The after-effects of Japan’s earthquake and tsunami dominated headlines last week, shaking investors’ confidence and spreading volatility through the market. Late in the week though, a window opened for two issuers — Hyva Global and Development Bank of the Philippines — to jump in and price US dollar bonds on Friday.
Netherlands-headquartered Hyva Global braved the market first with its $375 million high-yield bond. There was some uncertainty at first as to whether the deal would get done amid the choppy market conditions, but it closed successfully in the end and the bonds rallied in the secondary market.
The five-year non-call-three Reg-S/144a bond offered a coupon of 8.625% and the notes priced at par. The guidance was 8.875% plus or minus 0.125%. The notes were expected to price at 8.75%, at the tight end of guidance, but eventually came inside that.
The new bonds rose more than two points to 102/102.375 on Friday morning.
The leads — Bank of America Merrill Lynch, Goldman Sachs, Nomura and Standard Chartered Bank — did not disclose the final order details, but the books stood at $1.25 billion last Thursday afternoon and were still building at that point.
The company considered raising funds through the loan market and had won commitments from lenders, but it has scratched that plan after successfully raising $375 million from the bond sale.
The margin on the loan was Libor plus 450bp, which worked out to be about 6.625% as of last Friday. Based on that level, Hyva was paying about 200bp more for the bond, which offers looser covenants and is not amortising.
The bond will partly finance the €525 million ($750 million) leveraged buyout of Hyva by Asian private equity firm Unitas Capital and Hong Kong’s NSW Holdings which was completed at the end of last year. Hyva is rated B1/B+/BB- by Moody’s/S&P/Fitch.
The iTraxx Asia Investment Grade Index (which does not include Japanese credits) was at 114bp/115bp last Thursday, about 10bp wider than the previous week. By Friday afternoon, the index had tightened about five basis points to 109bp/111bp.
Against this improved backdrop, Development Bank of the Philippines pushed ahead with its dollar bond. “There was a break in the clouds and we decided to go ahead with the deal. The issuer also did not want to take the risk of the market turning over the weekend,” said one banker.
The $300 million 10-year senior bond priced at a yield of 5.51%. The bonds were marketed to investors at a spread of 95bp to 100bp over the Republic of Philippines 2021s. The coupon was fixed at 5.50% and the notes reoffered at 99.924. The notes mature on March 25, 2021.
The joint bookrunners were Credit Suisse, Goldman Sachs, HSBC and J.P. Morgan.
Development Bank of the Philippines (DBP) had previously planned to issue a peso global bond to raise about $500 million but decided against it, opting instead to tap the Reg-S dollar market, where it expected to find more support from investors.
The peso global bond market has been shut since the Republic of the Philippines completed its Ps54.7 billion ($1.25 billion) 25-year peso global bond at the start of this year. The bonds fell as much as 10 points in secondary trading after the offering, burning investors.
DBP is wholly government-owned and its issue is rated BB by Standard & Poor's and Fitch. There is no government guarantee in place for the bonds, but they offer a change of control put at 101% if the government's stake falls below 100%, which one Philippine-based banker deemed "highly unlikely to happen".
Elsewhere, the Republic of the Philippines is said to have mandated Citi, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan and UBS for a global dollar bond. The Philippine central bank is reported to have granted approval to raise up to $1.5 billion in global bonds.
HSBC and Goldman Sachs are the global coordinators for the Philippines bond. The latter's appointment as a global coordinator has drawn some surprise as the bank does not presently have an Asian head of debt syndicate and has not had one for several months.
Yanlord Land and the Republic of Indonesia also concluded investor meetings last week.
