High-Yield Bond House

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 .

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 .

The Republic of Indonesia laid down an important marker in Asia’s sustainable finance arena, becoming the first sovereign in the region to sell Green securities to offshore investors, and the first worldwide to sell Green sukuk. The government issued a US$1.25bn five-year Green sukuk alongside a US$1.75bn conventional 10-year sukuk, completing its first US dollar Islamic issue since a rating upgrade from S&P in May 2017 lifted it to full investment-grade status. The shorter tranche suited the maturity preferences of dedicated Green funds, which took as much as one fifth of that portion, by some estimates. Islamic investors, who share some of the same social motivations, took about a third of the paper, highlighting the role of alternative investor bases in funding sustainable development. Indonesia (Baa3/BBB–/BBB) at the time has become an increasingly savvy, and prolific, issuer in the international bond markets in recent years, and has grown an investor following. Still, some work was required to establish a framework for its Green wakala sukuk, which is backed by state-owned assets such as land and buildings, as well as projects under construction. Proceeds were allocated to green projects that will promote Indonesia’s transition to a low-emission economy and climate-resilient growth. The Green sukuk and framework received a “Medium Green” rating from the Center for International Climate Research (Cicero), an acknowledgement that Indonesia has some way to go on its journey towards sustainability. President Joko Widodo has set a target of cutting emissions by at least 29% by 2030. The deal came in February, taking advantage of a supportive market window following a period of volatility, and achieved the lowest Treasury spreads on the two tranches for an Indonesian sovereign sukuk. The US$1.25bn five-year sukuk priced at 3.75%, equivalent to Treasuries plus 109.5bp, tightening from guidance of 4.05% area. Orders totalled US$3bn for that tranche, as the 144A/Reg S format helped to reach a broad investor base and meant that Indonesia paid only a single-digit new issue premium. Asian accounts took 25%, the US 18%, Europe 15%, Indonesia 10% and “Islamic” 32%, giving a diverse geographic distribution. Banks booked 40% and fund managers 29%, while high-quality accounts like central banks and sovereign wealth funds took 20% and insurers and pension funds a combined 10%. Perusahaan Penerbit SBSN Indonesia III was the issuance vehicle on behalf of the government. CIMB, Citigroup, Dubai Islamic Bank, HSBC and Abu Dhabi Islamic Bank were joint bookrunners. CIMB was sole principal adviser, while HSBC was green structuring adviser. 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 .

Few bonds over the decades can claim a potentially revolutionary impact on capital markets, but the World Bank and Commonwealth Bank of Australia won that right with the world’s first public offering of blockchain bonds. The International Bank for Reconstruction and Development’s A$110m (US$82m) 2.2% two-year Kangaroo may be modest of size and short in tenor, but its implications could be huge if the groundbreaking trade is replicated and improved to establish a new, more efficient template for global bond issuance. Blockchain advocates emphasise the technology’s potential to deliver substantial savings as intermediary activities, including clearing and the use of depository institutions, are eventually reduced or removed. The Blockchain Operated New Debt Instrument, or Bondi, in reference to Australia’s most famous beach, was issued in August 2018 off the IBRD’s existing global debt issuance facility. It trades on a consortium blockchain platform operated by the World Bank and sole lead manager CBA. This is the first time globally that a legally binding bond has been created, allocated, transferred and managed solely using distributed ledger technology. In technological terms, the deal therefore looks like the genuine article, helping usher in revolutionary new tools that will result in greater transparency and more efficiency. The World Bank referenced two reasons behind Australia becoming the venue for its first blockchain issue. The first is the fact that the Australian investment community has shown itself to be receptive to this technology, as underlined by the decision of ASX in December 2017 to replace its equity clearing and settlement system with a distributed ledger system. Secondly, Australia’s self-contained market and easily identifiable participants made it an ideal laboratory for the inaugural blockchain bond. A diverse group of investors showed that they were ready to embrace the technology. CBA secured sole lead manager status thanks to its credible track record in the space, having previously put together an experimental cryptobond for Queensland Treasury Corp in January 2017 using its capital markets blockchain platform. The new bond does not fully embrace blockchain technology as payments are made via the existing SWIFT system to avoid the 10% Australian goods and services tax on fiat-currency-linked tokens. “We are yet to work out the benefits in terms of cost using the blockchain platform for this bond but we have demonstrated the principle that this technology could be used to efficiently settle transactions,” said Paul Snaith, the World Bank’s treasury head of capital markets operations. The Bondi trade provides a solid foundation for others to take the next steps to bring it into the mainstream. 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 .

Citigroup’s forte is the selective use of its massive balance sheet and a sharp focus on syndicating risk, and those attributes stood it in good stead in Asia’s loan markets in 2018 as volatile financial market conditions led to fewer plain vanilla opportunities and added pressure to generate returns. “Citi’s strength is evident in the depth and breadth of deals it closed, as well as thought leadership demonstrated in bespoke structured financing advisory – for example, bridge-to-bond, liability management and loan/bond/equity combo solutions for borrowers’ evolving needs,” said Benjamin Ng, Citigroup’s head of debt syndicate, loans and acquisition finance in Asia. The bank started the review period well, wrapping up a US$4.1bn leveraged financing supporting the acquisition of GLP, Asia’s biggest warehouse operator. Citigroup acted as equal underwriter and joint M&A adviser with one other bank, navigating structural challenges for the financing and the unique nature of the business. The loan, which made possible one of the largest leveraged buyouts from Asia, closed in December 2017 with 13 other lenders, representing a good mix of US, Asian and European banks. Another event-driven financing that stood out was a NT$90bn (US$2.91bn) five-year term loan in April backing Advanced Semiconductor Engineering’s planned merger with peer Siliconware Precision Industries. Citigroup was coordinator on a facility that attracted 37 other banks and is Taiwan’s biggest and most widely syndicated acquisition financing ever. Citigroup was also instrumental in a US$2.85bn 18-month bridge loan backing state-owned Indonesian miner Inalum’s purchase of a controlling stake in Freeport-McMoran’s local unit, before helping place a US$4bn offshore bond that cancelled out the loan. In Malaysia, Citigroup acted as sole coordinator and underwriter on a US$310m acquisition loan in March for Top Glove’s acquisition of Aspion, the world’s largest surgical glove maker. The loan was split into conventional and murabaha structures, helping Top Glove maintain its mix of conventional and Islamic debt. In May, Citigroup was one of two physical bookrunners on the first sterling-denominated Term Loan B for an Australian LBO – a £301m seven-year covenant-lite facility to finance private equity giant Carlyle Group’s purchase of Accolade Wines, the fifth-largest wine producer in the world. India proved a fertile hunting ground for Citigroup despite intense competition and pricing compression. The US bank picked its spots well in the country, bagging lead roles on unusual opportunities such as the repricing and conversion of a US$250m brownfield project loan from 2016 for Fiat India Automobiles into a corporate financing. The exercise marked a rare amendment of an external commercial borrowing under Indian regulations. Citigroup also distinguished itself as one of the three key banks among 20 lenders on a US$2.275bn acquisition financing in November for Aditya Birla’s US-based aluminium producer Novelis. The bank dodged the pitfalls of India’s troubled financial sector, but was still an active player as one of the nine leads on a US$750m five-year loan for Housing Development Finance Corp, which closed in November with 12 other participants. In August, Citigroup helped Charoen Pokphand Indonesia, the country’s largest poultry feed maker, to complete a US$630m-equivalent liability management, repricing and extension exercise for loans signed in 2014 and 2015. Citigroup also showed its abilities in the aviation sector with a US$1.27bn secured loan in July for New York-listed Fly Leasing’s purchase of aircraft from Malaysian budget airline AirAsia. Citigroup was one of four original mandated lead arrangers and bookrunners on the borrowing, which attracted 14 other lenders. The bank was also involved in other popular aircraft leasing deals for BOC Aviation, Australia’s Macquarie AirFinance and SMBC Aviation Capital. Citigroup also sparkled in domestic markets with a Tk

The financing for Asia’s biggest private equity buyout raised the bar for the region’s leveraged finance industry, illustrating the kind of scale and complexity that the Asian loan market can offer to cash-rich financial sponsors. A consortium of Chinese investors wrapped up a US$4.108bn loan for the acquisition of GLP in January 2018, marking the end of a two-year campaign to take control of the Singapore-listed logistics provider. Chinese PE firms Hopu Investment and Hillhouse Capital, and SMG Eastern – an entity under the full control of GLP CEO Ming Zhi Mei – sealed the LBO loan in a relatively shorter timeframe, but the financing still provided a tough test for lenders given the structural complexities. GLP’s appeal as Asia’s biggest warehouse operator was not in doubt. However, the unique nature of its business, with operations in multiple jurisdictions, and its existing debt of around US$4bn posed significant hurdles. GLP is not just a developer and owner-operator of logistics facilities, but also one of the largest real estate fund managers in the world. When the US$4.10bn loan emerged in mid-2017 via equal underwriters and M&A advisers Citigroup and Goldman Sachs, GLP had a global portfolio comprising 700 million square feet of logistics facilities in China, Japan, Brazil and the US, among others. The buyout loan for Nesta Investment Holdings, the bidco, was subordinated to the existing debt, which resided at several operating entities in different geographies with some of the facilities carrying change-of-control clauses. The leads had to structure the financing taking into account the Ebitda and the attributable value of the properties GLP owned directly as well as via its real estate funds. The combined debt at the bidco and the operating company represented leverage of around 13x. For the year ended March 31 2017, GLP’s Ebitda had totalled around US$489m and it had investment properties valued at US$14.70bn. The financing structure also had to ensure that GLP’s investment-grade ratings –Baa2/BBB+ (Moody’s/Fitch) at the time the deal was launched – were not impacted. Conviction that the company would remain a solid Triple B credit was reflected in the pricing, security and covenant package on the loan. The pricing was extremely tight for a leveraged deal, with the top-level blended all-in at 135.4bp based on a blended interest margin of 124.06bp over Libor and blended tenor of 3.095 years. The loan did not carry any security or flex on the leverage covenants. The deal picked up momentum with seven other lenders joining the arranger group well before launch into syndication in September. It attracted another six banks in general syndication before closing in December with the final group representing a mix of lenders from the US, China, Japan, Europe and Taiwan. 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 .

Goldman Sachs was back at its best in Asia’s equity capital markets in 2018, securing key roles on the biggest capital raisings of the year and showing its strengths across a broad mix of markets and products. The US investment bank led six of the 11 US$1bn-plus IPOs in the year and topped the equity and equity-related league table for Asia Pacific, excluding Japan. Goldman’s performance in the technology sector was especially remarkable, as it has worked hard to rebuild its tech franchise after missing out on high-profile listings the previous year. Its strong showing in the equity-linked market also surprised rivals. “This year, we led all the important transactions in all the relevant markets,” said Aaron Arth, head of the financing group for Asia ex-Japan. China was again the busiest market for Asian equity offerings during the year with tech issuers in focus. Goldman, after a disappointing 2017, made a strong comeback in 2018 with leading roles on the most high-profile tech IPOs in the region. The bank was one of the sponsors for the landmark HK$42.6bn (US$5.4bn) Hong Kong IPO of Chinese smartphone maker Xiaomi, the first listing in the city for a company with weighted voting rights under new rules introduced in April to attract tech listings. The bank was also in the driving seat of the HK$33.1bn Hong Kong IPO of Chinese online services provider Meituan Dianping, the second dual-class share listing. The bank also secured sponsor roles on all four pre-revenue biotech listings in Hong Kong, leading the development of what is expected to become an important funding venue for the sector in the future. Playing to its strengths, Goldman brought a series of Chinese technology companies to the US market. It led the US$2.4bn Nasdaq IPO of video streaming company iQiyi, the US$1.7bn Nasdaq listing of online group discounter Pinduoduo and the US$1.2bn NYSE float of Chinese electric vehicle startup Nio. In China’s domestic market, Goldman, through its joint venture Goldman Sachs Gao Hua Securities, arranged the Rmb5.46bn (US$851m) ChiNext IPO of Contemporary Amperex Technology (CATL), China’s largest lithium battery producer. As well as raising capital for new economy clients, Goldman extended its reputation as the go-to house for the biggest deals in the state-owned sector. It was one of two sponsors on the HK$58.8bn Hong Kong IPO of mobile phone infrastructure company China Tower, at the time the world’s biggest listing in two years. In the equity-linked market, Goldman shocked rivals with a US$3bn dual-track offering for Chinese property developer Country Garden in January. Leveraging on its long-term relationship with the issuer, Goldman was the sole arranger of a HK$15.6bn 363-day convertible bond and a simultaneous HK$7.88bn primary share placement. The deal showcased the bank’s ability to spot the best issuance windows, and opened the floodgate for four more CBs from the Chinese property sector in quick succession, raising a combined US$3.2bn. Beyond the important Chinese market, Goldman handled a broad range of deals across the region. The bank helped South Korean messaging app operator Kakao raise US$1bn from the sale of global depositary receipts in Singapore. It also helped Temasek Holdings cash in a combined W1.07trn (US$1bn) from the sale of shares in Korean protein producer Celltrion and its distributor Celltrion Healthcare through block trades. As sole bookrunner, Goldman sold a US$500m CB for Singapore-based internet company Sea. Equity issuance in India and South-East Asia was relatively thin in the period under review, but Goldman featured on a handful of meaningful transactions. In the troubled financial sector, it seized on a short-lived rebound in sentiment in late 2017 to help Punjab National Bank raise Rs50bn (US$705m) from an institutional placement, before acting as one of the bookrunners on the Rs45bn IPO of Bandhan Bank, India’s biggest ever bank listing, and on HDFC Bank’s US$1.8bn American depositary sha

International equity-linked issuance from Asia more than doubled in 2018, and Credit Suisse used its experience and relationships to do more deals in more countries than any other bank. The bank was a regular feature in the offshore Chinese market, moving quickly to seize a window early in the year, and it also helped issuers in Australia, South Korea and Vietnam raise funds during IFR’s review period. Credit Suisse impressed with a broad range of public deals, covering high-grade and high-yield credits and a mix of structures, from zero coupons and dual-currency benchmarks to CB/stock placement combos, equity swaps and liability management. It is clear the bank values structured equity – both public and private – as a core part of its Asian offering, and has lost none of its focus under Aaron Oh, who took over as head of structured equity origination for Asia Pacific following the retirement of Jim McDonnell in 2017. It was quick to spot market trends in 2018, completing three out of the five CBs from the Chinese property sector in January as debt-laden developers seized a chance to capitalise on surging stock prices. The bank raised HK$2.79bn for Cifi Holdings Group and HK$1.99bn for Powerlong Real Estate. A tenor of 363 days for both deals allowed the issuers to move quickly, as bonds with maturities under one year do not need to be registered with China’s National Development and Reform Commission. Credit Suisse also completed an HK$18bn convertible bond for long-term client China Evergrande Group, the largest offshore equity-linked issue in Asia Pacific ex-Japan since 2001 and the largest ever from the Chinese real estate sector. Chinese property developers were the biggest source of new convertible bonds in the year, with five deals raising a combined US$5.2bn, but investors were soon looking for alternatives as stock prices weakened. The US$610m dual-currency CB of South Korean chemicals maker LG Chem was the highlight of the year. A rare sole mandate for a deal of its size in Asia’s competitive equity-linked market, the transaction was the first US dollar and euro dual-currency offering from a Korean issuer. It gave the issuer a neat way to monetise treasury shares it had acquired from its purchase of LG Life Sciences the previous year, while the currency mix suited its global funding needs and maximised investors’ appetite for the deal – as they had two currencies and different conversion premiums to choose from. Credit Suisse also brought innovation to Vietnam, a market which drew increasing attention from international investors in 2018. The bank, again as sole bookrunner, helped Vietnamese property company No Va Land Investment Group raise US$310m from a top-up share placement and convertible bond issue – the first concurrent CB offering and equity placement in Vietnam. At US$160m, the CB portion was also the largest debut issuance from the country. The bank has dominated Vietnam’s equity-linked sector since it brought Vingroup, the country’s biggest developer, to the market in 2009, working on all six equity-linked offerings from Vingroup since then. During IFR’s awards period, Credit Suisse, as a joint bookrunner, helped Vingroup subsidiary Vinpearl, a resort developer, raise US$325m in June from the sale of an exchangeable bond with Vingroup as underlying. Vinpearl reopened the deal and raised an additional US$125m in October – this time with Credit Suisse as sole bookrunner – to bring it to a total size of US$450m, the biggest deal of its kind in a frontier market. In Australia, Credit Suisse was one of the two banks that led the €230m (US$284m) seven-year CB for Cromwell Property Group, the largest CB in the country since 2011, and sole buyback agent on a €93m repurchase of its outstanding CBs. 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 .

In a year when Hong Kong’s stock exchange passed reforms aimed at attracting more technology companies, it is fitting that the city’s biggest tech stock should have been at the heart of the most significant – and impressive – deal of the year. Naspers’ HK$76.95bn (US$9.8bn) sell-down in internet giant Tencent Holdings showed that Hong Kong can compete with the world’s biggest equity financing venues. Asia Pacific’s largest overnight block trade smashed a record in Hong Kong that had stood since Vodafone sold a HK$50.9bn China Mobile stake in 2010. It is also the third-largest on record anywhere in the world. The March 23 share sale was the first from South African media company Naspers, which had seen its US$32m Tencent investment in 2001 balloon to US$175bn. The deal was launched a day after Tencent announced its quarterly results. Slowing gaming revenues worried investors, dragging down the shares by 5% before the sell-down was announced. After months of preparations, joint bookrunners Bank of America Merrill Lynch, Citigroup and Morgan Stanley nevertheless went ahead and launched the offer of about 190m secondary shares, or about 2% of the company. Unlike a typical block trade in Asia, the deal was launched on a best-efforts basis without any wall-crossing and no price range at launch. Naspers, which still owns a 31.1% stake after the trade, also said it had no intention of selling any more shares for at least three years. This allowed the banks to build a genuine, global book from the outset, creating competition among investors and ultimately leading to greater price tension. Launching without a price range also gave the leads more flexibility on pricing, which was critical to the deal’s success given that the Dow tumbled 2.9% during bookbuilding after US President Donald Trump announced fresh tariffs on Chinese goods. Tencent’s American depositary receipts were still trading in the US, while Naspers – which trades largely as a Tencent proxy – is quoted in Johannesburg. Despite the challenges, the block was covered in a few hours and ended well oversubscribed with more than 300 investors participating. About an hour before the books closed, the leads issued guidance of HK$400–$410 per share or a discount of 6.7%–9%. The shares were eventually priced at HK$405 each, or a 7.8% discount to the pre-deal close of HK$439.40. The top 20 investors took around 60% of the deal and the top 10 bought 40%. Demand came from global top-tier long-only funds, sovereign wealth funds and hedge funds. Geographically, about 55% of demand came from Asia, 38% from the US and 7% from Europe. Tencent closed at HK$420 the day following the sell-down, a 4.4% drop on the day but left investors who took part in the deal comfortably in the money. Naspers got the best of the bargain, however, after Tencent retreated from its first-quarter peaks. 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 .

A US$610m dual-currency convertible from South Korean chemicals maker LG Chem showed the potential for innovative equity-linked issuance from the country. LG Chem launched three-year convertible bonds split between €315.2m and US$220m tranches on April 10. South Korean issuers typically prefer to sell such instruments domestically, and LG Chem had never previously looked offshore. However, the acquisition of LG Life Sciences the previous year left it looking to monetise a stash of treasury shares, and the CB format met its objectives well. Despite being a debut international issuer, LG Chem was not shy at testing a new structure. The CB was the first US dollar and euro dual-currency offering and also the first undocumented offering from a South Korean issuer. Both tranches were launched at aggressive terms, with a zero coupon and zero yield. The euro tranche was marketed at a conversion premium of 40%–50% while the US dollar tranche guidance was 25%–30%. To simplify the issuance process and allow greater flexibility in timing, the deal was executed as an undocumented offering, where there is no specific deal disclosure. Investors were comfortable with the lack of offering circular, thanks to LG Chem’s status as a blue-chip company with a reputation for good corporate governance. As a result, the deal managed to generate strong demand from investors in Asia and Europe with participation mainly from outright buyers. The deal had been structured to maximise interest from all types of CB investors. Some liked the US dollar tranche as it carried a lower conversion premium and provided more equity upside (the bond floor ended up at 90). Others preferred the euro tranche as a defensive play in a low-rate environment. The euro tranche was more popular than the US dollar one, allowing it to be priced at the mid-point of the conversion premium at 45%. The US dollar CB was priced at the low end of 25%. For Asian investors, the LG Chem deal also offered them some diversity in their China-heavy portfolios. For the issuer, the dual-currency structure allowed it to raise funds for overseas investments as LG Chem has diversified businesses and a global footprint. Credit Suisse was the sole bookrunner. Both CBs traded well a day after the issuance. The US dollar CB traded at 100 in the secondary market, while the euro was quoted at 101. Credit spread was assumed at 80bp and stock borrow cost at 50bp. Implied volatility for the US dollar tranche was 30. For the euro piece, implied volatility was in the mid-20s. 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 .

Anton Oilfield Services Group earns this year’s Turnaround Deal award for a transaction that dealt with a near-term maturity and earned it ratings upgrades and breathing room while oil prices were in the doldrums. At the start of IFR’s review period in late 2017, Beijing-headquartered Anton was struggling with the low oil price and staring down a US$242.25m maturity in less than 12 months, putting its issuer ratings of Caa1/CCC (Moody’s/Fitch) under threat. Its solution was an exchange offer with a new money component, giving bondholders the choice of exchanging into new notes with a longer maturity and higher coupon or holding onto the bonds and waiting for them to be redeemed. Since the exchange did not involve a haircut, rating agencies did not consider it a distressed exchange. Success, however, was critical. Moody’s warned that Anton’s ratings would face downward pressure if the exchange offer failed, while Fitch gave it just six months to sort out alternative refinancing arrangements. Appetite for Asian high-yield paper also appeared to be waning, making it far from certain that the deal would succeed, especially at expected ratings of Caa1/CCC– (Moody’s/Fitch). Anton engaged investors to find out their preferences and yield expectations, and the response showed that it had picked the right approach. It achieved a solid take-up rate of 70.81% in the exchange, despite high levels of private bank ownership which typically makes it hard to reach all investors. Holders of US$172.249m of Anton’s 2018s exchanged them for new Reg S bonds at a rate of US$1,018.75 for every US$1,000 of old notes. It also sold US$123.58m of new notes at a cash price of 99.366 with a coupon of 9.75% to yield 10%. While it was a bond-for-bond exchange, Anton paid an additional US$6.34 in cash per US$1,000 of exchange notes in order to round up to par and give bondholders participating in the exchange offer the same equivalent yield as new investors. Raising new money was especially impressive, given that three Asian high-yield issuers had pulled deals in mid-November. The 10% yield was also inside secondary quotes of 10.25% for the 2018s, despite the maturity extension. It was also the minimum yield Anton had indicated to investors earlier in the process, yet still managed to attract a diverse mix of investors, including real money accounts. Rating agencies responded by upgrading the issuer immediately, with Moody’s raising it to B3 from Caa1, noting the improvement in its maturity profile and liquidity, while Fitch upgraded it to B– from CCC. In January, Anton redeemed the remaining US$71m of 2018 bonds. In April Moody’s upgraded the company again, to B2, while Fitch raised it to B in October. Nomura was dealer manager for the exchange and sole global coordinator for the new issue. 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 .