Deutsche Bank covered the broadest possible range of products and markets for Asian high-yield issuers in 2017, setting itself apart from rivals in a record year for the sector. It led deals from China to India and Macau to Mongolia, in sectors ranging from coal mining to solar power. It connected Asian issuers with investors in both the US 144A and Reg S-only markets, delivered complex liability management exercises and helped debut borrowers access new sources of funding.
Deutsche Bank set the standard early in IFR’s review period with an audacious US$1.2bn dual-tranche deal in November 2016 for Studio City, one of Macau’s newest casino resorts, two weeks after the shock of Donald Trump’s victory in the US presidential election set global financial markets spinning.
Deutsche, as sole global coordinator, left lead bookrunner and rating advisor, helped Studio City attract both high-quality US investors and Asian interest by pointing to a recovery in Macau’s growth.
“It sent a strong signal that our market was open for business,” said Haitham Ghattas, head of debt origination for Asia. “High yield was basically back. I genuinely believe to this day that we were the only firm that could have pulled this off. It absolutely set the stage for 2017.”
Asian high-yield issuance soared to a record in 2017, but many deals were far from straightforward.
Deutsche’s structuring and distribution capabilities were tested on Kaisa Group Holdings’ US$3.45bn exchange offer and concurrent new issue, which achieved an extraordinary outcome for a company that had just resurfaced from a restructuring in 2016. Deutsche helped Kaisa achieve over 90% participation in the exchange, enabling it to take out all of its outstanding payment-in-kind notes, which had restrictive covenants that could have hampered the company’s growth. At US$2.66bn, it was also the largest exchanged notional amount in Asia.
The new-money component was further complicated after China Evergrande Group’s outsized new issue a day earlier surprised investors, and ultimately closed the high-yield market for two weeks.
Deutsche expanded its expertise and reach in Indonesia, leading a bond and loan refinancing for tyre maker Gajah Tunggal, which resulted in a ratings upgrade, and helping coal producer Geo Energy Resources print a debut US$300m five-year non-call three at a yield 45bp inside initial guidance.
Elsewhere, it won a lead role on the first US dollar high-yield corporate bond from Malaysia in more than a decade, when Press Metals Aluminium Holdings completed a hugely popular transaction that was nearly 10 times oversubscribed.
In a strong year in India, Deutsche was global coordinator on a 4x subscribed US$500m bond issue for the private equity owners of Indian IT solutions provider Mphasis in a dividend recapitalisation transaction. Deutsche also led a Green bond from first-time issuer Jain Irrigation in January, and brought car parts maker Samvardhana Motherson, now a crossover credit, to the euro market.
It was also a bookrunner on Asia’s largest corporate Green bond, for renewable energy producer Greenko Group. Greenko issued offshore bonds and used the proceeds to subscribe to onshore bonds from its power entities, but Deutsche tweaked that structure when it brought peer Azure Power Energy to market, giving it the flexibility to subscribe to bonds, loans or both, after foreign investment in Indian corporate rupee bonds neared its limit that month.
In October, it helped Mongolia, rated Caa1/B–/B– at the time, extend its maturity profile with a new US$800m 5.5-year issue and tender for its 2018 dollar and renminbi notes.
Deutsche also leveraged on Studio City’s success to represent Wynn Macau as sole global coordinator for a US$1.35bn dual-tranche deal, the largest Asia ex-Japan high-yield offering of the year outside the real estate sector and the first from the Macau gaming sector to include a 10-year tranche.
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