If at first you don't succeed, try, try again. That seems to be the message from the highly successful relaunch of LG Caltex's $300 million bond issue.
The Korean oil refiner had started roadshows for the issue on July 19 only to see its offering derailed by a high profile labour dispute. Indeed, having gone through Singapore, Hong Kong, Boston and New York, the decision was taken to delay.
However, with the labour dispute coming to an end joint bookrunners, Bank of America, Citigroup and Deutsche Bank decided to relaunch the transaction last Friday. Ironically, the deal benefited from the delay thanks to a US treasury market that had tightened in 28bp since the initial launch attempt, and likewise thanks to a relative absence of competing supply and an investor base hungry for energy sector credit stories.
On Monday the bookrunners began an accelerated bookbuilding process with an initial price guideline of 143bp over treasuries. On the first day it saw $200 million of demand generated in Asia, $130 million in Europe and, most incredibly, $850 million generated from the US. Indeed, with the region having got used to deals being driven by the 'Asian bid' this marked an astounding reversal. Suddenly US demand was driving the transaction.
This may in part have been down to the fact that the company is 50% owned by Chevron Texaco, and was thus viewed as a leveraged play on the US oil major.
With the US demand surging, the bookrunners tightened in pricing at the start of the next Asian day to a range of 138-140bp over and saw Asian orders increase dramatically. In the end, the book saw $2.025 billion of total orders, which at almost seven times covered ranks it among the region's most oversubscribed bond offers.
The deal size, however, could not be increased. Board approval would have been required.
The largest single order was for $100 million with 30 orders coming in at over $20 million. The book saw 114 orders placed in total.
The 10 year deal was priced at 138bp over, with a final coupon of 5.5% and a new issue price of 99.122. That compares with recent deals for PTT and Korean Southern Power that were respectively trading at the time of pricing at 123bp over and 128bp over. However, in the case of the latter, LG Caltex was rated two notches lower.
Rated at Baa2 and BBB respectively by Moody's and S&P, the Korean oil refiner is, however, on positive outlook from both and the potential for an upgrade may also have been a factor in investors' enthusiasm.
While the level of oversubscription might suggest overly-generous pricing, the bond tightened in only three basis points in the secondary market.
The deal was placed 39% in Asia, 11% in Europe and 45% in the US, with 56% going to asset managers, 25% to banks, 18% to insurers and 1% to retail.
