Japfa Comfeed Indonesia, a Singapore-listed producer of animal feed and poultry, dived into the international bond markets with a maiden $150 million bond sale on Thursday, as investors continue to load up on emerging-market bonds.
The Reg S sale was launched shortly after two Indonesia borrowers from opposite ends of the credit spectrum completed their fundraising exercise earlier this week, with a $3 billion dual-tranche offering from the Republic of Indonesia and a $150 million high-yield bond from Sritex, a garment manufacturer.
“Investors are willing to put their money to work outside of the traditional safe-haven assets such as investment-grade bonds and loans,” said a syndicate banker running the deal. “In terms of maturity preference, investors generally like shorter-dated maturities because they are less sensitive to an upward movement of the interest rates.”
In addition to a decent appeittie for risky bonds, a potential credit upgrade helped drive demand for the bond. In a March 20 report, S&P said it will raise the rating on Japfa by one notch to “BB-” after the US dollar bond issuance. The company is currently rated B+ by the US credit rating agency.
The sole bookrunner, Credit Suisse, initially went out with a price range of “the 5.875% area”, before narrowing the marketing range to “5.625% the number”. Final pricing of the March 2022 bond was fixed at 99.462 on a coupon of 5.5% to yield 5.625%, according to a term sheet seen by FinanceAsia.
The Singapore-listed bonds are redeemable after three years at a cash price of 102.75 in March 2020. The next call date is March 2021 at 101.375.
The peak order book reached $600 million, before settling at $550 million from 85 accounts, the syndicate banker said. The majority of the bonds were sold to Asian investors, leaving the remaining 15% for European accounts. Fund managers took 75% of the deal, followed by private banks’ 20% and banks’ 5%.
In terms of fair value, banks used Tower Bersama Infrastructure’s 5.25% 2022 note and Lippo Karawaci’s 7% 2022 note as the main comparables. On a yield-to-call basis, the former was trading on a cash price of 102.375 to yield 4.57%, while the latter was trading at 104.5 to yield 5.38%.
Tower Bersama is a telecom tower provider with a BB- rating by both S&P and Fitch, while Lippo Karawaci is a real estate developer rated Ba3/B+/BB- by Moody’s/S&P/Fitch.
In the secondary market, the Japfa bonds edged up on Friday morning, with a bid price of 99.5, a tad tighter than its reoffer price, according to market data.
The company plans to use the new proceeds to redeem a $195 million 2018 bond which is callable in May. The buyback will also be funded by a newly-issued Rp1 billion ($75 million) five-year domestic bond, which was issued on the same day as the dollar offering.
US private equity firm KKR invested $81 million for a 12% stake in the company in June last year, with a lock-up period of one year.
