Alliance Global prints $500 million debut security

Despite weaker markets, the Philippine holding company prints at the tight end of guidance to yield 6.625%.

It’s been a while since the market saw a corporate bond issued from the Philippines, but Alliance Global Group put an end to the quiet by pricing a debut $500 million bond yesterday evening (August 12).

The last Philippine credit to come to market was International Container Terminal Services (ICTSI), a shipping company that has sold $450 million of debt this year through two deals: an initial $250 million 10-year bond, followed by a $200 million tap in April.

Alliance Global had initially announced the seven-year deal with the intention to print a $400 million bond, but strong investor appetite led the company to upsize the deal to $500 million. The strong demand helped UBS, the sole bookrunner, to build a book that was 7.4 times subscribed -- $3.7 billion from over 150 orders.

The benchmark notes used to assess fair value were Hong Kong’s First Pacific Company (FirstPac), which launched a $300 million seven-year bond in July this year, and the ICTSI 2020s. These comparable bonds were trading at 6.15% and 6.55% respectively when the deal was announced.

Of these two, FirstPac was the closer matched. Both FirstPac and AGI had issued bonds at the holding company level, whereas ICTSI was at the operating level. For this deal, the notes were issued through Alliance Global Group Cayman Islands with Alliance Global Group as the guarantor.

However, FirstPac printed with a security package while Alliance had gone out with Reg-S senior unsecured notes.

Initial guidance had been set between 6.625% and 6.75%. Despite the all-round benign market backdrop, the borrower still managed to print at the tight end of guidance to yield 6.625%.

The notes pay a fixed-rate coupon of 6.5% and were reoffered at 99.309 -- equivalent to a spread of 454.1bp over the seven-year US Treasury yield, which at the time of pricing was quoted at 2.084%.

While many recent deals have been brought by opportunistic borrowers exploiting the record low-yield environment, Alliance has been less reactive and more methodical in its timing.

Three weeks prior to announcement, the company went on a non-deal roadshow to familiarise investors with its credit story and management. As a debut issuer of unrated securities, Alliance Global and UBS viewed an extensive roadshow as vital to ensure a healthy uptake in the primary market, as well as a reasonable secondary market performance.

On Wednesday (April 11), the company followed the publication of its half-year results with the announcement of its intention to sell dollar bonds. The deal finally priced at the end of Asia’s trading session and distribution settled that same night.

The bulk of orders were placed during Asia time, so it is no surprise that the biggest uptake for the bonds came from Asia investors, who bought 89% of the deal. European investors bought 7% and offshore US investors bought 4%.

Across investor types fund managers and asset managers made up for 43% of distribution with banks taking 23% of the bonds. Private banks were also a large buyer of Alliance Global’s debt, taking 27%, while corporate and other types of accounts got 5% and insurers 2%.

Alliance Global Group is a holding company presently engaged in the food and beverage business (manufacturing and trading of consumer products), real estate (investment in and development of real estate, lease of properties, hotel operations and tourism-oriented businesses), and fast-food restaurants (McDonald’s).

According to Bloomberg data, it has $44 million in loans outstanding. The term loan denominated in Philippine pesos was arranged in 2008 and matures next year. One source familiar with the deal said that the purpose for issuing a seven-year security was to help the borrower secure longer-dated funding than on offer in the local loan market.

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