Cooked to perfection
Indofood CBP Sukses Makmur made an eye-catching debut in the US dollar bond market in June with an ambitious US$1.75bn two-tranche deal that was the year’s best capital markets trade from Indonesia.
Marketing a maiden US dollar bond is hard enough, but Indofood aimed for a large size and long tenors, presenting additional challenges.
The instant noodle producer priced a US$1.15bn 10-year note at par to yield 3.398% and a US$600m 30-year bond at par to yield 4.745%. The shorter tranche saw price guidance tighten by 45bp during the bookbuild, while the guidance for the longer notes tightened 35bp.
The combined order book stood at US$8.9bn at reoffer, after peaking at US$11.4bn during the day.
Indofood, which carries a Baa3/BBB– (Moody’s/Fitch) rating, did not suffer from any order cannibalisation, even though the Indonesian government was courting investors for a US dollar sukuk the same day.
Instead, investors saw the rare investment-grade, privately owned company as a diversification play, offering the buyside something other than the usual energy and utility offerings from Indonesia.
Indofood’s deal was still not an easy sell. Lead banks UBS, Deutsche Bank, Mizuho Securities, SMBC Nikko, DBS Bank, Mandiri Securities, Natixis and OCBC faced concerns from investors over the company’s ESG standing.
Indofood’s sister company PP London Sumatra Indonesia was kicked out of a palm oil certification scheme in 2019 because of alleged violations of the organisation’s standards related to poor working conditions and child labour. Since then, Lonsum’s parent company Salim Ivomas Pratama has focused on implementing Indonesian sustainable palm oil standards.
Banks including Citigroup, Rabobank and Standard Chartered have since stopped providing credit or scaled back their exposure to Indofood. And bankers on the Indofood bond sale acknowledged that the ESG concerns kept some investors away.
To get the deal done, the syndicate team leaned into Indofood’s brand recognition, as the company is a market leader, serving popular products ranging from snacks to sauces and seasonings to beverages. The banks hosted a full week of calls leading up to the deal to educate investors about the company and its credit story, and to address ESG issues.
The long tenors also played to the demand for duration and yield, with indications of interest providing early momentum. Asian demand was the strongest, with investors from the region taking 59% of the 10-year notes and 66% of the 30-year bonds.
The deal’s success and strong secondary performance allowed Indofood to return to the US dollar market in October with another dual-tranche transaction. For the latter trade, it raised US$600m from a 10.5-year note and US$400m from a 30.5-year bond.
To see the digital version of this report, please click here
To purchase printed copies or a PDF, please email email@example.com