Global A&T Electronics, the holding company of United Test and Assembly Centre (UTAC), tapped the Asia high-yield market late last week, demonstrating the diversity of offerings carried by the wave of issuance in January.
UTAC is the sixth-biggest outsourced semiconductor assembly and test service provider in the world, with manufacturing plants in Singapore, Thailand, Taiwan and China. It was bought by buyout funds Affinity Equity Partners and TPG Capital in 2007, with each owning 50%.
UTAC posted revenues of $946 million during the 12 months to September 2012 and earnings (before interest, taxes, depreciation and amortisation) of $244 million in the same period.
It is the biggest ever high-yield bond launched by a private equity-owned entity in Asia, and the net proceeds from the $625 million issue will be used to help repay the joint venture’s existing senior debt.
“The high-yield financing alternative expands the toolkit for sponsor business in Asia, supporting increased LBO and refinancing activity at a time when sponsors have ever-larger Asia funds to put to work,” said a person familiar with the transaction.
There was “robust appetite seen from Asia and US accounts, but US distribution was the key for a deal of this size, which benefited from demand from US-centric, traditional high-yield investors”, he added. But, there was also “meaningful participation” by emerging market funds.
The total size of the order book was not disclosed, but is said to be around $2 billion.
It marked a happier approach to the market than two months ago. In late November 2012, UTAC postponed its bond offering as investor appetite for speculative-grade credits waned towards year-end.
The window re-opened for the company on Tuesday last week, when joint bookrunners Bank of America Merrill Lynch, Credit Suisse, J.P. Morgan and UBS approached investors once more.
On Thursday, New York time, they priced the deal. The senior secured notes pay a 10% semi-annual coupon and were re-offered at par. They have a final maturity date of February 1, 2019, and the 10% yield was equivalent to 882bp over the yield of the US Treasury 1.25% 2019.
The US high-yield market provided the best comparable credits to assess relative value. Advanced Micro Devices has three existing bonds across the yield curve, and all trade with yields higher than 9%. Investors also apparently compared the offering with MMI International’s bonds.
The Global A&T Electronics issue is rated B1 by Moody’s and a notch lower at single-B by Standard & Poor’s. It is non-callable until 2016, when the borrower would need to pay 105, falling to 102.5 in 2017 and then par from 2018.
However, there is a claw-back clause that allows the company to redeem up to 35% of the notes at any time with the proceeds from equity offerings at a redemption price of 110 — provided that at least 65% of the notes originally issued remains outstanding and that it takes place within 90 days of the closing of the equity offering.
The notes traded higher at 102 in the secondary market on Friday.
