Export-Import Bank of Malaysia (Mexim) attracted strong demand for its inaugural US dollar bond issue late last week, despite mounting risk aversion among investors amid a further worsening of the European crisis.
It was the first-ever foreign currency bond issue by a Malaysian development finance institution and it even achieved the lowest coupon by any Malaysian entity for a 5-year tenor. Apparently, Mexim met interest for a 10-year deal, but chose the shorter-dated option.
The $500 million transaction was launched on June 7 under Mexim’s $1.5 billion multicurrency medium-term-note programme, and was priced late that evening after a rally in the US treasury market gave investors a brief respite from the interminable gloom in Europe.
Its launch followed several days on the road by Mexim officials and their advisors to London and Asian centres including Hong Kong, Kuala Lumpur, Singapore and Tokyo. The joint lead managers and bookrunners were BNP Paribas, CIMB, Maybank and Nomura.
Initial price guidance for the senior, unsecured notes was at US Treasuries plus 240bp, which then narrowed to a range of 220bp to 230bp when London opened on Thursday before tightening further on strong demand.
The notes pay a 2.875% semi-annual coupon, and were reoffered at 99.899, yielding 2.895% to a maturity date of December 14, 2017.
That was equivalent to a spread of 218bp over the yield of the 5-year US Treasury benchmark note.
Despite credit markets weakening by about five basis points during the following day’s trading, Mexim’s issue held up well, with the spread widening by just a couple of basis points.
“The trading performance suggests that the pricing was correct,” said a person familiar with deal. “Some bankers have argued that it was too cheap, but if that had been the case, the issue would have rallied strongly rather than simply held up against a soft market environment,” he said.
He pointed out that at a spread of about 15bp wider than where a Malaysia sovereign five-and-a-half-year issue would be launched, (after extrapolating from existing issues), Mexim’s deal was in fact highly competitively priced from the issuer’s perspective.
Similar state-owned policy banks in Korea and Indonesia trade at significantly bigger yield premiums to their countries’ sovereign bonds: Kexim at 45bp-50bp wider and Bank Exspor Indonesia (Exim) at 65bp.
The Malaysian lender’s offering came after Export-Import Bank of Korea (Kexim) sold a record ¥100 billion ($1.3 billion) of samurai bonds in mid-May.
The total book size of Mexim’s Regulation-S issue was round $3 billion, made up of more than 180 orders.
Most of the bonds were placed in Asia, where accounts in the region bought 60% and a further 13% were sold into Japan; 22% were distributed to Europe and 5% to the Middle East.
By investor type, banks were the biggest buyers, taking 51% of the deal; funds and asset managers took 31%, and central banks and others were each allocated 9%.
Investors enjoy a change-of-control put option at par if Mexim ceases to be wholly-owned by the Malaysian government, which, through the finance ministry, controls 99% of the bank.
The proceeds of the issue deal will be used for general corporate purposes.
Mexim reported net profit of M$176.3 million ($56 million) in 2011 and plans to approve a 28% increase in loans this year, as it extends more credit to Malaysian companies operating in the Middle East and North Africa, according to a recent statement by chief executive Adissadikin Ali.
The bank is rated A3 (stable) by Moody’s Investor Services and the equivalent A- (stable) by Fitch, which are the same as the sovereign ratings.
