The transaction is the companyÆs second foray into the international bond market since it issued a $465 million seven-year deal in December 2006 via Citi and Deutsche Bank. And the deal comes just a few weeks before True Move enters into covenant waiver negotiations with its local banks.
Over 40 investors took part in the deal, with 31% of the bonds allocated to banks, 59% allocated to funds, 6% to retail and 3% to insurance and pension funds. In terms of geographic split, bookrunners allocated 52% of the bonds to Asia, 15% to Europe and 33% to the US.
Guidance for this transaction was not announced, as specialists believed this would immediately cause the market to widen. Instead, bookrunners indicated that the deal would come in at the mid- to high-10% range, and then launched the deal at 10.625%, leaving investors just one hour to decide whether to participate.
Bankers quoted True MoveÆs existing 2013s as a suitable comparable. These were trading yesterday at 102/103 bid/offer, while the companyÆs new bonds traded up Wednesday to 99.5/100.5. This is a significant achievement considering the diminished liquidity brought about by current market volatility.
ôWe didnÆt buy, since we were feeling bearish about the political situation in Thailand, and we werenÆt too sure about the credit but I am shocked these bonds have performed so well in this market environment,ö says one investor. The company has a high degree of leverage with 98% debt-to-capital and a debt-to-Ebitda ratio for 2007 of 5.2 times.
The sale received a number of reverse enquiries from the original 2013 bondholders, with a large portion of the allocation going to buy-and-hold US West Coast and European investors.
When asked for his opinion about the performance of the bonds, one investor says: ôIn a normal environment, this type of deal would be offered to anyone. But in volatile markets such as this one, the negotiation between the issuer and the client is much more controlled. Fast money such as hedge funds withdraw, leaving mainly dedicated, high-yield emerging market funds intent on holding the funds.ö
The proceeds for the bond are to be used to cover True MoveÆs near-term obligations to a number of Thai banks, which the company initially intended to meet by an amortising syndicated loan. True Move had mandated DBS to arrange the transaction, but the bank failed to syndicate the loan.
ôThe deal has allowed secured debt to drop from 47% to 22%, and released the company from a rolling covenant waiver process which threatened to send the company into default,ö says a source close to the deal. In early June, Standard & PoorÆs downgraded True Move from BBû to B+ with a negative outlook. It also estimated a 30% probability that parent True Corp group would breach financial covenants after September 2007.
As expected for a high-yield deal in this kind of environment, a substantial new issue premium was priced into the transaction. However, sources on the sell-side state: ôThis exercise was not about cheap money, but about finding a solution for the company to operate properly.ö
ôThe deal priced to clear, the bonds traded up. Hats off to Deutsche,ö says one investor, who did not participate in the transaction.
True Move is the only completely domestically owned mobile operator in Thailand and is a 93% subsidiary of integrated telecom operator True Corp. It is 30% owned by the Charoen Pokphand Group. The company has a 19% market share, equivalent to eight million cellular subscribers.
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