result would likely lead the losing party to challenge it through the courts, which could have taken months to resolve. Indonesia’s finance ministry opted for certainty and was rewarded with a strong response from overseas investors looking to add a new name to their portfolios. At the same time, it took advantage of the low yields available in the euro market and broke away from its reliance on US dollar funding. This was Indonesia’s debut in the euros and the first such offering from a sovereign in South or South-East Asia since the Philippines in 2006. Following positive feedback from a roadshow in continental Europe, the seven-year offering was announced at a price guidance to yield around 225bp over mid-swaps, and the book built quickly. Indonesia later revised the guidance to 195bp–200bp over mid-swaps, and priced at the tight end for a 2.875% coupon and reoffer yield of 2.976%. The deal size was set at €1bn after the deal drew orders of €6.7bn from 400 investors. While it was a difficult time to be in the market, the pricing was only around 5bp higher than for its outstanding 2021 dollar bonds, had the country chosen to swap the proceeds. Excess demand from the US and Asia allowed the leads to squeeze investors on pricing, while still drawing in the European accounts they had targeted. The offering served its purpose to introduce Indonesia to a wider range of investors and diversifying its bondholder base. European accounts took around two-thirds of the issue, as did fund managers. This was in stark contrast to the sovereign’s dollar deal in January, when European investors had been allocated less than 20% of the notes. Indonesia has become not only Asia’s most frequent sovereign issuer over the past few years, but it has also turned itself into one of the smartest. The country’s first trade was another example of its thoughtful approach to the global capital markets. Bank of America Merrill Lynch, Citigroup and Deutsche Bank were joint bookrunners, with Bahana, Danareksa and Mandiri were co-managers. To see the digital version of this report, please click here.