2009: Bouncing back

IFR Asia - 20th Anniversary Special Issue 2017
8 min read

While the crisis was still making waves at the beginning of the year – Bank of America’s rescue of Merrill Lynch very nearly collapsed in January – Asia’s capital markets were soon back to doing what they do best: raising money. Global investors turned to block trades to monetise their Chinese bank stakes, and Australia’s lenders were on a recapitalisation binge, helped by a government debt guarantee.

Regional players also sensed an opportunity to profit from the trouble in the west. Giant deals for Petronas and Maxis underlined Malaysia’s growing ambitions, and interest in RBS’s Asian assets was running high.

IFR Asia 598 – May 9, 2009

Blowout Kookmin tightens 75bp at debut

Kookmin Bank last Wednesday priced Asia’s first covered bond, a blowout deal that both established the asset class in the region and underscored the returning vigour of Asian G3.

Still, the screaming in of the bond’s spread the following day in Asia prompted a chorus of criticisms from rivals that the deal – led by Citigroup and HSBC – was priced far too generously.

The US$1bn five-year deal carried a 7.25% coupon and priced at 98.68 for a Treasuries plus 550bp spread.

Grey market pricing had the deal 10bp tighter in London 15 minutes ahead of its emergence. It broke at Treasuries plus 515bp/505bp, and rallied in Asia on Thursday morning to 494bp/492bp. By the late afternoon it settled at 475bp/472bp.

“Perhaps you need to leave something on the table in what remains a recovering market that could falter at any time. But I don’t think you leave 75bp on the table, particularly when you’re dealing with Double A rated debt,” said a regional syndicate head.

The comment was a tad disingenuous. There was a powerful rally in Asia on Thursday that saw the iTraxx Investment Grade index tighten by 40bp. That was bolstered by widespread buying of the Korea concept, with the recent Hana Bank rallying up to 103.625 bid on Thursday morning from the 102.25 Thursday close, and adding another 5/8 on Thursday afternoon.

The leads were at pains to push the structure as one of credit enhancement rather than as a pure rates instrument. The generous collateral coverage made the deal a no-brainer for accounts that would have been willing to book a senior unsecured Kookmin deal.

“By issuing a covered bond we were able to retain our independence rather than rely on the government guarantee – and we could price at a longer tenor than the three years imposed by the use of the government guarantee,” said Kookmin Bank CEO Kang Chung-won.

IFR Asia 599 – May 16, 2009

CCB: Political sensitivities cost BoA Merrill US$1bn

The long-awaited Bank of America Merrill Lynch selldown in China Construction Bank arrived last week. BoA Merrill sold 13.5bn shares to a consortium of investors led by Hopu, a private equity fund.

On May 12 BoA Merrill privately sold its 13.5bn CCB shares at HK$4.20 apiece, a 14.3% discount to the pre-deal spot, to the Hopu consortium, to raise HK$56.7bn (US$7.29bn).

BoA Merrill placed the deal to the Hopu consortium partly to satisfy perceived government pressures to put the shares into Chinese hands, to repatriate the stock, said bankers. Mainly the bank was told to sell the shares privately in a way that limited the market impact on the CCB share price.

Controversially, large tranches of the block were seen to be immediately flipped into the market by the consortium. Even more painfully for BoA Merrill, the shares were resold at a significantly higher level. Given that blocks of CCB shares were being sold in the immediate aftermath at the HK$4.8 level (and above), one could fairly estimate that BoA Merrill gave up HK$0.60 of value per share, or about HK$8.1bn.

One day after BoA sold its CCB shares, on May 13, UBS launched a selldown in CCB in the US market for an undisclosed institutional seller. That deal priced at HK$4.88, a tight discount of 2% to the pre-deal spot, to raise HK$3.6bn.

Soon after the afternoon trading session began, CICC launched another selldown in CCB on behalf of an undisclosed institutional investor at HK$4.82 apiece, a 3.3% discount to the previous close, to raise HK$964m.

Fund managers suspected that the selldowns were by investors who bought the shares from BoA Merrill or BOC International. If that was the case the two investors made a 14.8%–16.2% gain by holding the stock for just one day. After the latest selldown, BoA Merrill holds 25.5bn shares of CCB (10.95% of the bank), which are locked up until August 29 2011.

IFR Asia 601 – May 30, 2009

ANZ: cashed up and chasing its Asian ambitions

After months of speculation, ANZ finally confirmed last week it is bidding for RBS’s Asian retail and commercial assets across eight markets. The move highlighted its seriousness in achieving a long-held aspiration to become a regional bank focused on Australia, New Zealand and Asia Pacific.

“An acquisition of the selected RBS Asian assets would initially have a modest negative impact on reported earnings per share but over the medium term the impact would be expected to be positive,” ANZ said in a statement.

“The aim for the acquisition would be to provide a base for substantial value creation.”

Following last week’s capital raising, ANZ has suddenly emerged as the leading contender for the RBS assets, which have been valued at around US$1bn. Despite the financial firepower of HSBC and Standard Chartered Bank – two key rivals – both institutions are thought to have pulled out of the process after having second thoughts.

HSBC and StanChart declined to comment.

It is not clear what assets and in which jurisdictions are being pitched for by ANZ, although RBS has put its regional loans book and retail banking businesses on the block.

ANZ, by far the most adventurous of the four major Australian banks, is said to be focusing on RBS’s operations in the Middle East, Hong Kong, China and Singapore. India, where ANZ sold its presence via ANZ Grindlays Bank in 2000, could also be targeted as an avenue for expansion.

ANZ is cashed up. The lender raised A$2.5bn via an institutional equity placement of 173.6m shares at A$14.40, or a 9.4% discount, to the May 29 close.

Following the capital raising, a Goldman Sachs JBWere research report said that ANZ had four available options. These were buying RBS’ Asian assets, looking for other Asian assets, investing in its own platforms or do nothing (an unlikely outcome).

IFR Asia 625 – November 14, 2009

Maxis IPO catapults Malaysia onto the big stage

Malaysian telco Maxis on November 10 completed a M$11.2bn (US$3.3bn) – the largest IPO ever in Southeast Asia and the largest initial offering from a telecoms firm in Asia Pacific since 2000. The scale of the deal marks a significant step in the development of the Malaysian market and building investor interest in the country.

Malaysian Prime Minister Najib Razak strongly encouraged – if not devised – the IPO as a move to develop the stock market, and it seems to have worked.

One domestic banker said: “There are a lot more bankers from Hong Kong and Singapore coming through the airport now. Malaysia is definitely not a market that investors have to own in Asia, but now they will put their binoculars on it.”

The Maxis IPO involved the domestic assets of parent Maxis Communications and comprised 2.25bn secondary shares offered at M$4.80–$5.50 initially, which was subsequently tightened to M$5–$5.20 on November 9.

The transaction was the first in Malaysia to feature cornerstone investors. Fidelity’s Malaysia fund and three state-owned investors – the Employees Provident Fund, retirement fund Kumpulan Wang Persaraan and fund manager Permodalan Nasional – agreed to take 625.5m shares, 27.8% of the offering, at a price of up to M$5.20 before bookbuilding began. Foreign investors accounted for more than half of the final M$5.3bn institutional allocation.

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