Following a hard fought mandate process the Republic of Indonesia has mandated Barclays, JPMorgan and UBS to lead a dollar-denominated benchmark in hopes of being the second sovereign to take advantage of the excess liquidity in the market following the success of the Republic of Philippines 1.5 billion 25-year and E500 million 10-year offering two weeks ago.
Barclays, JPMorgan, Morgan Stanley and UBS had been short listed, with Citigroup rumoured to have managed to get itself on the list late in the selection process. The beauty pageant was said to have been somewhat contentious with one of the banks pitching a fee of only 3bp, which was surprisingly rejected by the sovereign.
This will prove to be a interesting deal for Indonesia in light of the trouble it had with its two deals last year, both of which suffered from aggressive pricing and poor timing. Tthe Philippines, under National Treasurer Omar Cruz, on the other hand, has been able to re-salvage its reputation by being steadfast in its funding strategy; outlining clear and concrete funding requirements and deal sizes while maintaining a flexible approach to timing and pricing.
"Despite its prominence in the regional debt market, The Philippines is still a second tier issuer in Asia, and it's aware of that fact", says one investment banker. "Right now it is at the stage where the primary concern is getting the execution, structure and timing of each deal right. The country seems to understand that fighting for that extra basis point or two should not be the main priority and it has paid dividends."
This practice is something that Indonesia has yet to match. Its first deal of the year was particularly badly timed and came to market too soon after almost S&P's downgrade of Ford and General Motors to junk bond status in the spring.
Its predecessor - a $1.5 billion Reg-S 144A 10-year and 30-year dual tranche deal - suffered a similar fate. Already the subject of much debate among syndicate bankers, thanks to its precarious timing so soon after last year's terrorist bombings in Bali, the deal was launched in the second day of a downturn in the high-yield market, which saw the deal trade off almost immediately after it came to market.
Indeed the 10-year tranche, which was priced to yield at 7.625%, pushed out 2bp on the break and was trading at a bid/offer of 7.75%-7.70% on its first day of trading in Asia.
Other deals in the immediate G3 bond pipeline include issues by: The Kingdom of Thailand; Davamos; AMBank and C&M Communications. Thailand becomes the third sovereign to mandate a proposed new dollar denominated offering, hiring Standard Chartered to lead a $200 million three-year bullet deal.
However, this deal is expected to be a bought deal that will go straight onto the bank's books having been mandated at the astonishing level of Libor minus 7bp. "This is a least 10bp below anything dollar investors will even look at," says one syndicate banker. "I imagine it could even be below Standard Chartered lending rate."
Unlike other regional sovereigns, Thailand has yet to set a proper dollar benchmark fo the country. Ever since the Asian financial crisis, bankers have been pressing the sovereign to print a deal that can be used as a functioning benchmark for corporates and banks from the country. So far it has refused, prefering to avoid strategic trades in favour of cheap ones.
Lehman Brothers has been mandated as sole lead for a dollar denominated deal by Indonesian agricultural company Davomas Abadi.
Malaysia's AMBank is also slated to price a BB-rated $150 million hybrid tier 1 perpetual non-call 10-year deal following the conclusion of roadshows in London on Tuesday (January 17). Joint leads BNP Paribas, Credit Suisse First Boston and, parent AmMerchant Bank have set guidance for the deal at 100bp over mid-swaps.
Finally, C&M Communications, the South Korean cable company, has hired Goldman Sachs and Citigroup to sell a proposed $550 million dual tranche deal. The B+/Ba2 rated deal is expected to consist of five-year FRN and a 10-year no-call five-year fixed rate tranche.
