Roadshows began in Hong Kong and Singapore on Friday for a $125 million seven non call four issue for New ASAT (Finance) Ltd. With Citigroup as lead manager, presentations move onto the US today (Monday) with pricing expected towards the end of the week.
Unlike many recent non-investment grade offerings from Asia, ASAT's 144a transaction is being structured to appease US investors and is said to be covered with covenants including limitations on indebtedness, limitations on asset-sales, dividends, payment of reserves and a change of control put. However, unlike the B/B3 rated group's original deal back in 1999, which was almost exclusively distributed to US accounts, the new deal is likely to have a much broader geographical split.
In the interim period, the Asian bid has grown strongly and for regional investors the semiconductor assembly and packaging company offers good diversity away from the Indonesian credits that populate the far end of the credit curve.
Back in 1999, the company was responsible for Hong Kong's first true high yield deal and Asia's first US-style LBO. Chase and DLJ were lead managers of a $155 million high yield deal complementing a $70 million loan. Both formed the financing for the purchase of a 50% equity stake by Chase Equity Partners, Olympus Capital and Orchid Asia in ASAT, then 100% owned by QPL International Holdings.
Terms on the November 2006 deal comprised a coupon of 12.5%, yield of 13% and spread of 682bp over 10-year Treasuries. There were also warrants equivalent to 3% of the company's outstanding equity.
At the end of last week, the deal was trading at about 8.4% and observers expect the new 2011 call 2008 deal to yield somewhere around the 10% mark.
The company is on stable outlook from Moody's and negative outlook from Standard & Poor's, although the latter commented in its ratings release that it would amend the outlook to stable on successful completion of a new deal. Proceeds are being used to partially re-pay the outstanding deal and for costs incurred from the company's re-location of its operations from Hong Kong to China.
The agency said that its rating reflects, "the company's tight liquidity position, the highly competitive and cyclical nature of the independent semiconductor packaging industry and the company's reliance on the troubled communications sector."
And it adds, "These weaknesses are partially offset by the company's improving cost structure, advanced packaging technologies and good relationship with its customers."
