Congratulations once again to the winners of our Achievement Awards 2020.
It has been a year of exceptional transactions and capital raisings despite the extreme volatility and dislocation that Covid-19 has wrought.
Part 1 covers the rationale for our issuer awards and the first selection of our deal awards. Part 2 will cover the remainder of our deal awards and part 3, the house awards.
CORPORATE CAPITAL RAISER OF THE YEAR, DEAL OF THE YEAR, MEGATREND DEAL OF THE YEAR – TECHNOLOGY, BEST OF SOUTH ASIA DEALS OF THE YEAR
Jio Platforms, and the transaction recognised for the deal awards: its Rs435.7 billion ($5.83 billion) sale of a 9.99% stake to Jaadhu Holdings (Facebook)
Financial advisors:
Sell side: Morgan Stanley
Buy side: BofA Securities
Legal advisors:
Sell side: AZB & Partners, Davis Polk & Wardwell
Buy side: Hogan Lovells
There was only ever one winner of FinanceAsia’s two most prestigious awards. But there should have been two in contention. The fact that there wasn’t speaks volumes about the different ways that business is executed in Asia’s two economic giants: India and China.
A record-breaking IPO for Ant Financial fell by the wayside hours before it was due to begin trading after the not-so-invisible hand of the Chinese government asserted itself over one of the country’s most successful private sector corporations.
Over in India, the opposite has been the case where Mukesh Ambani is concerned. And as his empire grows, so does the desire of the world’s largest companies and investors to join him in riding India’s economic momentum.
Nevertheless, raising $20.3 billion from 13 of the world’s biggest tech and financial investors in the space of three months was no mean feat. It wasn’t quite a deal a day, but it must have felt like that at times as one big investment after another was announced in Reliance’s next-generation technology company, Jio Platforms.
The deals were book-ended by Silicon Valley giants Facebook and Google. In total, Reliance sold 20% of Jio Platforms, starting with a 9.99% stake, which went to Facebook for $5.7 billion on a pre-money valuation of INR4.36 trillion ($59.1 billion) according to S&P Global Market Intelligence data.
Fixing and announcing this one first proved to be a smart move as it set the scene for the financial investors to come in at a 12.5% higher equity valuation: INR4.9 trillion ($66.6 billion).
First up was Silicon Valley tech investor Silver Lake, which paid $750 million for a 1.15% stake in its first-ever Indian investment, followed by a second $600 million investment one month later. Then came US private equity firm Vista Equity Partners, which paid $1.5 billion for a 2.32% stake, also its first Indian investment.
This was followed by General Atlantic and KKR, which respectively paid $875 million and $1.5 billion for their largest-ever Asian investments.
The next month (June) was dominated by investment from the Middle East. The Emirati sovereign wealth fund Mubadala spent $1.2 billion on its first direct investment in India, while the Abu Dhabi Investment Authority invested $750 million and Saudi Arabia’s Public Investment Fund ploughed in $1.5 billion.
June also saw investments from TPG ($600 million) and L Catterton ($250 million), followed by semiconductor manufacturers Intel ($250 million) and Qualcomm ($100 million) in July.
Then to round it all off, Google signed on the dotted line in its largest ever minority stake investment. It paid $4.5 billion for a 7.73% stake on Facebook's valuation of INR4.36 trillion ($58.9 billion).
For Ambani, these investments serve three very important purposes. They will aid Jio Platforms strategic thinking and help to forge an ongoing commercial partnership. The funds raised will also help the parent, Reliance Industries, to deleverage its balance sheet after a massive five-year spending spree to turn the group from a largely oil company to an oil-to-technology conglomerate.
For yet another year, Reliance has demonstrated that it is not just a corporate titan in India but on a global scale too.
ESG CAPITAL RAISER OF THE YEAR
Bank of China
This is arguably the most important award that FinanceAsia now gives out because the winner is not only helping to set the financing template for years to come, but also promoting the kind of wider social and environmental good, which the world so desperately needs.
In 2020, Bank of China set not one but two important ESG markers on the ground. It launched the world’s first blue bond by a private sector entity and the world’s first Covid-19 social impact alleviation bond.
Coming first is not that remarkable for Bank of China anymore. The bank has established a well-deserved reputation for defining trends with the way that it structures its deals and being ahead of the pack in identifying untapped pockets of demand.
The CNH3 billion ($460 million) and $500 million blue bond, which it launched in September, represented only the world’s fourth-ever bond in the sector following a handful of transactions by sovereigns and supranational agencies. It is already prompting other Chinese banks to follow suit.
The blue template serves an important role highlighting the criticality of water and marine conservation. Proceeds are being used to finance a variety of different projects from offshore wind to waste management.
The deal also helped to diversify the bank’s investor base into Europe, where many of the world’s biggest ESG investors are based. Notably, 41% was placed in the region (double the levels Bank of China achieves on conventional bonds) and 42% went to central banks and sovereign wealth funds.
Adding in a CNH tranche was also a smart move, capturing unfulfilled demand in a sector that has seen little issuance in recent years.
Bank of China achieved a similar feat back in February with its HK$4 billion ($520 million) and its MOP1 billion ($130 million) Covid-19 social alleviation bond. Deals in the Macanese pataca are so few and far between that Bank of China is currently the only public issuer.
Proceeds were used to fund a special programme to help small and medium sized enterprises impacted by the pandemic.
FINANCIAL INSTITUTION BORROWER OF THE YEAR, BOND DEAL OF THE YEAR
AIA, and the transaction recognised for the deal awards: its $1.75 billion subordinated bond
Active bookrunners: HSBC, Morgan Stanley, Standard Chartered, Wells Fargo
Passive bookrunners: ANZ, BNP Paribas, Credit Agricole
Legal advisors:
Issuer: Debevoise & Plimpton
Managers: Clifford Chance
It’s not often that a debut borrower is responsible for a structural first in the FIG space, but that’s what AIA achieved this year when it launched its maiden subordinated bond.
The insurer’s 20-year bullet deal was an incredibly clever transaction on a number of levels. It not only spoke to the expertise of its syndicate banks, but also of Ethan Farbman, AIA’s head of external capital and liquidity, and former head of debt capital markets at Morgan Stanley.
Farbman’s experience meant that AIA did not fall into the trap of pushing pricing beyond its limits and ending up with a deal that traded down in the secondary markets. It will become a more regular borrower and its funding team understood the importance of leaving a little bit on the table for investors in order to create a good long-term relationship.
The right balance was also evident in the way that the deal was structured. AIA’s low leverage meant that it did not need to consider a ratings-led deal with an equity capital component. But it did like the regulatory capital benefits and the all-in costs it could achieve at the 20-year mark.
It also knew that US investors in particular prefer bullet bonds. AIA is quite an unusual brand by regional standards, given it has an equal following in the US and Asia. It wanted to create a deal that appealed to both.
It also timed it well, bringing it to market after the Hong Kong regulator had published its draft insurance capital guidelines and at the beginning of September, when the bond markets were catching fire again.
The pricing was also positioned well. AIA was able to successfully argue that it should command a tighter senior- to sub-debt premium than the banking sector because it only faces solvency risk rather than solvency and liquidity risk. Persuading investors to actively embrace a 25bp senior-sub premium inside US banking comps and build a $11 billion peak order book in the process was no mean feat.
Not all insurance companies will be able to replicate AIA’s structure, because they are subject to different regulatory regimes. But some will, and AIA has set a very good template for those that do follow.
Highly commended financial institution borrower of the year: OCBC
Highly commended bond deal of the year: PLDT’s $600 million bond
SOVEREIGN BORROWER OF THE YEAR, BEST OF THE FRONTIER MARKETS DEALS
Government of Mongolia and the transaction recognised for the deal awards: its $600 million bond and concurrent tender offering
Financial advisors:
Issuer: Frontier Strategies
Bookrunners: HSBC, JP Morgan, Morgan Stanley, Nomura
Legal advisors:
Issuer: Cleary Gottlieb Steen & Hamilton, Melville Erdenedalai
Managers: Mayer Brown, DB & GTS
This was a category where there were two standout sovereign deals this year. One came one from Mongolia and the other from Indonesia.
The latter’s $2.5 billion triple-tranche green sukuk was a textbook example of great execution and market timing in June. However, overall, Indonesia had a tricky year because it had not pre-funded in 2019, leaving it with a larger than usual requirement in 2020. This initially prompted it to hit the market in April, when spreads were still being battered by Covid-19-related volatility, with a deal that has handsomely rewarded investors in the secondary market.
In the end, we decided that Mongolia had an edge because its liability management exercise spelled perfection from start to finish. The sovereign and its advisors picked an opportune market window in late September at a time when there had been little issuance from emerging and frontier markets sovereigns, allowing it to take advantage of untapped demand.
The government also did a very good job outlining its strategy as the country exited its IMF programme. Bond investors are well aware that this often marks the high point in frontier market land, but the Mongolian government clearly communicated its intention to raise no new debt.
The liability management exercise also incorporated a few novel twists. One was the inclusion of a sustainability roadmap, which explained how the re-financing would free up funds for sustainable purposes: hydropower projects, schools and affordable housing.
This enabled it to diversify its investor base to ESG investors.
The government also persuaded investors to hand over their existing 2021 bonds despite the attractiveness of a high 10.875% cash coupon. It launched an any-and-all tender, with investors given allocation codes, which guaranteed them a matching allocation in the new bond.
The existing 2022 bonds were partially taken out via a capped tender.
The exercise was a resounding success on all levels. The government reduced its overall financing costs and extended its yield curve. It also mitigated short-term re-financing risks, while paving the way for a long-term sustainable development plan.
It had been under intense domestic scrutiny to make sure that it did not pay up. And it succeeded here too, creating a nice balance between its pricing needs and investors.
The bond has consistently traded well in the secondary market, up two-and-a-half points two weeks post execution and nearly seven points by mid-December.
EQUITY DEAL OF THE YEAR, BEST OF CHINA/HONG KONG DEALS OF THE YEAR
JD.com’s HK$34.56 billion ($4.46 billion) Hong Kong secondary listing
Joint sponsors: BofA Securities, CLSA, UBS
Joint global co-ordinators: BOCI, CCBI, China Renaissance, Jefferies
Legal advisors:
Issuer: Maples and Calder; Shihui Partners; Skadden, Arps, Slate, Meagher & Flom
Managers: Clifford Chance, Han Kun
FinanceAsia’s two main equity awards highlight contrasting trends: one expected, the other less so. At the beginning of the year, there was a strong assumption that 2020 would be remembered as the year when the de-coupling between China and the US accelerated.
This partially played out in the equity markets as a string of companies either de-listed from New York, or executed secondary listings in Hong Kong or China. The largest of them all in Hong Kong was JD.com’s secondary market flotation in June.
This was a year when JD.com came into its own on a number of levels.
Firstly, online and logistics operators have had a phenomenal year and JD.com’s Hong Kong secondary listing came at a time when the New York-listed stock was showing considerable momentum. It rose 50% during the first half of the year and was up nearly 140% by mid-December.
Secondly, Richard Liu’s JD.com has often been the bridesmaid to Jack Ma’s Alibaba. It seemed that 2020 would prove no different given the latter was preparing to list his fintech giant, Ant Financial.
Yet, it turned out to be the opposite. Ant and its founder were cut down to size by the Chinese government, while Liu had a great year with two mega-IPOs including JD Health in December.
JD.com’s equity deal was well executed. It has also underlined the benefits of dual listings for China’s largest companies.
Since listing, the Hong Kong stock trades about a quarter of the US stock. This shows that Hong Kong is able to hold its own as a liquidity pool and offers a number of benefits for local and global investors.
Having a HK listing widens the group’s investor base capturing more regional and local investors. But it also offers global investors the opportunity to react to news about the company in its own time zone.
IPO OF THE YEAR, BEST OF CHINA/HONG KONG DEALS OF THE YEAR
XPeng’s $1.7 billion New York IPO
Financial advisors and underwriters: Credit Suisse, JP Morgan, BofA Securities
Underwriters: ABCI Securities, BOCI Asia, Haitong International, Futu5.com, Tiger Brokers
Legal advisors:
Issuer: Fangda Partners, Harney Westwood & Riegels, Simpson Thacher & Bartlett
Managers: JunHe, Latham & Watkins
There were multiple fantastic IPOs for FinanceAsia to choose from this year. We selected XPeng for two main reasons.
Firstly, this was supposed to be the year when Chinese companies either de-listed from New York, or chose to list in China or Hong Kong instead. This only partially happened: there were plenty of sizeable deals on Greater China bourses, but there was still a steady progression to the US too.
XPeng was among the largest New York listings by a Chinese company in 2020. It is where the electric vehicle (EV) start-ups are largely choosing to list.
Secondly, the tsunami of deals that come out of China are often priced and structured in a way, which means they perform badly in the secondary market, particularly those in Hong Kong with large cornerstone tranches.
This year nearly every single China-related IPO has performed well. But few have performed as well as XPeng.
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