The window for Asia’s high-yield corporate borrowers to issue dollar bonds is fast vanishing, with Global A&T Electronics being the latest to postpone its $625 million high-yield bond. The year is drawing to a close and investor appetite for speculative-grade bonds has clearly waned.
The company was planning to issue a six year-bond callable after three years and had embarked on roadshows to Asia and the US. However, on Tuesday, when roadshows concluded, the leads told investors that the bond was postponed due to market conditions.
“The deal was targeting US high-yield investors,” said a source. “We have seen $1.4 billion worth of outflows in the US high-yield market last week and three to four deals getting postponed,” he added. “It’s not an easy market.”
There was said to be interest from investors, but pricing expectations moved wider amid risk-off markets. Investors were comparing the deal to Amkor and MMI, although the latter is not very liquid, and both had moved wider.
According to the source, there is a possibility of the deal returning at some point in the future and the company does not have immediate need for the funds. “It may come back in two weeks’ time, we don’t know,” said the source. The proceeds were to be used to prepay an existing loan.
Global A&T Electronics is the holding company of United Test and Assembly Centre (UTAC), which provides semiconductor assembly and test services with manufacturing plants in Singapore, Thailand, Taiwan and China.
The deal was expected to be rated B1/B. UTAC was acquired by buyout funds Affinity Equity Partners and TPG Capital in 2007. Bank of America Merrill Lynch, Credit Suisse, J.P. Morgan and UBS were joint arrangers for the bond.
The high-yield market has had a tough couple of weeks. Late last week, Studio City, a subsidiary of gaming company Melco Crown, managed to close an $825 million high-yield bond. However, the leads were forced to revise final pricing for the eight-year non-call-three bond wider to 8.5%, 25bp wide of the initial guidance of 8.25%.
“There was a specific group of US high-yield investors that were willing to participate at a certain clearing price and their expectations moved wider so we had to push pricing wider,” said a source. The deal relied heavily on the US bid — with US investors allocated 70% of the deal. Asian investors were allocated only 20%, and overall, the deal was only two times covered. (However, the bonds have since risen two points in secondary).
This contrasts sharply with the performance of recent high-yield bonds from the Chinese property sector, which were massively subscribed, with heavy allocations into Asia and the private banks.
Soho China — which priced three weeks ago — saw Asian investors scoop up 74% of its 10-year bond and nearly half the bonds were allocated to private banks. However those bonds have since dropped five points, investors have lost money, and the bid has disappeared. “The Reg-S bid is fickle,” said a source.
Deutsche Bank, ANZ, Bank of America Merrill Lynch, BOC International, Citi, Credit Agricole and UBS were joint bookrunners for Studio City. Studio City was a project finance bond and investors only had recourse to cash flows from the project and not to Melco.
