Who sets the bar in North Asia transaction banking?
In 2016, you can say that the renminbi cross-borde...
With the prevalent low interest rate regime and abundant liquidity, several Asian issuers initiated liability management (LM) exercises to actively manage their balance sheet and restructure debt facilities.
Citi was among the banks leading the way in undertaking LM exercises for issuers, such as that of China Overseas Holdings Limited (COHL), which involved the simultaneous cash tender of US$750 million existing exchangeable bond (EB) and issuance of US$1.5 billion new EB. The bank designed the new issue funded fixed price tender structure for overnight execution at launch, to secure COHL’s exchange price target while limiting market risk.
Another deal involved the US$270 million tender offer and US$350 million new bond for Sri Rejeki Isman (Sritex) of Indonesia. This was the first Asian issuer to effectively employ the five-day accelerated tender offer. The exercise helped the company to reduce cash interest cost, refinance working capital loans, extend its debt maturity profile, and lock-in long-term funding at low interest rates.
In the only second LM exercise targeting corporate hybrid securities in Asia, Citi undertook a tender offer and new issue deal for the International Container Terminal Services Inc (ICTSI) of the Philippines, that extended the duration of its hybrid portfolio at attractive rates. Incidentally, ICTSI also did the first such deal in January 2015. The bank was also involved in the Republic of the Philippines’ (RoP) US$2 billion accelerated one-day switch tender offer, new global bond, and in the PTT Exploration and Production US$176.5 million cash tender offer.
DBS carried out 12 LM exercises for issuers in 2016 in various currencies, such as US dollar, Singapore dollar, and CNH/CNY. These include the 3.3 billion yuan tender and consent solicitation for China Eastern Airlines, which helped the company redeem its 2017 notes early in their entirety, through a pioneering and cost effective structure. Acting as the sole dealer-manager, this was the first Chinese central state-owned enterprise LM exercise, and the first modified Dutch auction tender with a concurrent consent solicitation.
The bank was the sole structuring adviser and joint dealer-manager in the US$350 million tender and consent solicitation for Yuexiu Property, that enabled the company to redeem its 2018 notes early. This exercise allowed Yuexiu to substantially reduce its forex risk against the renminbi depreciation. The bank also carried out the S$260 million tender offer and consent solicitation for G8 Education Limited, in which it sought for the company to insert an issuer’s call option to redeem all of the notes then outstanding at a redemption price equal to 101.50%.
Another bank at the forefront of LM exercises in 2016 was HSBC, undertaking diverse transaction formats for issuers, including tender and exchange offers, one-day switches, and consent solicitations. In the first Indonesian LM transaction post the US presidential election in November, the bank was a joint solicitation agent on a consent solicitation for Gajah Tunggal’s US$500 million bond due 2018.
HSBC was a joint dealer-manager on a partial fixed price cash tender offer in relation to Hengdeli Holdings’ outstanding US$350 million bond due in 2018, which was designed to support the company’s policy of actively managing its balance sheet liabilities and optimizing its debt structure. It was the sole dealer-manager on the tender offer for Poly Real Estate’s existing US$500 million senior bond due 2018, and US$500 million senior bond due 2019. HSBC advised the company to structure a reverse modified Dutch auction tender offer targeting two series of its 2018 and 2019 bonds at maximum purchase spread of 175bp and 180bp, respectively.
The bank’s other notable LM exercises in 2016 include deals for RoP, ICTSI, Sritex, China South City Holdings, and the Kingdom of Thailand’s 218.7 billion baht bond exchange.
The winner of the Triple A Best Liability Management House will be revealed on February 28 2017 during The Asset’s Regional House & Deal Awards Dinner. For more information about the awards ceremony, please click here.
12 Jan 2017