High yield bond

IFR Asia Awards 2014
3 min read
Daniel Stanton

Taking advantage of strong investor demand for exposure to the reawakening Indian economy, Tata Steel made its US dollar debut in style, raising US$1.5bn from a dual-tranche bond.

The steel-maker had only tapped the offshore bond market once before 2014, with a Singapore dollar print the previous year, and there was pent-up demand from investors when it finally burst into the US dollar market.

Tata Steel announced two tranches, one for 5.5 years and one for 10, to balance its maturities, and the structure helped the steel-maker achieve its aims in both price and size. The issuer decided to launch a Reg S-only bond, which S&P saw as a BB and Fitch as a BB+, and showed it did not need the support of US investors, drawing an order book of over US$9bn from around 300 accounts, despite a crowded new-issue market.

The company’s offering was a landmark in the region, becoming the largest sub-investment-grade G3 debut from an Asian issuer, but its execution was especially impressive.

The timeline was quick for a debut issue, with around two weeks between kick-off and pricing and, as a result, captured surging enthusiasm for Indian risk. The company conducted roadshows across Hong Kong, Singapore and London on a single day, using three teams, and added more meetings when investor interest grew, helping to draw a strong book from fund managers, in particular. The nimble sounding process allowed Tata Steel to execute the deal quickly against a volatile rates backdrop.

“It was heartening to get such an enormous response from high-quality investors across Asia, Europe and the Middle East,” said Koushik Chatterjee, group executive director (finance and corporate), Tata Steel. “The successful bond issue enables the company to diversify the investor base, lengthen the maturity profile and optimise the financing and capital structure.”

Yield guidance was tightened to 4.90% for the 5.5-year and 6.00% for the longer tranche, plus or minus 5bp, from initial price thoughts of 5.125% and 6.250% areas, respectively. The strength of demand meant both tranches priced at 4.85% and 5.95%, the tight ends of final guidance.

Investors have not had a bad word to say about the bonds, which have performed solidly in secondary, and the success of the issue means the market is open for Tata Steel whenever it wants to return for more.

ANZ, Bank of America Merrill Lynch, BNP Paribas, Citigroup, Credit Agricole, Deutsche Bank, HSBC, Morgan Stanley, Rabobank, Royal Bank of Scotland, SBI Capital Markets and Standard Chartered Bank were joint bookrunners on the offering, which was issued through ABJA Investments.

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