Bond pipeline

Borrowers line up deals ahead of Memorial Day weekend

Vedanta, Lonking and GCL-Poly could raise more than $2 billion before the weekend, while Kia Motors and Aluco join the queue to issue bonds in the G3 market.

Asian debt markets are poised for a busy few days as borrowers rush to issue more than $2 billion of G3-currency bonds ahead of a long weekend in the US.

“People are trying to get deals out,” said one banker. GCL-Poly Energy and Lonking Holdings have spent the past few days meeting investors, and Vedanta Resources is expected to price a deal tonight.

However, market conditions have been jittery, with a sell-off in equities during the past few days. Getting deals away could be a challenge.

GCL-Poly wraps up roadshows in the West Coast today. China’s biggest producer of solar polysilicon went out with a whisper for its five-year non-call-three at mid-8% yesterday. According to one investor, the deal was expected to raise $300 million to $500 million, but expectations have been scaled back slightly to $350 million. The deal is “this week’s business”, he said.

Royal Bank of Scotland is a sole global coordinator and bookrunner. BOCI, BNP Paribas and Standard Chartered are also joint bookrunners. The issue is a crossover credit, rated investment grade at BBB- by Fitch and sub-investment grade at BB by Standard & Poor’s.

Also in the market is China-based Lonking Holdings, which concluded roadshows in New York yesterday. The leads went out with a whisper of mid-to-high 8% for its proposed $300 million to $400 million five-year non-call-three senior note, which is expected to price tonight. The issue is rated Ba3 by Moody’s and BB by S&P.

Lonking Holdings makes wheel loaders for the construction industry. Credit Suisse is the sole global coordinator and bookrunner. Standard Chartered is also a joint bookrunner.

Indian billionaire Anil Agarwal’s Vedanta Resources is expected to price a dual-tranche five- and 10-year high-yield bond to raise up to $1.5 billion tonight. Early yesterday, the five-year tranche was whispered in the area of 7%, while the 10-year tranche was whispered at low- to mid-8%.

Vedanta is a London-listed Indian mining company with exposure to diverse commodities including aluminium, copper, zinc, iron ore and power. It is tapping the bond market at a time when commodity prices have softened.

“The company is fairly acquisitive, which means it will keep coming back to the debt market again and again,” said one investor. “There are also some corporate governance issues. However, its acquisitions have been cash generative, so I guess at the end of the day, it works out. I don’t think we’ll participate though.”

Barclays, Citi, Credit Suisse, Royal Bank of Scotland and Standard Chartered are joint global coordinators. Goldman Sachs and Morgan Stanley are joint bookrunners. UniCredit is a co-lead manager.

Vedanta has outstanding 2014s and 2018s, which were bid at 5.4% and 7.5% respectively yesterday afternoon. Those bonds are the closest comparables and the covenants on the new notes are substantially similar to these earlier issues.

The proceeds will be partly used to finance Vedanta Resources’ acquisition of Cairn India, which is still pending approval. If the acquisition does not proceed, they will be used for capital expenditure, to repay debt and for general corporate purposes.

The expected issue rating if the Cairn acquisition is completed is Ba3 by Moody’s and BB by S&P and Fitch. In the event that the Cairn acquisition is not completed, the expected issue rating is Ba2 by Moody’s and BB by S&P and Fitch.

A few more borrowers are lining up to meet with investors. Kia Motors, a Korean automobile manufacturer has mandated Bank of America Merrill Lynch, Citi, Korea Development Bank and Morgan Stanley to arrange fixed-income investor meetings.

The meetings kick off on May 30 in Singapore, continue in Hong Kong and New York on May 31, move on to Boston on June 1 and London and LA on June 2. The issuer is rated Baa3 by Moody’s and BBB by S&P and Fitch.

Elsewhere, Indonesian cable manufacturer Aluco has mandated BNP Paribas and DBS to arrange a series of investor meetings in Asia and Europe.

¬ Haymarket Media Limited. All rights reserved.
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