Garment manufacturer Pan Brothers became the first issuer out of Indonesia to tap the offshore bond market this year, when it priced on January 19, its debut offering amounting to US$200 million.

The Reg S five-year non-call three deal was priced at 99.49% with a coupon of 7.625%, to offer a yield of 7.75%. This was in line with the final price guidance, and 25bp inside the initial guidance of the 8% area. The bond performed in the secondary market and was quoted at 100.15% around lunch time on January 20.

In executing the transaction, Pan Brothers held an extensive roadshow in Hong Kong, Singapore and London earlier during the week, and met a lot of investors to tell its credit story. “The feedback was very constructive and the investors are happy to see a new name come out of the Indonesian high yield space,” says a banker familiar with the deal. Pan Brothers is rated B1 with stable outlook by Moody’s Investors Service, and B with positive outlook by Fitch Ratings.

The strong indication of interest from investors gave Pan Brothers the confidence to proceed with the transaction on January 19, and announced an initial price guidance of the 8% area. The deal size was capped at US$200 million at the outset.

As a debut issuer, there were not a lot of comparables for the transaction, the banker points out. The closest was Sri Rejeki Isman (Sritex), which is a larger company, and whose bond was trading at around 6.84% at the time of the deal announcement.

The offering, issued through PB International BV, a company incorporated in the Netherlands, garnered an order book of over US$800 million, with 82% of the bond allocated in Asia and 18% in EMEA. By type of investors, fund and asset managers accounted for 93% of the paper, private banks 6% and banks 1%.

The proceeds from the offering will be used to refinance existing indebtedness and for general corporate purposes. ANZ, HSBC and ING were the joint global coordinators for the transaction, as well as joint bookrunners and lead managers, along with Emirates NBD Capital.

Moody’s notes that Pan Brothers embarked on an expansion plan in 2014, which increased its total production capacity to 84 million garments as of September 30 2016, up from 42 million pieces at the end of 2013.

The company expects capital spending for growth of around US$35 million, covering investments in two new factories under its subsidiary company, PT Eco Smart Garments Indonesia (ESGI), and one new factory in Tasik over 2017 and 2018, to increase capacity to 111 million pieces.

ESGI is a key joint venture between Pan Brothers and its largest customer, Mitsubishi Corporation, which will be a major driver of Pan Brothers’ growth in the coming years. Mitsubishi currently accounts for 26% of consolidated sales, and Moody’s estimates this to trend towards 30%, as ESGI’s capacity additions come online during 2018 and 2019.