Earlier this month we revealed the Deal Award winners of the Achievement Awards for 2019. These are the best capital markets transactions in the region since December 1, 2018.
It goes without saying that the quality of the submissions this year was unparalleled across all categories and competition was extremely tight.
Here we present the rationale for our decisions, why it was that these deals stood out.
The Achievement Award winners and their clients will be honoured at our annual celebration dinner on February 13.
For more information on this event, please contact Keith Frith at [email protected] or +852 2122 5266.
DEAL OF THE YEAR
Alibaba’s HK$101.2 billion Hong Kong IPO
Joint sponsors: CICC, Credit Suisse
Global co-ordinators: Citi, JP Morgan, Morgan Stanley
Bookrunners: HSBC, ICBCI
Senior joint lead managers: Deutsche Bank, DBS, Mizuho
Legal advisors to the issuer: Simpson Thacher & Bartlett, Maples & Calder, Fangda Partners
If ever there was a deal, which highlights how the world is changing then this is it. In a year marked by the ongoing trade war between China and the US, Alibaba demonstrated where its future lies.
Its secondary market listing in Hong Kong was a number of years in the planning, but when it happened, it heralded the great homecoming for China’s largest internet company.
Alibaba came to Hong Kong five years after it listed on the New York Stock Exchange (NYSE) and it delivered in spades at a time when the Territory was in dire need of cheer after months of escalating street protests.
The e-commerce giant executed its deal in late-November having hung back for some months hoping for a more conducive backdrop. In the end, the timing did not affect its pricing or reception.
Alibaba’s achievement was significant on a number of levels. It delivered: the world’s second-largest equity offering of the year; the largest Hong Kong listing since 2010; the largest-ever technology follow-on offering globally, and the third-largest technology IPO globally – after its own US IPO and that of Facebook.
At its listing ceremony group chairman and chief executive officer Daniel Zhang rightly called this an “important milestone”.
"We thank Alibaba for returning home after five years," added Charles Li, chief executive of HKEX.
The HK$101.2 billion ($12.93 billion) secondary listing was a blockbuster deal by any reckoning. The group sold 500 million primary shares, or 2.3% of its enlarged share capital, at HK$176 per share, plus a further 75 million through the greenshoe.
The institutional order book closed multiple times oversubscribed with investment from blue-chip investors including: sovereign wealth funds; long-only funds; Chinese funds and hedge funds.
Such was the retail public demand for the shares – the retail tranche was more than 42 times covered – that bankers quadrupled the public tranche to 10%.
Alibaba’s confident and well-executed debut has subsequently given the HKEX a welcome boost and acted as an exemplar for other potential technology stock listings in Hong Kong.
Symbolism aside, perhaps most sweetly of all for Alibaba is that it traded up 6.6% on its debut in line with its US-traded shares, which had also performed well during the offering period.
Alibaba has now overtaken rival Tencent to become the largest company on the HKEX by market cap. Key now will be whether it can maintain the liquidity in Hong Kong compared to the US where its trading volumes are much higher.
BEST EQUITY DEAL
Sea’s $1.55 billion NYSE follow-on offering
Global co-ordinators: Goldman Sachs, Morgan Stanley
Co-manager: CICC
Legal advisors to the issuer: Skadden Arps Slate Meagher & Flom, Maples & Calder
This $1.55 billion deal represents the largest-ever US follow-on offering by a Southeast Asian issuer and ranks among the top 10 largest US tech first follow-on offerings. It was one of those deals where everyone ended up feeling extremely satisfied with the outcome.
For Sea, the transaction was an opportunity to re-set its relationship with public equity investors after a fairly disappointing IPO in October 2017 that went on to trade down and down before hitting a low almost one year later.
For investors, it provided an opportunity to ride the momentum, which had gripped the multi-faceted internet stock since the beginning of this year. At the time the deal was launched in early-March, it had already risen 105% year-to-date.
However, this was not the end of the run, but only the beginning and investors have been well rewarded since then. By mid-December, the stock had risen three-fold from its 2018 low point.
Sea was delighted. “With the success of this offering, we have a very strong cash position supporting our ambitious growth plans,” said Forrest Li, founder and group chief executive officer of Sea shortly after the deal closed.
Execution on the deal was also exemplary. Sea sold 60 million American depositary shares at $22.50 each, plus a nine million ADS greenshoe.
Pricing was accelerated (it certainly helped that Tencent Holdings, one of Sea’s principal shareholders, indicated early on that it intended to come in for $50 million) and the deal was upsized by 20% on the back of strong investor demand.
Such was the success of that deal that Sea was able to sell an oversubscribed $1 billion convertible bond in mid-November.
Sea is a leading internet company in Southeast Asia and Taiwan operating three businesses: Garena, the leading online gaming platform in the region by revenue; e-commerce platform Shopee; and digital financial services company AirPay.
BEST IPO
Hansoh Pharmaceutical’s HK$8.49 billion IPO
Sponsors: Morgan Stanley, Citi
Global co-ordinators: UBS, Goldman Sachs, CMS
Bookrunner: CICC
Lead manager: CMBI
Legal advisors to the issuer: Cleary Gottlieb Steen & Hamilton, Li & Partners, Maples & Calder
This was a flotation which bucked the trend in Hong Kong where all too often issuers fail to understand the need to offer an IPO discount so their deal trades well in the secondary market.
It was one of those deals that institutions loved, a true old-school IPO that was not stuffed with friends and family investors.
The HK$8.49 billion ($1.08 billion) flotation (post greenshoe) represented the largest healthcare IPO from Asia Pacific this year. Much investor attention has been focused on biotech companies, but the generic drug manufacturer stood out thanks to its well-established market position and fully commercialised product line.
It makes money too. For the 2018 financial year, Hansoh reported Rmb1.9 billion ($275 million) in net profits on Rmb7.7 billion of revenue, implying a solid net profit margin of 24.6%.
No wonder then that nine impressive cornerstone investors came in to take up $344 million worth of shares. These included Singapore sovereign wealth fund GIC ($70 million), as well as existing shareholders Boyu ($60 million) and Hillhouse (US$29m), strategic partners Shanghai Pharma ($20 million), plus a dream team of healthcare specialists Ally Bridge, OrbiMed, Prime Capital, Cormorant and Vivo Capital.
This was one of the standout aspects of the deal. Such a strong roll call helped to build momentum among institutional investors. The order book was consequently covered within 30 minutes of launch and heavily oversubscribed by the end of day one with no price sensitivity. It went on to generate $11 billion of demand.
Retail investors, meanwhile, appeared far more focused on street protests, with the public offering tranche closing a more modest 11 times covered.
Strong demand enabled Hansoh to price at the top of the HK$13.06 to HK$14.26 price range notwithstanding the volatile market backdrop and a fairly punchy valuation at 27.5 times forecast 2019 earnings. Most of the book went to long only funds and healthcare specialists.
Hansoh had a remarkable first day trading too. Its share price closed up 37% from IPO price giving it a market cap of $14.2 billion. By mid-December, the stock had risen around 60% from its IPO price, outperforming the HSCEI, which was flat over the same time period.
BEST M&A DEAL
CRE & CRB’s formation of a $3.1 billion global strategic partnership with Heineken
Buyside financial advisor: JP Morgan
Sellside financial advisors: UBS, Nomura
Buyside legal advisor: Davis Polk & Wardwell
Sellside legal advisor: Allen & Overy
It is rare for a deal to change the competitive landscape of a sector in a country, but that is precisely what Heineken’s $3.1 billion acquisition of a 40% stake in China Resources Beer (CRB) did for the beer sector in early August last year.
The deal has proved to be an important and strategic opportunity for both CRB and Heineken.
CRB, the market leader in the world’s largest beer market, has been able to strengthen its presence in the leading beer market as it focuses on premiumisation. It has been able to use Heineken’s established global network to promote and internationalise its own beer brands with the help of Heineken’s well-known premium brand-building capabilities and world-class international brand portfolio.
And for Heineken, the Dutch brewing company now has the opportunity to realise its potential in China’s beer market thanks to CRB’s best-in-class route to market network, a wide brewery footprint and deep understanding of the Chinese market.
“We believe that our strategic alliance will maximise synergies, enhance the long-term competitiveness of both companies and further increase our market share in China’s premium beer market,” said Chen Lang, chairman of CRE, in a statement in November last year. “It will bring together the competitive advantages of Heineken’s international premium brands with CR Beer’s leading position and rich experience in the Chinese beer market,” he added.
It seems to have done precisely that. In an upbeat analyst report towards the end of August, Citi estimated that China Resources Beer could see its market share double to 30% in the high-end beer market over the next five years following the launch of Heineken’s products by next year. Shareholders certainly agree. Shares in Hong Kong-listed China Resources Beer have almost doubled since the start of the year to trade around the HK$40.8 mark in mid-December.
The deal completed at the end of April this year.
BEST INVESTMENT GRADE BOND
Tencent’s $6 billion bond
Global co-ordinators: Deutsche Bank, HSBC, Goldman Sachs, Morgan Stanley
Bookrunners: Bank of China (Hong Kong), BofA Securities, BNP Paribas, Credit Suisse, ICBC (Asia), JP Morgan, Mizuho Securities, MUFG and SPDB International
Legal advisor to the issuer: Davis Polk & Wardwell
This $6 billion multi-tranche deal has been rightly praised across the market and is the deserved winner of this year’s Investment Grade Bond Deal. Tencent always issues in size and this deal was no different, representing the largest dollar-denominated corporate bond deal from Asia this year.
The internet behemoth used up its entire offshore issuance quota from the National Development and Reform Commission in one fell swoop when it came to the market in early-April.
One of the key standouts of the transaction was how Tencent pushed its curve out, for the first time, to 30 years. It underlines one of the year’s key trends as investment grade issuers seek to take advantage of low rates.
“We are pleased with the encouraging response to the notes, which illustrates investors’ recognition of our solid credit profile, supported by our highly cash generative business model and increasingly diversified revenue streams,” said president Martin Lau after the deal had priced.
Following a comprehensive one-day marketing period, the order book opened on April 3. Enthusiastic interest from more than 500 investors saw demand hit an aggregate $30 billion by mid-morning New York time.
This allowed pricing to tighten in 20bp to 25bp across all four of the five-, seven-, 10- and 30-year tranches.
It should not be underestimated how much of an achievement this was. The new issue premium on all four tranches was flat to negative compared to Tencent’s outstanding secondary curve.
So much so, that the curve between 10- and 30-years was only 15bp. This was the flattest for a corporate issuer since Johnson & Johnson’s deal in November 2017.
Yet investors were well-rewarded. The incredibly strong performance of Asia’s G3 bond markets means that the deal has traded extremely well over the final eight months of the year.
As of mid-December, the five-year bonds were up three points, while the seven-year were up four points and the 10-year up seven points. Most remarkably of all, the 30-year had shot up 17 points.
BEST HIGH YIELD BOND
Country Garden’s $1.5 billion bond
Global co-ordinators: Morgan Stanley, Goldman Sachs, BNP Paribas, HSBC, ICBC (Asia)
Legal advisors to the issuer: Conyers Dill & Pearman, Commerce & Finance, Sidley Austin
The asset class, which defined Asia’s G3 debt capital markets during 2019 was high yield, with volumes rising about 150% year-on-year. And within high yield, it was the Chinese property borrowers that dominated after they all took advantage of liberal offshore issuance quotas.
Country Garden stood above the rest, setting a new benchmark for the sector in late-March. Its dual tranche deal came at a time when there had already been heavy supply from the Chinese real estate sector amounting $6.4 billion.
Nevertheless, the credit was able to issue its largest-ever bond and the sector’s second largest this year.
The structure also grabbed investors’ attention. The bear market, which gripped investors during 2018, meant that few were willing to extend beyond three years.
This deal not only incorporated a five-year tranche, but also a seven-year one. It represented the longest tenor for a Chinese high yield real estate issuer since January 2018.
Despite a busy market, the leads were able to leverage reverse enquiry demand to launch in a window that allowed bookbuilding momentum to pick up immediately following the deal announcement.
Strong support from high quality international institutional investors, including global asset managers, hedge funds and life insurance companies meant the final book closed two times oversubscribed.
This allowed pricing on the $550 million five-year and $950 million seven-year tranches to be tightened in 25bp from initial price guidance to print at 6.5% and 7.25% respectively.
The final orderbook continued to support the trade in the secondary market. Like its peers, Country Garden’s paper has traded well during the course of the year with the five-year paper up five points to mid-December and the seven-year up eight bonds.
BEST LOCAL CURRENCY BOND
UOB’s Rmb2 billion Panda bond
Lead underwriter and lead bookrunner: Bank of China
Joint lead underwriters and joint bookrunners: China Securities, Standard Chartered Bank
Legal advisors to the issuer: Allen & Overy, Fangda Partners
This was a milestone transaction for Singapore and Southeast Asian issuers, as UOB became the first borrower from City State to issue a Panda bond.
It also marked the first Panda bond from a financial institution under new guidelines from the People’s Bank of China and the ministry of finance.
It was a long-expected deal. UOB had planned the issue as far back as early 2018, but the Rmb2 billion ($298 million) three-year issue managed to grab an opportune window.
The book opened with an initial price range of 3.40% to 4.00%. Demand was strong on the back of an extensive five-day non-deal roadshow across Beijing, Shanghai, Shenzhen and Hong Kong. This led to an oversubscription ratio of almost three times, allowing pricing to settle at 3.49%.
Some 38% of the paper was placed with onshore investors and 62% with offshore investors.
“Our debut Panda bond issuance marks another milestone in UOB’s longstanding commitment to supporting greater financial market connectivity in the region,” said deputy chairman and group chief executive officer Wee Ee Cheong. He also cited the increased connectivity between China and ASEAN arising from the Belt and Road Initiative.
But the deal was more than that. It also provided an important reference point for Panda bonds by other international banks in the future.
Back home, the Monetary Authority of Singapore acknowledged its significance too. “Such cross-border issuances will expand financing channels and strengthen capital markets connectivity between China and Singapore,” said MAS deputy managing director Jacqueline Loh.
BEST PROJECT FINANCE DEAL
Yunlin Offshore Wind Project’s NT$94 billion financing
Lead arrangers: Cathay United Bank, CTBC Bank, E.Sun Bank, Taipei Fubon Bank, BNP Paribas, Commerzbank, Credit Agricole, DBS, Deutsche Bank, ING, KfW-IPEX, Mizuho, MUFG, Natixis, OCBC, SiemensBank, Standard Chartered, Soc Gen, SMBC
Legal advisor to the issuer: Linklaters
The financing for Yunlin Offshore Wind Project – the largest offshore wind transaction in Asia Pacific and the first large multi-megawatt offshore wind project from Taiwan – has set a standard for project financing across Asia.
It is a strategic endeavour for the Taiwanese government. It has pledged to increase its offshore wind target from 0MW in 2016 to 520MW of installed offshore capacity by 2020, while it has a grid capacity goal of 5.5GW to be commissioned between 2020 and 2025.
The project involves the development, construction, commissioning, ownership, operation and maintenance of a 640MW offshore wind power generation facility and related infrastructure off the western coast of Taiwan.
The wind farm will generate electricity and sell it to Taiwan Power Company over a 20-year period using a feed-in tariff scheme under Taiwan’s Renewable Energy Development Act. It is expected to be completed by the end of 2021.
Germany’s wpd won the contract in April and the project itself is 73%-owned by wpd and 27% by a Sojitz Corp-led consortium.
The deal was structured as an 18-year term loan facility, a standby facility, a working capital facility and a VAT facility. Wpd successfully raised non-recourse facilities of NT$94 billion ($3.09 billion) through a group of 15 international banks, four local banks, and three export credit agencies – Euler Hermes, Atradius and EKF.
As one the bankers close to the deal said: “This is the benchmark for Taiwan against which all other projects will be compared”.
BEST BELT & ROAD DEAL
Bank of China’s $3.8 billion equivalent bond
Bookrunners: Citi, ANZ, BofA Securities, BNP Paribas, Bank of China, Bocom, CBA, China Construction Bank (Asia), Commerzbank, Credit Agricole, DBS, Deutsche Bank, HSBC, ICBC, ING, JP Morgan, KGI, LBBW, Macquarie, Mizuho Securities, MUFG, Nomura, SCB, Scotiabank, UBS, Unicredit,Wells Fargo
Legal advisor to the issuer: Linklaters
This was a masterpiece of issuance when in April Bank of China raised $3.8 billion equivalent across eight tranches and five currencies (US dollars, euros, Australian dollars, CNH and Hong Kong dollars).
The aim was to achieve low-cost funding for medium and long-term projects related to the Belt and Road Initiative (BRI) and it delivered it well.
The offering stood out at the time as the largest multi-currency offering from a financial institution in Asia-Pacific of the year, the biggest international bond from any bank in Asia and the largest offshore senior deal ever from a Chinese commercial bank.
It was a massive capital markets thumbs up for BRI too and particularly welcomed as it came only a couple of weeks before the second Belt and Road Forum in Beijing.
Execution was, of course, challenging. The bonds priced after a two-day process, where a mandate announcement was released on Day one, allowing for roadshow conferences for APAC and European investors.
But a robust order book led to an oversubscription ratio of three times and resulted in no new issue premium across all tranches.
“The successful issuance of the bond shows BOC is well recognised by global investors”, said Zhou Lihong, chief executive of BOC Luxembourg.
The bank remains at the heart of BRI planning. It has lent more than $130 billion to BRI countries and worked on over 600 projects between 2015 and 2018.
BEST ISLAMIC FINANCE DEAL
Indonesia’s $2 billion green Sukuk
Bookrunners: Deutsche Bank, Dubai Islamic Bank, HSBC, Mandiri Securities, Maybank
Co-managers: Bahana Sekuritas, Danareksa Sekuritas, Trimegah Sekuritas
Second party opinion: Cicero
Legal advisors: Clifford Chance, AZP, White & Case, Assegaf, Hamzah & Partners
When the Republic of Indonesia brought a $2 billion sovereign Sukuk to market in February it marked its second green Sukuk in the space of a year.
Timing was everything in this deal. Although few surprises were expected or indeed emerged, the sovereign was keen to print the deal before elections in mid-April. But thanks both to the release of positive economic data and strong investor interest, the republic cut short its roadshows to launch the deal ahead of time.
It was the right thing to do. The transaction drew strong investor demand that resulted in 2.8 times book cover on the 5.5-year green tranche with a final order book that hit $2.1 billion from 117 investors. There was even more demand for the 10-year. It achieved a 3.8 times oversubscription ratio with a final order book of $4.5 billion from 162 investors.
A banker close to the deal said that the government could have gone even longer and had considered a 30-year tranche.
The thinking behind the Wakala issue was to carry on building a Sukuk curve and specifically to promote the structure to state-owned enterprises. But Indonesia also wanted to highlight its developmental agenda. Indeed, it added Zurich and Frankfurt on the roadshow specifically to talk to green-only investors.
This meant that it was able to boost the participation of European green investors from 15% in 2018 to 22% in 2019.
The secondary performance of the paper has also been strong. As of mid-December, the five-and-a-half year tranche was up nearly six points and the 10-year tranche up 10 points.
BEST SUSTAINABLE DEAL
Hong Kong’s $1 billion inaugural green bond
Bookrunners: Credit Agricole, HSBC
Second party opinion: Vigeo Eiris
Legal advisor to the issuer: Allen & Overy
Green finance is a policy priority of the Hong Kong government and 2019 was the year that it really laid roots in the global financial markets.
“We see Hong Kong serving as a premier financing centre for international and mainland green companies and projects, raising funds by issuing bonds and IPOs,” said Hong Kong financial secretary Paul Chan at a conference back in January.
He proved that this was more than just political cant after the government printed an inaugural $1 billion Reg S/144a senior fixed five-year notes towards the end of May off its $100 billion green programme.
"The favourable response from global investors indicates not only their recognition of Hong Kong's credit strength but also their support of Hong Kong's determination and efforts in promoting sustainable development and combatting climate change," said Chan after the deal had printed.
Following a week of roadshows in Hong Kong, Singapore, London, Paris, Frankfurt, Amsterdam, Boston and New York, the book opened on May 21 with initial price guidance around 50bp over Treasuries. Before the New York open, demand had reached $4.4 billion and guidance had been tightened to between 40bp and 45bp.
Final price guidance was set at 2.5bp either side of 32.5bp before the deal printed at32.5bp. At the time, this represented the tightest re-offer spread of any Asian issuer year-to-date.
It was a landmark issue because, as one banker with knowledge of the matter put it, Hong Kong wanted to “to make a buzz” and “to develop a fuller green ecosystem”.
To show its commitment and to avoid any hint of greenwashing, Hong Kong became the first Asian signatory to the Green Bond Pledge at the start of May. In doing so, it joined the US State Treasurers of California, New Mexico and Rhode Island, plus the government of Mexico City and Australian pension fund LGS, to name just a few.
“The HKSAR government aims to develop and firmly establish Hong Kong as a leading hub for green finance in the region,” said one spokesperson for the treasury bureau. There is certainly no doubt of Hong Kong’s commitment.
Proceeds from the issue were set aside to focus on projects in water and waste management, green buildings and energy efficiency.
BEST VENTURE CAPITAL DEAL
Chehaoduo Group’s $1.5 billion from SoftBank Vision Fund
Financial advisor: China TH Capital
Legal advisor: Morrison & Foerster
It is not often that venture financing completely disrupts an industry, but SoftBank Vision Fund's bet on China’s auto market, did just that.
After closing this round – also the largest private placement deal in China this year – Chehaoduo Group, the parent company of Guazi.com and Maodou.com, became China’s largest used car and new car trading platform, the second largest in the world, and became the fastest company in the world's second-hand car industry to reach a valuation of nearly $10 billion.
"China's used car market is growing rapidly but online penetration remains low and auto financing is underutilised compared to developed markets,” said SoftBank partner Eric Chen.
Although it takes on average 10 months for a venture deal to complete in China, it only took Chehaoduo five months to close the deal. This is even more impressive given the complexity of the financing. China TH Capital did a great job to make this deal happen, matching both buyers and sellers' interests. There were more than 30 shareholders covering corporate venture capital, private equity funds as well as US dollar- and RMB-denominated funds, plus a sovereign wealth fund, all with different requests.
The company has become China's leading platform for integrated automotive retail services in the used car sector. It combines in-depth big data analytics and artificial intelligence technology to implement standardised evaluation and intelligent pricing mechanisms for China's highly fragmented and unregulated used car market.
Chehaoduo’s offline business includes more than 600 stores, which have formed a one-stop, closed-loop service use case for car consumption. By connecting its online and offline business, and driving its operation with data and synergy, the company reckons that it has built a new retail ecosystem for the car consumer service industry.
