Indonesian mobile phone operator Bakrie Telecom sold $250 million worth of five-year bonds on Friday. The 144A high-yield notes, which are callable after three years, pay a semi-annual coupon of 11.5% and were re-offered at par, resulting in a yield of 11.5% as well. The maturity date has been set to May 7, 2015.
Bakrie initially announced a deal roadshow on April 21 and on the following Monday (April 26) it indicated that it would sell $250 million worth of five-year bonds. Unfortunately, the Asian stock markets opened the week in the red and Asian credit default swaps (CDS) widened. The iTraxx investment grade index was wider by 3bp and Indonesian five-year bonds had widened by 2bp to 3bp. On the back of all this movement, the price guidance for Bakrie's new bonds was later in the week set at 11.5% to 11.75%.
The new bonds opened yesterday's trading session at around the 100.25 to 100.50 mark, but by noon the price had fallen to 98.75. However, the weak secondary market performance could be attributed to a combination of the influx of high-yield issuance that has dominated the debt markets over the past fortnight and a quiet market backdrop with major markets in the UK, Japan, China, Thailand and the Philippines all closed for the day.
The sale had been rumoured to be a private placement, but with an order book of $600 million from 85 accounts, this was very much a public deal.
The bulk of the transaction was sold to Asian investors, who took 49%. Offshore US investors took 38% and European accounts were allocated 13%. Fund managers bought 89% of the transaction, private banks took 6%, banks 4%, and other types of investors walked off with the remaining 1%
This is Bakrie's debut issue into the international bond markets and it is expected that it will use the proceeds to fully repay the outstanding principal of its existing $145 million syndicated facility and a $45 million bridging loan facility. The rest of the money will be used for capital expenditure related to its wireless broadband business and for general purposes.
Both Fitch and Standard and Poor's have given the issue a B rating. The deal was arranged by Bank of America Merrill Lynch, Credit Suisse and Morgan Stanley.
The pipeline of Asian issuers eyeing the dollar bond market is still heavily laden with other high-yield issuers looking to come to market. Among the hopefuls are Chinese property companies Fantasia Holdings and Renhe Commercial Holdings; Indonesian property company Lippo Karawaci; and Indian steel producer Essar Steel Holdings.
It is expected that Lippo Karawaci could price as early as today.