RI firms hit the road for $350m
RI firms hit the road for $350m
Oliver Biggadike and Karen Lane, Dow Jones/Singapore
Asia's international bond pipeline is looking stronger after the
only deal scheduled last week was canceled, with issuance from a
handful of companies likely to top US$1 billion over the next
fortnight.
Indonesian tire company PT Gajah Tunggal will start roadshows
on its B-rated $250 million five-year bond on Tuesday in Hong
Kong, finishing in London on Thursday.
Ratings agencies say that while Gajah Tunggal is highly
leveraged, its costs are low and it has a strong position in the
Indonesian tire market.
In a press release, Standard & Poor's Ratings Services noted
that around 50 percent of Gajah Tunggal's revenue comes from
exports, "providing a hedge against its U.S. dollar denominated
debts."
The proceeds from the bond will be used to refinance around
$220 million in existing debt, with the remainder used for
investment.
Another Indonesian company seeking to tap the dollar bond
market is Bank Niaga which is aiming to raise $100 million in 10-
year subordinated bonds with a five-year call. It is roadshowing
in Hong Kong on Tuesday and, pending demand, in London on
Wednesday.
Moody's Investors Service rates the bonds at B2 with a
positive outlook, while Fitch Ratings is one notch higher at B+.
In a press release, Fitch said that Bank Niaga's target for 40
percent annual loans growth lifts the risk that the bank's
lending to weaker credits will increase. While competition will
narrow the company's margins, "this should be offset by greater
efficiency as revenue growth begins to outstrip cost growth,"
Fitch added.
Recent issues have had a mixed reception as issuers rushed to
market, trying to take advantage of low interest rates while
they're still around.
"The past few weeks have seen too many issues in a short
period, with the last few deals either underperforming (Thai
Olefins 2015), reduced in size (Hynix from $750 million to $500
million), or pulled from the market (Thai Aromatics)," wrote
Lehman Brothers analysts in a research report.
Still, investors have digested the supply, and secondary
market spreads should tighten as the summer issuance pipeline
volume drops, Lehman said.
Also heading out on the road this week are the Export Import
Bank of China and South Korean telecommunications company KT
Corp. Both are set to price next week.
The A-/A3-rated KT Corp. is looking to raise $300 million in
10-year bonds, and is holding roadshows in Hong Kong, London and
New York.
Moody's upgraded KT Corp. to A3 from Baa1 in mid-June this
year, noting the company is "well positioned to benefit from
growth in broadband technologies."
Chexim, a BBB+/A2-rated borrower, is looking to sell a
benchmark U.S. dollar-denominated bond with a 10-year maturity in
a move it will be hoping turns out to be smoother than last
year's foray. It hasn't set the size yet, but it will likely be
at least $500 million.
In July last year, Chexim approached the market for the first
time in five years with a view to raising $1 billion. However, it
subsequently cut the size of the deal due to the borrower's high
price sensitivity amid lower-than-expected demand. It then
reopened the bond and sold a further $250 million a month later.
Those bonds are now trading at around 70 basis points over
U.S. Treasurys versus the 93-basis-point spread it paid a year
ago.
Managing the deal this time are BNP Paribas, Citigroup Inc.,
HSBC Markets and Merrill Lynch with Bank of China International
and Goldman Sachs as joint leads.