The Republic of the
The deal further indicates that there is an alternative investor pool that wants exposure to the synthetic peso and will help the sovereign to reduce its US dollar liability.
Citi, Credit Suisse, Deutsche Bank, HSBC, J.P. Morgan and UBS were joint bookrunners. Citi and HSBC were global coordinators.
Notably, the 25-year peso global priced inside the
The bonds priced at a 22% discount to the PDST-R2. In comparison, the RoP’s debut 10-year peso global priced at a discount of about 20% to the PDST-R2. The PDST-R2 is calculated based on the weighted average yields of completed transactions.
As the peso global is not subject to the 20% withholding tax that onshore investors pay for government bonds, a discount greater than 20% effectively means that the sovereign is pricing inside its domestic yield curve.
This was the second peso global for the
Investor demand was not as exuberant for the long-dated issue as for its maiden 10-year bond. This was reflected in the order book which amounted to $3.6 billion from 160 accounts.
In contrast, when the
Still, it was a positive outcome for the sovereign, given that it succeeded in raising $1.25 billion at a yield lower than the domestic market.
The eventual deal size was also slightly more than the $1 billion size that bankers had been communicating to investors. The sovereign had approval from the central bank to raise up to $1.5 billion.
The sovereign’s success in raising the funds was also laudable as the deal launched as investors were becoming wary about buying bonds with an ultra -long duration. Overnight, US Treasury yields rose by about 10bp amid a positive
Selling a local currency bond of such a long tenor to international investors further added to the challenge.
“Long-dated local currency bonds are more difficult to execute compared to long-dated US dollar bonds so the
The bonds traded at 100/100.50 yesterday morning, before rising further to 100.375/100.875. It straddled reoffer yesterday afternoon.
Globally, other sovereigns have taken advantage of low interest rates to the tap the market with long-dated local currency bonds. In 2007,
The
Stats ChipPac
Meanwhile, Temasek subsidiary Stats ChipPac also priced its $200 million five-year non-call-three bond amid resounding appetite from investors.
While small in size, the deal drew an astounding order book of $2.9 billion from 200 accounts. The company was raising the funds to repay a loan and not keen to upsize the deal despite buoyant demand.
The new bonds managed to price inside its implied yield curve. The coupon was fixed at 5.375%, at the tight end of the 5.375% to 5.50% guidance. The initial guidance was 5.625% (+/-1/8).
The yield to maturity for the latest issue was 5.377% or Treasuries plus 324bp. The notes were issued at par. In contrast, the outstanding August 2015s were trading at a cash price of 108.5/109 or a yield to maturity of 5.38%, which meant that the new bonds priced inside the implied yield curve.
Asia took up 58%, Europe 26% and the
Despite the tight pricing, the bonds rose in secondary and were quoted at 100.5/100.75 yesterday morning, above the par issue price.
The company’s cost of funding has gone down substantially compared to its last visit less than six months ago. Stats ChipPac last tapped the US dollar bond market with a $600 million five-year non-call-three in August 2010. The bonds paid a coupon of 7.5% or Treasuries plus 588bp.
The new bonds mature on March 31, 2016, and the tenor of the bonds is slightly longer than three years. The bonds are callable on March 31, 2014 at 102.6875 and on March 31, 2015 at 101.3438. Deutsche Bank was the sole bookrunner.
