Pertamina back with $500 million 30-year bond

Just three days after printing its debut $1 billion 10-year international bond, Indonesian oil and gas company Pertamina returned to the market with a long-dated issue. Late on Friday night, the state-owned company priced a $500 million 30-year bond after investors showed interest in a longer deal.

“There was quite a bit of unfilled demand from the first bond and a few reverse enquiries,” said one banker close to the deal. “A number of companies have recently issued 30-year bonds, including Sinochem, CNOOC and CNPC, and Pertamina was looking to do the same.”

Pertamina used the same group of banks to run the books on both deals: Citi, Credit Suisse and HSBC. On the more recent offer, the leads gathered a book in excess of $5 billion from more than 250 accounts, making it the biggest 30-year bond from a high-yield company since 2007, when Perusahaan Listrik Negara raised $500 million. Pertamina’s issue is rated Ba1 by Moody’s and BB+ by S&P and Fitch.

The leads released initial guidance at 6.75% to 6.875% on Friday at noon and told investors the size would be capped at $500 million. This was tightened to a final guidance of 6.625% to 6.75%. The bonds priced at the tight end to yield 6.625%, or 231.8bp over the US Treasuries due in February 2041. The coupon was fixed at 6.5% and the notes were reoffered at 98.38. They traded up about 1.5 points yesterday morning.

Distribution of the bonds was evenly mixed across regions. Asian investors bought 40% of the deal, US investors 37% and European investors 23%. By investor type, fund managers bought 75%, insurance, pension and central banks 15%, banks 6% and private banks 4%.

The key comparables included Pertamina’s recently issued 10-year bonds and the Indonesian sovereign’s outstanding 10- and 30-year bonds. The Pertamina 2021s were yielding 5.375% and offered a 63bp yield pick up over the Indonesia 2021s which were yielding 4.75%.

Back in 2008, Indonesia issued a $1 billion 30-year bond, which paid a yield of 7.75%. Those bonds, which mature in 2038, were yielding 5.9% as the Pertamina deal was being marketed, and adding on another 63bp, this meant that a new Pertamina bond of a similar maturity should have yielded about 6.53%.

Pertamina’s new 30-year bonds mature on May 27, 2041 but as the long end of Indonesia’s yield curve is flat, according to one banker close to the deal, the three-year tenor extension would have been worth about 2bp, which indicated that Pertamina paid a new issue concession of about 7.5bp.

Ironically, there was much speculation that Indonesia would issue a 30-year bond, but the sovereign ended up choosing to print a single-tranche $2.5 billion 10-year bond in April.