Asian primary debt market recovering
Asian primary debt market recovering
HONG KONG (Dow Jones): The Asian primary debt market came alive last week with three major deals out of the Philippines, Hong Kong, and Indonesia.
After a dull start to the new year, market participants were pleased to see just over US$3 billion in new paper emerge from the region. Hopes are the momentum will continue, with two more corporates tapping the overseas markets this week.
The Philippines' global bond pricing late Friday was the most widely watched, coming just on the heels of a corruption scandal involving the local stock market. The launch and pricing of the two-tranche offering were delayed by one day due to the controversy, which sent the stock market lower by 6.7 percent in four days.
In the wake of the scandal, secondary spreads on outstanding Philippine bonds widened significantly, which meant cheaper pricing - and more investor demand - for the new global.
The new issue ultimately was raised to $1.6 billion from the $1.2 billion amount initially planned. The two-tranche offering comprised a $600 million 10-year tranche that was priced at 350 basis points over Treasurys with a yield of 9.883 percent, and a $1 billion 25-year tranche priced at 440 basis points and a yield of 10.698%. The deal was lead-managed by Lehman Brothers.
U.S. accounts comprised 50 percent of the issue, while the rest of the investor base was evenly split between European and Asian accounts.
By Monday midday, spreads on the 2010 had narrowed to 346-342 basis points; and the 2025 had tightened to 427-424 basis points, according to data from asiabondportal.com.
The bond issue's debt exchange and tender component, totaling $269 million, allowed investors to swap outstanding bonds from the National Power Corp. for the new securities.
Also Friday, Hong Kong's Kowloon Canton Railway Corp. sold $1 billion of 10-year global notes yielding 168 basis points over Treasurys, in its first global bond issue and second U.S. dollar- denominated offering.
Asia-based investors said the deal had to be sweetened from market expectations of 150 basis points, as investors are favoring higher-yielding paper at the moment.
The deal was 25 percent oversubscribed, with 40 percent going to U.S. investors, 35 percent to Asia and the rest to Europe. Morgan Stanley Dean Witter and HSBC Securities were joint bookrunners.
Because the deal was sold mostly to buy-and-hold investors, KCRC '00 was barely moved at 168/165 basis points midday Monday, according to asiabondportal.com.
APP China, a unit of Indonesia's Asia Pulp & Paper group, last week tapped targeted high-yield U.S. investors in Indonesia's first overseas issuance since the crisis.
The 10-year issue, non-callable for five years with detachable warrants, was increased to $403 million from the initial $350 million, getting a boost from Moody's upgrade of the APP group to the B3 sovereign ceiling. The APP China debt will be guaranteed by the parent holding company, which has significant Indonesian exposure.
The company priced the issue with a 14 percent coupon at 86.866 to yield 16.75 percent. Morgan Stanley Dean Witter was lead manager.
Roadshows for two more debt issues are kicking off this week. Korea Electric Power is planning a $500 million five-year global, for which Merrill Lynch and Deutsche Bank are lead managers.
Pricing is expected around 15 basis points over Korea Development Bank 2004, which midday Monday was indicated at 150 basis points over U.S. Treasurys.