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Treasury & Capital Markets
Axiata smoothens out debt maturity profile
Chito Santiago 1 Apr 2016

One of Asia’s largest regional cellular telecommunications providers Axiata Group of Malaysia has smoothen out its debt maturity profile by going for a longer maturity of 10 years in its latest fund raising in the sukuk market on March 15 amounting to US$500 million.

The Reg S deal was priced at par with a similar profit rate and re-offer yield of 4.357%. This was equivalent to a spread of 240bp over the US treasuries, or at the tight end of the final price guidance of 245bp area (+/- 5bp) and 20bp inside the initial guidance of 260bp area.

The sukuk performed in the secondary market as it further tightened by 7-8bp on March 16, according to a banker familiar with the deal.

In going for a 10-year maturity, the Baa2/BBB+ rated company is terming out its debt maturity profile as it has about US$800 million in sukuk and conventional bonds due in 2020. Axiata issued a 10-year US$300 million conventional bonds in 2010 and a five-year US$500 million sukuk in November 2015.

“Charting a new benchmark, we have taken this opportunity to build Axiata’s curve with a 10-year issuance maturing in 2026, in line with our long-term strategy and growth plans,” Axiata president and group CEO Dato’ Sri Jamaludin Ibrahim says in a statement. “Axiata will continue to look towards opportunities in the capital markets to strengthen our capital base.”

In marketing the transaction, Axiata conducted a roadshow beginning March 7 in Hong Kong, Singapore, Abu Dhabi, Dubai and London. Pricing a 10-year deal was a bit of a challenge for Axiata, the banker notes, as the Middle East investors prefer a shorter five-year maturity. “There was an initial push back from the Middle East investors with respect to tenor, but the arrangers managed to bring the accounts across the line and convinced them to stay in the book.”

So amid a weaker market backdrop and the liquidity issues confronting the region, about 18% of the sukuk was eventually distributed to the Middle East investors, which was close to the allocation in the November 2015 trade. The bulk of the sukuk was sold in Asia at 71%, while the remaining 11% was distributed in Europe.

There were also concerns about the debt head room of Axiata and on its expansion plans, but these were addressed by the management. Proceeds from this transaction will be used to partly finance its acquisition of Nepal’s leading mobile operator Ncell, which Axiata bought for 5.67 billion ringgit (US$1.37 billion).

“The company is determined to maintain its ratings post the latest acquisition and bring its leverage to more reasonable level,” the banker says. “Concurrent with this latest fund raising, it is undertaking certain exercises to reduce its gearing, which the management shared with the investors. These include a rights issue by the Indonesian subsidiary PT XL Axiata and sale of some towers. That gives a lot of comfort to investors.”

Overall, the deal garnered an order book of over US$900 million from 64 accounts. By type of investors, fund managers accounted for 44%; insurance companies 23%; central banks, sovereigns and supranationals 18%; banks 12%; and private banks 3%. “There are new investors who came into the deal after failing to get an allocation in the November 2015 issuance. It is good for them in terms of diversifying their portfolio,” the banker says.

Drawn under Axiata’s US$1.5 billion multi-currency sukuk issuance programme, the offering was issued through Axiata SPV2 Berhad and is structured based on the Shariah principle of wakala. Airtime vouchers, representing entitlement to a specified number of airtime minutes on the mobile telecommunications network of Axiata subsidiaries for on-net calls, were utilized as the underlying assets for this sukuk issuance – also similar with the November 2015 deal.

CIMB Investment Bank, Deutsche Bank and HSBC were the joint bookrunners for the transaction.

Axiata has more than 275 million customers as of end-December 2015. According to Moody’s Investors Service, its major investments include its wholly-owned Celcom in Malaysia, PT XL Axiata in Indonesia (66.43% stake), Dialog in Sri Lanka (83.32%), Smart in Cambodia (95.28%), Robi in Bangladesh (91.59%) M1 Limited in Singapore (28.3%) and Idea Cellular in India (19.8%).

 

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