Lippo Bank prices new lower tier-2 bond

Sole bookrunner UBS completed an upsized Reg-S lower tier-2 10-year non-call 5 Eurobond for Lippo Bank worth $200 million on Wednesday (November 15). The deal garnered huge demand with an order book topping 13-times oversubscription. The lead was able to leverage that demand into an upsized final deal that priced inside of initial guidance.

UBS roadshowed the deal Monday through Wednesday earlier this week, stopping in Hong Kong, Singapore and London. Guidance was formally announced on Tuesday in Asia for a $150 million deal looking to close in the region of 7.5%.

As the book built momentum UBS opted to tighten the metrics. By Wednesday night the lead was able to upsize to $200 million and price an eighth tighter than guidance.

The Ba3/B+ (Moody's/Fitch) deal closed at par, with a semi-annual coupon of 7.375%, equivalent to 277bp over comparable US Treasuries. If not called the coupon will step-up to the prevailing five-year US Treasuries plus 416bp.

The order book closed with 110 accounts taking part. Geographically, Asia made up the bulk of the orders accounting for 75% of the total book, Europe followed with 23% and offshore US accounts picked up the remaining 2%. By investor type, banks were allocated 31%, asset managers 38%, retail investors 20% and insurance companies 11%.

UBS has timed this deal well, as the market has enjoyed a bullish run in recent weeks, especially in the sub-investment grade space where deals have enjoyed the benefits of some of the largest order books ever recorded in the asset class in Asia.

WhatÆs more, as with most bank capital deals, the book size is bolstered by the strong performance of the respective sovereign, and after many years in the doghouse, IndonesiaÆs benchmark has been one of the strongest credits to emerge this year.

In terms of comparables, bankers quoted the triple-A rated Temasek-owned Bank Danamon and the A3 rated Bank Niaga which is owned by CIMB. Lippo Bank priced in between these two.

Bank Danamon currently has Ba3/B rated $300 million 7.65% September 2014 in the market. That paper is currently trading at a bid/offer yield of 6.84% to 6.61%. An implied new 10-year non-call 5 would be two-and-a-half years longer and is estimated to price at around the 7.125% level.

On the flip side, Bank Niaga has a Ba3 rated $100mm 7.75% October 2015 in the market. That paper is quoted with a bid/offer yield of 7.27% to 7.11%. Bankers estimate that a new 10-year non-call 5 in a similar size as Lippo would price at around 7.625%.