San Miguel Corp's $300m five year fundraising was wrapped up by arrangers ABN, BNP, Citigroup, HSBC, ING, JP Morgan, Standard Chartered and Sumitomo Mitsui earlier this week. The conglomerate is considered to be one of the best credits in the Philippines and carries the same rating as the sovereign - BB from S&P.
In addition this was the borrowers first foray into the US dollar market since a $200 million fundraising back in 2001.
Market observers suggested that these two ingredients would add up to a successful syndication. This was despite the deal offering an all-in of just 168bp for an average life of three and a half years - well inside the 300bp paid for the same tenor last time out. In 2001 sole books JP Morgan signed up 16 banks in the underwriting phase with two further houses joining as lead managers. That credit was oversubscribed to $450 million as investors were eager to buy into the borrowers credit story.
This success was repeatede this year with a total of 15 banks joining in general with tickets of $478 million, oversubscribing the deal by some 60%. The borrower opted not to increase the size and the participants were scaled back.
Taiwanese banks made up the bulk of the syndicate with seven of the lead managers committing a combined total of $60 million being based on the island. This was in stark contrast to the last deal for the borrower when there were none. Bankers claim that this influx of investment was based upon the desire of these banks to book Philippine assets.
These banks are awash with liquidity and as this credit only comes to the market once every three years, it was an opportunity that could not be passed up.
Another attraction to this deal is that most US dollar Taiwanese loans pay a mere 50bp to 60bp all-in. The yield pick up alone on this transaction was enough to encourage Taiwanese bankers to sign up. The remainder of the syndicate was spread between Asian and European banks with a handful of first time lenders, including arranger ABN who held the top ticket size of $30m.
This broadening of the investor base - especially amongst banks in Asia - will make further fundraising activities even easier. This result was especially encouraging considering the political tensions surrounding the country.
These issues created major headaches for the sovereign when it tapped the debt market recently with analysts suggesting that it had to pay up to secure the funding.
Some commentators suggested that the length of the syndication process, at almost four months, did raise concerns amongst some bankers. This was attributed to the lack of urgency for the funds and the borrowers meticulous approach to the deal. The arrangers are reviewing the documents and the facility will be signed shortly.