Reg S: The team adjusts to a world of low banking fees

Few banks around the world can claim such consistent domestic dominance as ANZ, which once again topped the bond league tables on both sides of the Tasman Sea amid a slowdown of overall Antipodean supply after a record-breaking 2017. “The key development in 2018 has been the rates cycle. This has impacted on foreign demand, notably out of Japan, and made the long end particularly challenging, though it has been contained by an expanding Australian investor base,” said ANZ’s global head of syndication, Paul White. ANZ responded well to the shifting buyside dynamics to retain its now traditional position at the head of the Australian dollar bond table with 80 trades, excluding self-led issues, during the review period for a 13.3% share of the A$103.8bn (US$75bn) market. It is not just the number and size of the trades executed but the breadth of the coverage that makes ANZ the go-to house across the range of Australian dollar issuance. In the semi-government arena ANZ helped smash Australia’s Green bond record across all sectors when New South Wales Treasury Corp raised a whopping A$1.8bn from its first such offering, a 10-year print in November 2018. Underlining its green credentials, ANZ was a lead on International Finance Corp’s A$300m March 2023 five-year Social Kangaroo bond, the inaugural social issue in the Kangaroo market from an SSA, and a A$125m three-year Sustainability bond from Victoria-based mutual Bank Australia. In the corporate segment ANZ took more than a dozen Triple B and Single A offshore and onshore names to the Australian dollar market. But arguably the most innovative transaction was the relatively modest A$150m debut 8.25% five-year non-call three sale from Virgin Australia, rated just B3/B– (Moody’s/S&P), which pushed the country’s developing high-yield bond market further down the credit curve. ANZ continued to lead in the senior and subordinated, local and Kangaroo FIG universe where it was the number one house for Australian issuers and the first choice for Canadian, Middle Eastern, Korean, Japanese and Chinese bank supply. Despite continuing to steer clear of the large non-conforming RMBS market, ANZ remained active in securitisation as it won a place on 10 tickets during the review period, encompassing bank and non-bank prime residential mortgage, auto and agricultural equipment-backed issues. Across the ditch ANZ headed the New Zealand table for an astonishing 12th successive year having a market share of over 34% on all domestic and Kauri bond business. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

IFR Asia Awards 2018 The end of 2018 may not feel like much cause for celebration in Asia’s capital markets, but it would be a mistake to overlook the tremendous achievements of the past 12 months. After a slump in emerging-market currencies took hold over the summer, many market participants were left waiting for the end of the year to reset expectations. Investors who did well at the start of 2018 soon found themselves reeling, as higher dollar rates and fears for trade growth brought their portfolio values back to earth with a bump. Despite this tough backdrop – at least in the second half of the year – Asia’s capital markets took some enormous steps forward in 2018. Hong Kong ushered in reforms to bring its listing regime into the 21st century, and found immediate rewards with a string of major IPOs from technology companies with dual-class shares and biotech developers without a profitable track record. While secondary performance has been tough in some cases, the new framework will serve the entire market well in the long run. China also began laying the foundations for an overhaul of the domestic equity capital markets, with plans to introduce basic international standards such as market-driven pricing and a registration-based system through a new Shanghai technology board. Reforms in the Chinese bond market have been arguably even more significant, with renminbi securities poised to enter global indexes in 2019. Beyond Greater China, Asia’s frontier markets also took some important steps forward in 2018. There were bond market debuts from the Papau New Guinea government and from Cambodia’s corporate sector, while Vietnam’s stock market welcomed major international investors – and some big new listings. The outlook for 2019 is far from clear, with questions lingering over China’s continued growth as a trade spat with the US threatens to spiral out of control and as regulators crack down on excessive leverage in the financial system. After some tough months over the past year, however, much of the froth has already gone. Most recent financings have relied on real demand from international institutions, rather than leveraged orders from China’s corporate sector, and the exuberant acquisitions of recent years have all but vanished. That should limit the downside from this point, assuming there are no more nasty surprises. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

Australia & New Zealand Banking Group has transformed its institutional business into a leaner, sharper and more agile offering. While much of the focus in recent years has been on scaling back its retail and wealth management units in Asia and selling off joint ventures, the bank’s wholesale offering ended 2018 stronger, more focussed and – importantly – more profitable. By better leveraging its network and honing its attention on a target group of industry champions, ANZ won repeat business from regular issuers and picked up a number of first-time mandates. Its more agile approach allowed it to spot opportunities, whether it was connecting Middle Eastern companies with Australian investors or pioneering new sustainable financing structures in Asia. Overall there is a sense among insiders of a renewed push in the institutional division under chief executive Shayne Elliott, after years of rapid expansion under his predecessor gave way to retrenchment. With Australia’s retail banking sector currently reeling from the scandals exposed by the Royal Commission, the emphasis on the wholesale business is even more important. “When we sat down two and a half years ago, we asked ourselves some tough questions about how to build a business that is sustainable in Asia, and hence we have decided to place our focus on the institutional business and decided to exit businesses where we did not think we had a winning proposition,” said Farhan Faruqui, group executive for the international business. “We are seeing real success and that is because of the investment we have been making. We have built a dominant position in the region in the loans and DCM space. We have invested in cash management to build a strong platform in the region. Our markets business has become extremely successful.” BETTER CONNECTIVITY ANZ has always had the biggest Asian presence among Australia’s big four banks, but its super-regional expansion strategy under previous CEO Mike Smith earned it few points with shareholders, with analysts arguing that the overseas operations diverted too much capital away from the lucrative local market and weighed on group profits. Since Elliott took up the reins in January 2016, the bank has been selling off disappointing businesses and minority stakes in other lenders. Save for some minority shareholdings, such as a 12% stake in Bank of Tianjin and 24% of AmBank, the divestment process in Asia he kicked off is otherwise complete. ANZ also shrunk its institutional business by around a fifth during that period, whittling down its client base to around 8,000 customers. It now only chases clients that offer multiple sources of income, and has focused its efforts on certain key sectors in which the bank has traditionally excelled, namely financial institutions; technology, media and telecommunications; food and agriculture; resources and infrastructure; and real estate. The focus is now firmly on wallet share and profitability per client, rather than league tables or simple revenues. “What we have done is to reshape the business to grow revenues with the right customers and the right returns,” said Mark Whelan, group executive for the institutional business. “We have a pretty enviable network throughout the region and so our key strength is really intermediating those intra-regional trade and capital flows, in particular into and out of Australia and New Zealand.” Despite its period of retrenchment, ANZ has maintained its institutional presence in all 15 Asian markets where it had previously built a customer base. The bank is particularly fond of noting that it is the only international lender with a presence in all five countries in the Greater Mekong region. Its regional footprint has enabled it to compete for a share of the more lucrative cross-border financing mandates with larger rivals such as HSBC, Citigroup and Standard Chartered. “I t

UBS used its strong local franchise and full-service equities offering to full effect in 2018, raising more for its Australian clients than any of its peers. UBS topped the Australia/New Zealand equity and equity-linked league table for IFR’s review period. The Swiss bank raised a total of A$8.38bn (US$6.08bn) for its clients through 30 transactions with a market share of more than 25%, way ahead of 14% for its closest competitor, according to Refinitiv data. “In terms of the quality of the issues we have done as well as the sizes, there are no other banks in the market that could come close,” said Andrew Stevens, co-head of equity capital markets at UBS. Indeed, UBS led the four biggest merger and acquisition-driven equity raisings, the big theme in Australia equity capital markets in 2018, during the awards period. Highlights included the two-time fundraisings of a combined A$6.7bn for Transurban Group, in which UBS was one of the three leads for the share sales. The Australian toll-road operator raised A$1.9bn from an entitlement offer in December 2017 and completed an A$4.2bn entitlement offer and A$600m placement in August to fund an acquisition of a controlling stake in a Sydney toll road. The bank also worked on Australian gas and oil producer Woodside Petroleum’s A$2.5bn entitlement offer to fund the purchase of ExxonMobil’s stake in the Scarborough gas field. In demonstrating its execution capabilities, UBS has shown it can help its clients overcome market turbulence with its insights in timing, structuring the transaction and observing the broader environment. The fact that the bank is the largest equities broker in the country also provides support to the ECM operation. “The strengths of our franchise from advisory to ECM to equities show that we can really excel. A more volatile market is actually where we have been standing out,” Stevens said. The A$2.9bn rights issue from engineering service WorleyParsons fully demonstrated UBS’s ability to underwrite major financings even in a bad market. The deal launched just three days before October 25, the day the benchmark ASX 200 index hit a one-year low as investors turned cautious amid a global market sell-off. The Australian IPO market had another very quiet year, with many proposed listings pulled or postponed, but UBS still had a hand in the three biggest IPOs during the review period. The bank led Australian refinery and fuel supply network Viva Energy’s A$2.65bn float, Australia’s biggest IPO in four years, the A$744m listing of US coking coal miner Coronado Global Resources and the A$264m IPO of Australian wealth management platform Netwealth. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

China National Chemical Corp (ChemChina) pushed the boundaries of the international capital markets in March with Asia’s biggest Reg S-only bond, raising US$6.4bn across six tranches – five in US dollars and a €1.2bn long four-year in euros. The first jumbo trade from Asia since markets weakened in February equalled Sinopec’s US$6.4bn-equivalent US dollar and euro 2015 deal as the biggest from China’s corporate sector and the largest international bond from a Chinese state-owned enterprise. Proceeds were used to refinance bridge loans used to acquire Swiss seeds and pesticide maker Syngenta for US$43bn, showing that the bond market was a viable way to fund M&A and giving other Asian issuers the confidence to follow later in the year. The US dollar portions comprised a US$1bn 4.125% 2021 priced at Treasuries plus 182.5bp, a US$1.3bn 4.625% 2023 at plus 202.5bp, a US$800m 4.875% 2025 at plus 220bp, a US$1.75bn 5.125% 2028 at plus 235bp – all priced 15.0bp–17.5bp inside guidance – and a US$100m 2048 at 5.5% in response to reverse enquiries. The euro tranche priced 15bp inside initial guidance at mid-swaps plus 150bp. A 20bp–25bp premium against its secondary curve gave investors the confidence to participate and ensured good secondary performance. At the time, Asian high-grade issuers were still grappling with the new market reality, having become accustomed to printing flat to or inside their curves for the past two years, but such premiums soon became standard practice. Even with an established state-owned name like ChemChina, there was no guarantee that investors would show enough interest to print the size it was targeting. Since the start of the year, China had begun discouraging some companies from making too many large overseas acquisitions, and while ChemChina had emerged as a national champion in the chemical sector there was some wariness over whether the Syngenta acquisition, the largest ever by a Chinese company, might yet be affected. On top of that, Syngenta had postponed its own US dollar offering the previous September, creating an overhang as investors waited to see if it would return for its own jumbo trade to help with the acquisition funding. In the end, that trade came the month after ChemChina had settled investors’ concerns and shown what was possible in the Reg S market. Bank of America Merrill Lynch, Barclays, BNP Paribas, BOC International, China Citic Bank International, Commerzbank, Credit Agricole, Credit Suisse, First Abu Dhabi Bank, HSBC, Industrial Bank Hong Kong branch, Morgan Stanley, MUFG, Natixis, Rabobank, Banco Santander, Societe Generale and UniCredit were joint global coordinators and joint bookrunners for the bond offering. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

Australia and New Zealand Banking Group outperformed competitors in its home market in 2018 with leading roles in the biggest leveraged buyouts and infrastructure financings of the year. The bank topped the league table with more than 50 syndicated deals in Australia and New Zealand during IFR’s review period, underwriting over A$17bn (US$12.3bn). “Event-driven financing activity is a key focus for ANZ and our ability to leverage our long standing client relationships across both issuers and investors meant we could deliver large-scale timely solutions,” said Christina Tonkin, head of loans & specialised finance, institutional at ANZ. The A$1.475bn financing for Beach Energy’s purchase of Lattice Energy in late 2017 was a particular highlight, showcasing ANZ’s ability to underwrite a transformational acquisition financing before bringing in 14 other banks. ANZ was also involved in the US$1.364bn senior loan to back Adaro Energy and EMR Capital’s US$2.25bn purchase of the Kestrel coal mine as part of Rio Tinto’s divestment of its Australian coal assets. That deal was syndicated to seven banks. It was also part of the arranger group for the A$911m-equivalent refinancing for Spotless Group and the A$400m refinancing for Downer EDI after Downer EDI acquired a majority stake in Spotless. Nine banks joined the Downer EDI deal while 10 participated in the Spotless deal. On the infrastructure front, the A$3.5bn financing for a A$6bn tunnels-and-stations package for the mega A$11bn Melbourne Metro Tunnel project, which includes the construction of a nine-kilometre tunnel and five underground stations, was a headliner. ANZ was an active MLAB on the coveted government-owned project financing, which attracted 16 incoming lenders. ANZ was also part of a large group of banks that provided a A$1.1bn bridge loan and A$4bn refinancing to support Transurban Group and its partners on the purchase of 51% of WestConnex, another high-profile privatisation, in September. The A$4bn deal will replace the A$1.1bn bridge and existing debt for the M4 West and M4 East motorways, and provide the remaining construction costs for M4 East. During a slower year for the Australian property market, ANZ snagged sole MLAB and underwriter roles on marquee deals, including the A$880m refinancing for Brookfield Place in Perth, the largest sole underwritten deal in the first three quarters of 2018, the A$542.3m amend and extend for Schwartz Family and a A$405m refinancing for SB&G Hotel Group’s Watermark hotel portfolio. The bank was also a lead on the A$1.102bn deal for Brookfield’s Wynard Place development and an arranger for corporate deals such as the Scentre Group refinancing, which was increased to A$900m from A$500m after 11 banks joined, Vocus Group’s A$1.417bn-equivalent facility and Fortescue Metals’ US$1.4bn loan, used to redeem part of a bond. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

Nagacorp’s US$300m debut bond introduced the first Cambodian issuer to the international markets and was arguably one of the most difficult deals executed in Asia in 2018. Nagacorp, which operates the only integrated casino and hotel resort in Phnom Penh, had to negotiate a rocky period for emerging markets in May and set a price for Cambodian risk, given that even the sovereign had yet to set an offshore benchmark. The deal, however, priced inside guidance and traded well, giving the company a valuable funding platform for future projects and the poor South-East Asian nation a first foothold in the international markets. Risk appetite was off the table with US Treasury yields spiking: two Chinese issuers were forced to pull investment-grade US dollar bond offerings in the two days after Nagacorp priced, as the 10-year US Treasury yield hit its highest level since July 2011. Closer to home, there was also political risk from an election due in July. Given investors’ concerns over the country’s political and business environment, Nagacorp emphasised that the proceeds would be used to grow revenue, by developing the VIP business and refurbishing hotel rooms. Credit ratings of B1/B (Moody’s/S&P) helped position the company above the sovereign, which has a B2 from Moody’s and is not rated by S&P or Fitch. Leads Credit Suisse and Morgan Stanley arranged a visit to the casino and hotel complex to give potential investors a closer look at the operations, in addition to an extensive management roadshow. Nagacorp’s fundamentals were a strong selling point, as it had not taken bank loans before coming to the offshore bond market, and generated US$320m of Ebitda in 2017, helped by a steady flow of tourists, especially from China. The company engaged with US investors familiar with high-yield issuers from the casino industry and keen to pick up a rare Asian gaming credit. Some investors who were already familiar with the stock were said to have looked at the bonds, too. Nagacorp announced initial guidance at 9.75% area, based on pricing comparisons from around the region, but after receiving robust demand especially from the US, tightened to a final yield of 9.625%. Asian investors took 63% of the 144A/Reg S notes, with US investors booking 22% and EMEA 15%. By investor type, asset managers and fund managers bought 90%, banks and securities firms 9%, and private banks 1%. The bonds were bid 1.5 points higher in trading the next day, bucking the trend at the time in Asian high yield for new issues to trade down. The bonds had not fallen below par since issue and were spotted at around a cash price bid of 103 by mid-November. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .