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The Republic of Indonesia became the second sovereign to tap the dollar bond market in 2012 when it priced a $1.75 billion 30-year global early Tuesday morning. It is the biggest long-dated bond from an Asian borrower this year and carries the lowest yield for a new 30-year bond from the region.
The coupon for the bonds was fixed at 5.25% and the notes were reoffered at 98 to yield 5.375%, at the tight end of the 5.375% to 5.5% final guidance. That translated to a spread of 240bp over 30-year Treasuries, which was 30bp less than the 270bp over 10-year Treasuries paid by South Africa — rated A3 by Moody’s and BBB+ by Standard & Poor’s and Fitch — for a $1.5 billion 12-year bond earlier this week. South Africa offered investors a yield of 4.665%.
Fitch last month upgraded its rating on Indonesia from BB+ to BBB-, giving it investment-grade status. Moody’s and S&P kept their ratings at Ba1 and BB+, respectively.
However, the bonds were off to a weak start on Tuesday morning and were quoted a touch weaker at a cash price of 97.5 and a yield of 5.42%, half a point lower than the issue price and 4bp wider on a yield basis.
Indonesia last tapped the bond market with a 30-year bond in 2008, when it raised $1 billion at a yield of 7.75%. Those bonds, which mature in 2038, were trading at a yield of 5.24% when Indonesia was in the market. According to one person familiar with the deal, the four-year extension was worth about 12bp, putting the fair value of the new 2042 bonds at 5.36%, which meant that Indonesia offered hardly any new-issue premium.
The deal gathered an order book of $3.6 billion from more than 160 accounts. US investors were allocated the lion’s share (51%), Indonesian investors — mostly banks — were allocated 15%, the rest of Asia 22% and European investors 12%. The deal attracted solid interest from asset managers, which took 73% of the allocation, while banks took 20%, insurers 4% and private banks 3%.
HSBC, J.P. Morgan and Standard Chartered were joint bookrunners.
ICTSI kicks off hybrids
Philippine port operator International Container Terminal Services (ICTSI) on Monday night priced a $150 million perpetual non-call five-year deal, a reopening of its old $200 million bond priced in April last year. Its latest tap brought the total issue size to $350 million. ICTSI’s hybrids traded well last year, compared to other hybrids such as Citic Pacific, China Resources Power and Ballarpur Industries, which are all underwater.
The initial guidance was announced in the area of 98, a two point discount to the par cash price the outstanding bonds were trading at. This was tightened to 98.375 to 98.125, and the bonds eventually priced at 98.375 — the tight end. The deal printed at the large end of the $100 million to $150 million range.
According to one Hong Kong-based trader, the bonds were trading weaker on Tuesday morning and were quoted at 97.75/98, below the 98.375 price.
Structurally, the bond was similar to the one sold last year, with the only exception being that ICTSI has told investors that it will not exercise its option to convert the hybrid to a senior bullet due May 5, 2021 — an indication that it is happy keeping the bonds as hybrids. Citi and HSBC were joint bookrunners. HSBC structured the bonds.
The bonds pay a fixed rate of 8.375% until May 5, 2021, after which it resets to 637.8bp over the prevailing five-year Treasuries plus a one-time step-up of 250bp.
The bond market continues to pick up with a flurry of deals announced. Hutchison Whampoa was expected to price a dual-tranche five- and 10-year bond early this morning. HSBC, J.P. Morgan and Goldman Sachs were joint bookrunners.
Lifestyle International Holdings has mandated Bank of America Merrill Lynch and J.P. Morgan as joint bookrunners for a dollar bond. The company will be kicking off a series of investor meetings in Asia and Europe. Lifestyle International, a Hong Kong-based retail operator that owns two Sogo stores in Hong Kong, is rated Baa3 by Moody’s and BBB- by Fitch.
Natural gas company Korea Gas Corp has mandated Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and UBS for a potential long-dated dollar bond to be offered to professional US investors. Elsewhere, South Korean telecoms provider KT Corp is holding a non-deal roadshow. Citi, Goldman Sachs and J.P. Morgan are the arrangers.
