BLT upsizes low-coupon note to $400 million

An inventive strategy leads to a credit upgrade on the day of issuance, with the Indonesian shipping company attracting $4 billion in demand for its fixed-rate note.
Berlian Laju Tanker (BLT) issued a $400 million senior Reg-S, 144a fixed-rate note on Friday evening, pricing at par at 7.5%. The issue was upsized from an initial $200 million, after reaching $4 billion in demand. This was an oversubscription of 23 times based on its original size, and 10 times based on the upsized deal, with the books closing before pricing was announced.

The deal was managed by Deutsche Bank and JPMorgan and closed with the lowest coupon ever for a 100% Indonesian-owned company.

BLT specialises in industrial liquid bulk cargo transportation. The seven-year non-call-five bonds attracted 225 investors. This compares favourably with previous Indonesian deals (Arpeni had 98, Adaro 111). However, sources say that a significant number of accounts were not allocated bonds.

In terms of geographical split, 38% went to Asia and 27% to Europe, while 64% were allocated to funds, 18% to banks, 11% to insurance companies and pension funds, and 7% to retail. No funds sold to the US, since the roadshow was accelerated due to high demand, and the US leg was cancelled. The company is nonetheless due to meet with American investors soon.

In terms of comparables, ArpeniÆs 2013s (8.75%) were trading at 7.9%. It is thought a new Arpeni issue would price in the region of 8% or above. Some commentators expected BLT to price slightly behind this, since its covenant package was more flexible. Others believed BLTÆs solid management would ensure this flexibility was not abused and noted that 80% of BLTÆs revenues come from offshore. Its gross debt-to-Ebitda ratio currently stands at 4.5 times, while the net ratio is said to be below four.

BLT will use $214 million of the proceeds to finance vessel acquisitions and general corporate purposes, while channelling $180 million to repay senior secured debt repayments.

Standard and PoorÆs issued an upgrade for the transaction to BB- from B- on the day of pricing. The company had initially planned to raise $395 million through various instruments ($200 million through this transaction, $125 million via a CB and $70 million through an IDR bond). However, this left $250 million of senior secured debt on the companyÆs balance sheet.

It was therefore decided, following the high levels of demand, that $400 million should be raised through this high-yield deal alone, while the proceeds raised though the CB and IDR would repay senior secured debt. This strategy did not impact the leverage ratio of the company.
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