Achievement Awards 2018: Country Awards

We begin the announcement of our annual Achievement Awards winners with the outstanding deals by country across the region.
FinanceAsia is pleased to announce the winners of its country awards, the first of a three-part series revealing our Achievement Awards for 2018.
 
We will announce the best deals overall and the best banks in a variety of categories over the next two days. But for now — the following deals were the most impressive among all those we considered from individual countries.

 

 

 

BEST BANGLADESH DEAL

Technaf Solartech Energy's $15 million term loan

Local currency arrangers: Standard Chartered, One Bank, Shahjalal Islami Bank, Saudi Bangladesh Industrial & Agricultural Investment Company

Foreign currency arranger: Standard Chartered

Risk participator: GuarantCo

Legal advisors: Eversheds Sutherland, DFDL Bangladesh

Technical advisor: Advisian

Bangladesh is a country that has started to attract companies eager to tap into its huge population. During 2018, Ant Financial took a stake in mobile financial services provider bKash and Japan Tobacco took over United Dhaka Tobacco.

Neither deal, however, had closed at the end of FinanceAsia’s awards period. In their stead, a second big theme is the country’s attempt to improve its power infrastructure.

And while Technaf’s deal is small, it is pioneering because it has created a new template for private operators in the solar sector. A key issue was how to structure a deal with such a long maturity – 15 years – beyond the level with which commercial banks are normally comfortable.

The answer was a unique structure with an actual loan tenor of eight years and then a re-financing mechanism that ensures the final years are covered by Standard Chartered, GuarantCo, or a new set of banks.  

As a result of the deal, the solar project achieved a loan repayment schedule that matched the project’s cash flows.

 

BEST CAMBODIA DEAL

NagaCorp’s $300 million 9.375% May 2021 bond deal

Joint global co-ordinators: Credit Suisse, Morgan Stanley

Legal advisors:

Issuer: Freshfields Bruckhaus Deringer, Maples & Calder, HML Law Group

Managers: Latham & Watkins, DFDL

One of the key criteria for this award was a deal that worked for both issuer and investor. That made for a tough call in a year when practically every high-yield bond ended up trading below its issue price.

But this deal is in a league of its own to the extent that even the head of debt capital markets at a non-syndicate bank suggested it should win.

It is a standout on a number of levels. It not only performed well in the primary and secondary markets but it also introduced a whole new country to the international capital markets.

The lack of a sovereign benchmark, however, effectively doubled the complexity of bringing a debut credit like this to market. It meant that the issuer and its syndicate had to work exceptionally hard to get investors’ heads around Cambodian country risk in addition to NagaCorp’s balance sheet.

The deal also priced in mid-May at a time when the emerging markets were under intense pressure and Chinese high-yield credits had started to widen to double their 2017 levels.

In a year when so many assumptions have been turned on their head, it is perhaps fitting that the best high-yield deal came from a gaming company out of a country that is as frontier as they get.

 

BEST CHINA DEAL

Ant Financial's $14 billion Series C funding

Financial advisors: Deutsche Bank, Citi, China International Capital Corp, CITIC Securities, JPMorgan, Morgan Stanley

Legal advisors: 

To Ant Financial: Simpson Thacher & Bartlett, King & Wood Mallesons

To financial advisors: Sullivan & Cromwell LLP

To selected investors: Kirkland & Ellis, Allen & Overy

Few new-economy companies in Asia have withstood the winter chill in capital markets this year. An exception has been Ant Financial, the operator of China’s largest online payment platform. Shrugging off the choppiness in the market, it raised $14 billion in June in what turned out to be the single-largest confirmed fundraising round in history, according to data provider Crunchbase.

The money raised will boost the company’s coffers ahead of an anticipated initial public offering, which could come as soon as next year, sources close to the deal told FinanceAsia.

The funding included both US dollar and renminbi tranches. The dollar share made up over $10 billion with a list of star-studded investors like Singaporean sovereign wealth funds GIC and Temasek as well as US private equity firm Warburg Pincus.

Ant did not release any public details of its valuation after the funding round, but sources familiar with the deal now value Ant Financial at around $155 billion. This makes it one of the world’s most valuable financial firms.

 

BEST HONG KONG DEAL

Bank of China (Hong Kong) $3 billion 5.9% additional tier 1 perpetual bond deal

Joint global co-ordinators: Bank of China, Bank of China International, Cinda International, Citi, Goldman Sachs

Joint lead managers: BNP Paribas, Guotai Junan International, Morgan Stanley

Legal advisors:

Issuer: Clifford Chance

Managers: Linklaters

Hong Kong is always a tricky category to judge because its One Country Two Systems status not only means that the Territory’s financing is dominated by mainland Chinese entities, but it also wrong-foots banks into pitching those companies for this award.

Yet if ever there was a hybrid then it is Bank of China Hong Kong – both as a bank that crosses either side of the border and in terms of the type of transaction that won it this award. For in 2018, BOC HK returned to the US-dollar denominated bond markets for the first time in seven years with Asia’s largest-ever additional tier 1 deal.

The deal was a remarkable one. It was large, but unlike so many Chinese deals it was a true market-driven offering.

That is undoubtedly one of the reasons why it remains one of 2018’s few bonds still trading above its issue price. Another reason is rarity value. Despite the deal’s deep subordination within the capital structure, it holds two investment grade ratings (Baa3/BBB), which makes it unique within the Chinese AT1 sphere.

And it is a pacesetter for 2019 when bank capital issuance is expected to pick up markedly, particularly if Hong Kong and China accelerate banks’ TLAC (Total Loss Absorbing Capital) issuance schedules.

 

BEST INDIA DEAL

Walmart’s $16 billion acquisition of a 77% stake in Flipkart Online Services

Sell side advisors: Goldman Sachs, Raine Group

Buy side advisors: Barclays, JP Morgan

Sell side legal advisors: J. Sagar Associates, Allen & Gledhill, Cyril Amarchand Mangaldas, Dentons Rodyk & Davidson, Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, Khaitan & Co, Allen & Overy, TriLegal Partners,

Buy side legal advisors: Gibson Dunn & Crutcher, Hogan Lovells, Shardul Amarchand Mangaldas & Co, WongPartnership.

If ever there was a deal that symbolises so many current trends, then this is it.  

First and foremost, it is an M&A deal that underscores the online revolution that is radically re-shaping the dynamics of consumer behaviour. And it does so in a country that is set to become the world’s most populous within the next decade but remains underpenetrated on the e-commerce side.

It is also a deal that telegraphs the valuation inflation that propelled the world’s biggest tech companies ever upwards for most of 2018. SoftBank Vision Fund, for example, almost doubled its return in Flipkart in the space of less than one year.

Goldman Sachs did a great job achieving a high valuation for its client of 4.6 times implied net FY18 sales at a time when Chinese comparables were trading at around three times.  Amazon’s reported last-minute bid must have been a great help in that respect.

Yet the deal appears to be a win-win for both sides: Walmart gets access to a fast-growth market after exiting more developed ones in Western Europe, while Flipkart gets the financial muscle and supply-chain expertise it needs in its battle with Amazon.

 

BEST INDONESIA DEAL

MUFG Bank's $5.9 billion acquisition of a 40% stake in Bank Danamon from Fullerton Financial Holdings

Financial advisors:

Sell side: Credit Suisse, UBS

Buy side: JP Morgan, Mitsubishi UFJ Morgan Stanley Securities

Legal advisors:

Sell side: Herbert Smith Freehills, Hiswara Bunjamin & Tandjung in association with Herbert Smith Freehills, Makes & Partners, WongPartnership

Buy side: Baker McKenzie, Hadiputranto, Hadinoto & Partners

Indonesia’s largest-ever bank M&A deal is one that offers clear benefits to both sides. Japanese banks have always been big lenders in Indonesia but have recently stepped up their activity through more direct financial investments.

MUFG’s three-step process to gain majority control of Indonesia’s fifth-largest bank by assets will further help it to diversify away from ultra-low interest rates back home. It caps a spending spree across Asia, which also encompasses VietinBank (20% stake), Bank of Ayudhya (77%) and Philippines Security Bank (20%).

The deal is a win too for the Indonesian government, which has been keen to encourage more consolidation across its still fragmented banking system. However, it has yet to grant an exemption for the third stage of the agreed deal, which would see MUFG’s stake exceed its 40% cap and rise to 73.8%.

If it does go ahead, analysts expect MUFG to merge Danamon with Bank Nusantara, in which it already has a majority stake.

 

BEST KOREA DEAL

LG Chem's 315.2 million ($361 million) convertible bonds due 2021 and $220 million convertible bonds due 2021

Lead Manager: Credit Suisse

Trustee: Bank of New York Mellon

Legal Advisors: Linklaters, Cleary Gottlieb Steen & Hamilton LLP

South Korea was at the centre of the world’s attention in 2018 following its historic summit with North Korea, and as host of the Winter Olympics in Pyeongchang. It was definitely a landmark year. 

And it was an equally active year for Korea’s capital markets as well as for mergers and acquisitions.

LG Chem stood out as FinanceAsia’s pick as the Best Korea Deal by achieving multiple firsts.

The dual-tranche offering, which included a €315 million tranche and a $220 million tranche, was the first ever euro and US dollar convertible bond offering from a Korean issuer and set a benchmark for Korean enterprises that might use the same structure in the future.

In order to avoid any information leakage that might affect its share price, LG Chem kept the number of people involved in the bond offering to a minimum and did not file for the transaction, nor prepare any disclosure agreement ahead of launch.

It was the first undocumented convertible bond offering ever in Korean history and, as such, underlined the strong market confidence in the chemical giant since investors relied solely on public information to make their investment decisions instead of specific deal disclosures.

The A3/A- rated issuer managed to put together over $600 million of demand even as the overall Asian investment-grade credit market was falling out of favour with bond investors, which made it the largest convertible bond issue out of the country since 2011.

It was also the first convertible bond in Asia ex-Japan to be listed on the Vienna Stock Exchange.

 

BEST LAOS DEAL

EDL-Generation’s Bt13.7 billion ($410 million) multi-tranche bond

Financial advisor: Twin Pine Group

Joint lead arrangers: Bangkok Bank, Krung Thai Bank, Siam Commercial Bank, Thanachart Bank; Standard Chartered

Legal advisors: LS Horizon, Allen & Overy

Laos’s state-owned power producer EDL-Generation used the proceeds of this successful Thai baht-denominated bond to fund an ambitious expansion plan to boost generation capacity by 1,100 megawatts through the acquisition of stakes in two hydropower plants.

The company extended its Thai baht curve from 10 years to 15 years making it one of the few BBB+ rated borrowers in the Thai market to issue such long maturities at large volumes.

Over 90% of the paper was sold to high-net-worth investors. “The institutional investors that had a credit line to EDL were already full, so we had to find another investor base,” explained Adisorn Singhsacha, chief executive at advisory firm Twin Pine Group.

Investors felt reassured by EDL’s long-standing off-take agreements with the Electricity Generating Authority of Thailand, which now purchases nearly half of the company’s power. “The future cash flows for EDL look strong,” said Singhsacha.

EDL achieved a weighted average cost of funds of 4.81% on the transaction.

 

BEST MALAYSIA DEAL

Saudi Aramco's $7 billion acquisition of a 50% stake in Petronas' RAPID project

Financial advisor: Morgan Stanley

Legal advisors:

Sell side: Shearman & Sterling

Buy side: White & Case

There were two deals that stood out in a year of huge political uncertainty and few capital market offerings in Malaysia. One was CVC’s acquisition of Munchy Foods, which demonstrated the private equity group’s continued success in Malaysia, where it remains one of the few international private equity players.

The other was the tie-up between Petronas and Saudi Aramco.

On the surface, the latter seems pretty straightforward: two large oil companies get together to develop a refinery and petrochemical project. But the deal, which represents Malaysia’s largest ever-inward investment, is anything but.

First, there is the sheer scale of the investment, which also represents Saudi Aramco’s largest investment outside Saudi Arabia. Then there were the corporate egos involved, which would have necessitated a huge amount of shuttle diplomacy from their joint advisors.

And that is one of the true testaments of a great M&A franchise: the ability to add value to a long-standing client or in this case, to bring two together.

The deal was also complex because it was not a truly greenfield project. This meant that Petronas needed to convince Saudi Aramco that the money it had invested to date had been well spent.

 

BEST MONGOLIA DEAL

Development Bank of Mongolia’s $500 million 7.25% October 2023 bond deal

Joint global co-ordinators: HSBC, JP Morgan, Morgan Stanley

Financial advisor: Frontier Strategies

Legal advisors: Mayer Brown, Allen & Overy

This was a very well-judged deal by the Development Bank of Mongolia (DBM), which successfully rode the wave of the country’s two-year IMF-led economic makeover.

Investors like countries and credits with positive ratings momentum and Mongolia had that following Fitch’s decision to lift the sovereign rating back to B status in July. S&P’s decision to raise its rating to B shortly after the five-year deal was completed in mid-October added to that.

In a year when emerging markets have been roiled by crises, investors have migrated towards certain frontier-market countries, which they feel offer a measure of diversification and stability. Mongolia is one of them and the deal captured a large $4 billion order book.

The bank’s management team are proud of the fact that they pulled the deal off without an explicit sovereign guarantee. The reality of its 100% government ownership, however, makes DBM a proxy for the country’s accelerating 6%-plus growth rate.

 

BEST PAKISTAN DEAL

Government of Pakistan’s $565 million 12-month syndicated term loan

Lead advisors, joint mandated lead managers and bookrunners: Credit Suisse, ICBC

Lead arrangers: Bank of Zhengzhou (and Paris branch), Export-Import Bank of China, Postal Savings Bank of China, Beijing Changping sub-branch

Legal advisors: Clifford Chance, HaidermotaBNR

Choosing a syndicated loan as deal of the year is not a testament to a great year for Pakistan’s capital markets but rather a dreadful one. For the 22nd time since independence, the country was forced back into the arms of the IMF due to a foreign exchange crisis.

Foreign investors have been noticeably absent. The one exception is Ant Financial, which announced a $184 million acquisition of Telenor Pakistan in March, although the deal has yet to close.

Not all of Pakistan’s friends have deserted it. This deal is the eighth syndicated loan that Credit Suisse has arranged for Pakistan.

But perhaps most notable is the rest of the arranger group. Pakistan’s other great friend is China and its banks stumped up the cash at a time when elections were just around the corner and political volatility was at its height.

That uncertainty had led the Middle Eastern banks that normally support Pakistan’s sovereign loans to drop out, pushing the pricing up by nearly 10% compared with 2017. But the deal got done and the IMF came back.  

 

BEST PAPUA NEW GUINEA DEAL

Papua New Guinea’s 8.375% October 2028 bond deal

Global co-ordinator: Credit Suisse

Joint lead manager: Citi

Legal advisors:

Issuer: Milbank Tweed Hadley & McCloy

Managers: Linklaters, Dentons

This is the first time that FinanceAsia has assigned an award to Papua New Guinea (PNG) but it is well-deserved after such a long time in the making.

It has taken the sovereign almost 20 years to bring a debut international bond deal to the market. And in the end, the government chose the perfect time to showcase the country’s emergence onto the world stage shortly before it hosted the Asia Pacific Economic Cooperation meeting in the capital Port Moresby.

Indeed, having spent the past two decades trying to shake off its image as a country where people feared to tread, Papua New Guinea now finds itself in the enviable position of being surrounded by willing suitors. On the one side stands China, and on the other Australia and its Western allies.

Geopolitics and the relative stability of frontier market bonds helped PNG to achieve its strategic goals. The 10-year deal was well-received in the primary market, and attracted an order book of $3.3 billion. The paper has held its own in the secondary market, and trades around its issue price.

The government hopes that the deal will pave the way for its corporate sector as it embarks on a largely Chinese-funded infrastructure programme.

 

BEST PHILIPPINES DEAL

San Miguel Food and Beverage’s Ps34.1 billion ($637 million) follow-on

Financial advisor: Standard Chartered Bank

Joint global co-ordinators: JP Morgan, Morgan Stanley, UBS

Joint bookrunners: Deutsche Bank, Goldman Sachs

Local lead underwriters: BDO Capital, BPI Capital

Legal advisors: Picazo Buyco Tan Fider & Santo, SyCip Salazar Hernandex & Gatmaitan, Latham & Watkins, Milbank Tweed Hadley McCloy LLP

To issue into a weakening market takes courage and determination, which San Miguel has in spades.

This carefully executed follow-on in October was the final step in a wholesale restructuring of San Miguel’s food and beverage business designed to consolidate operations, release capital and revalue the conglomerate’s share price.

The deal was wisely scaled back as equity markets turned south and yet the bookrunners still managed to generate excess interest of 1.7 times the base deal, allowing it to be upsized by 15% to $637 million. This made it the largest non-rights offering in the Philippines since 2013.

The offer comprised entirely of secondary shares and demonstrated a willingness from domestic investors to participate in this type of transaction. At a final price of Ps85 per share, the company is valued at 22.8 times forward earnings – a discount to comparable domestic and regional consumer goods companies.

The restructuring of San Miguel will deliver significant cost savings to the business and a platform from which to grow international sales.

 

BEST SINGAPORE DEAL

Merger between ESR-Reit and Viva Industrial Trust, S$3 billion ($2.2 billion) asset base

Financial advisors:

ESR-REIT: Citi, RHB Securities, UOB

Viva Industrial Trust: Bank of America Merrill Lynch

Joint Lead Arrangers: HSBC, Maybank, RHB Bank, UOB

Legal advisors: WongPartnership, Rajah & Tann

Singapore’s listed-property players have been talking about consolidation for years, so when ESR-Reit and Viva Industrial Trust finally got the ball rolling in October our judges took note.

The scheme of arrangement created the fourth-largest industrial real estate investment trust (Reit) on the Singapore exchange with about S$3 billion in assets across 56 properties and a market capitalisation of approximately S$1.7 billion.

Security-holders in Viva were offered 10% in cash and 90% in new ESR-Reit units under the scheme, while ESR-Reit paid S$62 million to acquire the Viva manager and complete the transaction.

The new-look trust continues to be managed by ESG Manager which, as part of the ESR Group, has access to a pipeline of assets across China, South Korea, Japan, India and Australia. As a merged entity ESR-Reit has better access to pools of capital and more competitive costs of capital.

The deal is likely to spark interest from other second-tier Singapore Reits looking to increase scale and boost liquidity.

 

BEST SRI LANKA DEAL

The Democratic Socialist Republic of Sri Lanka’s $2.5 billion 5.75% and 6.75% April 2023 and 2028 bond deal

Joint global co-ordinators: Citi, Deutsche Bank, HSBC, JP Morgan, Standard Chartered

Legal advisors: 

Issuer: Allen & Overy

Managers: Mayer Brown, FJ & G De Saram

FinanceAsia got excited in 2017. We finally had something other than a sovereign bond deal to which we could award best deal of the year.

But 2018 has not been so kind to Sri Lanka. While the coalition government has been applauded for getting its finances back on track under the auspices of the IMF, the country has been afflicted by a double whammy of internal and external problems.

Globally it just about managed to navigate the volatility that beset emerging markets over the summer. But as the sovereign’s bond spreads were recovering, the country then shot itself in the foot with a constitutional crisis that was sparked by its president’s decision to sack the prime minister in favour of a strongman and former president who lacked a majority in parliament.

The turmoil had a detrimental impact on the country’s bond spreads, which widened by 200 basis points over the next two months. It has also caused a drop-off in tourists and in the inward investment that Sri Lanka so desperately needs.

 

BEST TAIWAN DEAL 

The $3.35 billion merger of Advanced Semiconductor Engineering (ASE) and Silicon Precision Industries (SPIL)

Financial advisors:

SPIL: JPMorgan

ASE: Citi, Credit Suisse, KGI Securities

Legal advisors:

SPIL: Jones Day, Simpson Thacher & Bartlett

ASE: Baker McKenzie, Davis Polk & Wardwell

There is no doubting that the merger between Advanced Semiconductor Engineering (ASE) and Silicon Precision Industries (SPIL), Taiwan’s top-two semiconductor assembling firms, is this year’s best Taiwan deal, but perhaps it is also the best of the past few years.

The bringing together of two big names aside, the merger was arguably Taiwan’s most complicated corporate merger ever. From the signing of the definitive agreement to completion, the transaction took nearly 20 months – the longest-ever for a merger deal involving a Taiwanese entity.

The deal ran into challenges as soon as ASE announced the hostile bid to take over its closest rival. It drew criticism from SPIL, as well as from industry insiders and government officials. At the time, no one could have foreseen that the deal would be completed successfully.

For the deal advisors, one of the major difficulties was to come up with an exchange ratio that was deemed fair to both ASE and SPIL shareholders.

There were also significant hurdles in terms of getting antitrust approval from multiple jurisdictions due to the sheer scale of the two companies – ASE was already the world’s largest chip assembly and testing services provider while SPIL was the fourth largest.

In addition, there were political headwinds since both ASE and SPIL have significant exposure in China, where it took a particularly long time to gain antitrust approval.

It is worth noting that the merger spanned two Taiwanese governments from opposing ends of the political spectrum too. First announced in 2015 under former president Ma Ying-jeou, chairman of the pro-China Kuomintang, a large part of the merger process was subsequently overseen by the incumbent, anti-China government under president Tsai Ing-wen.

The significance of the completed merger to the Taiwanese economy should not be underestimated. Cash-rich Chinese chip makers have been snapping up Taiwanese firms in recent years, which has sparked concerns that the island may gradually lose its technological know-how. As a combined entity, though, the company is now less likely to be an acquisition target for Chinese firms.

 

BEST THAILAND DEAL

Thai Future Fund's Bt44.7 billion ($1.372 billion) IPO

Domestic joint bookrunners: Finansa Securities, Krung Thai Bank, Phatra Securities

International joint bookrunners: Bank of America Merrill Lynch, JP Morgan

Legal advisors:

Issuer: Baker McKenzie

Managers: Linklaters

Asset owner: Weerawong C&P, Latham & Watkins
 
Selecting our top Thai deal was one of the most difficult decisions faced by FinanceAsia this year because of the high number of good deals that came out of the country in 2018. These included Thai Oil’s record-breaking bond bonanza, Gulf Energy’s incredibly well-received IPO and Eastspring’s template-setting acquisition of TMB Asset Management.

But we decided that Thai Future Fund (TFFIF) deserved the accolade for the way it has established a new template and a mechanism for the Thai government to fund the country’s infrastructure development without adding to the country’s public debt.

This was an immensely complex undertaking. It took the syndicate three years to navigate various government departments and the law courts after the deal was challenged by local labour unions.

What was created was a vehicle that aligns sponsor and investor interests through a revenue transfer agreement based around revenue sharing, and incentivising the asset owner (Expressway Authority of Thailand) to continue to improve the performance of the underlying assets.

It was a deal the government was keen to target at the general public and one of the most stand-out aspects of the IPO was the strength of retail participation: 50.3%.

Since listing at the end of October, the shares have held up above their issue price, setting the government up well to inject in new assets during 2019.

 

BEST VIETNAM DEAL

Vinhomes VND30.8 trillion ($1.349 billion) Initial Equity Offering

Joint global co-ordinators: Citi, Credit Suisse, Deutsche Bank, Morgan Stanley

Joint bookrunners: HSBC, Maybank Kim Eng Securities, Saigon Securities

Legal advisors: Latham & Watkins, Allen & Overy, VILAF

There was never any doubt about Vinhomes winning this award even though the Vietnamese equity market entered a well-flagged correction shortly after it had completed.

The group’s initial equity offering, as flotations are known in Vietnam, is the nation’s largest ever. The share sale was record-breaking for the wider region too as Southeast Asia’s largest equity deal of the year.

The deal for the property developer enabled Vietnam to leapfrog the Philippines and Malaysia for overall issuance volumes in 2018, according to Dealogic figures. That is no small achievement for a country that has been coming from a long way behind for some time.

Vinhomes is one of the flagship entities of the all-conquering Vingroup and its listing is typical of the way the latter operates. It was restructured and brought to market in record time by Vietnamese standards, raising much-needed cash for the group as it continues with its highly ambitious expansion plans.

 

¬ Haymarket Media Limited. All rights reserved.

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