Day 2: Awards for Achievement 2007

Today we announce our Deals of the Year.
Tata SteelÆs $12.2 billion acquisition of Corus

Buy side advisers to Tata Steel: ABN AMRO, Deutsche Bank, Rothschild
Original mandated lead arrangers for loan facility: ABN AMRO, Citi, Standard Chartered
Sell side advisers to Corus: Credit Suisse, HSBC, JPMorgan Cazenove
Legal advisers: De Brauw Blackstone Westbroek, Herbert Smith, Shearman & Sterling, Slaughter and May, Stibbe

It is rare for an M&A deal to be described as ôseminal for the countryö û or for advisers not involved in the transaction to point to it as shaping the landscape. Or for a deal to be considered responsible for letting loose a torrent of activity not only from the country in which the deal happened but across a region.

But Tata SteelÆs winning $12.2 billion bid for Corus merits all the praise listed above. If we had to capture one of the defining trends of 2007, it is the outbound M&A activity from Asia. Across investment banks, folks are talking about Asia-outbound opportunities with their clients and this is attributable in some degree to the Corus acquisition.

To put the size into context, consider that Tata Steel had a capacity of around 5 million tonnes pre-Corus. Corus added another 18 million tonnes. Tata SteelÆs consolidated revenue for fiscal 2007 was Rs274 billion ($7 billion) on which it earned a net profit of Rs42 billion. The outlay for Corus was a multiple of both.

A critical aspect of the deal is its financing. Being IndiaÆs largest leveraged buyout, the deal demonstrates the newfound ability of Indian companies to raise debt from a mixture of international and local lenders.

The original bid was supported by bridge loan financing, intended to be taken out by bank loans and high-yield debt. Citi led a syndicate that refinanced the bridge through a combination of a term loan A and B structure, which was launched in July during adverse market conditions, yet still fully subscribed. The ú3.7 billion ($7.4 billion) financing is the largest ever non-recourse facility put in place for an Asian sponsor.

Tata SteelÆs acquisition is already the subject of business-school case studies and is used as an example to illustrate the shifting balance of power from West to East. But for India and the rest of Asia it also represents a paradigm shift of how companies view the geographical boundaries in which they operate. And that lasting effect warrants our highest accolade.

Delisting of Maxis

Advisers: ABN AMRO, CIMB, JPMorgan, RHB Investment Bank
Legal advisers: Paul Hastings

Delisting a company that accounts for 4% of Bursa MalaysiaÆs total market capitalisation and which is the flagship company of one of MalaysiaÆs leading businessmen is impressive. Announcing the transaction before capital markets and equity investors get wind of the plan and then successfully buying out the 41% minority holding, puts this deal at a leading position to win this category. Then consider that the deal is the largest corporate transaction in Malaysia and the financing, via a $7.1 billion bridge loan facility, the countryÆs largest ever financing package. Further, the financing meets dual objectives of allowing the participating banks to provide commitments in US dollars while the borrower can draw down and fund onshore in Malaysian ringgit.

Any residual questions investors might have had about the rationale for the delisting were effectively answered when Maxis inducted Saudi Telecom as a strategic investor and announced an ambitious capital expenditure programme to kick-start its operations in markets like India.

But equally as compelling as the textbook deal execution of the voluntary general offer is that the Maxis delisting has made a number of Malaysian businessmen rethink the need to have their group companies listed. They are now contemplating similar deals, their confidence bolstered by the knowledge that a delisting can be effectively executed as the trailblazing path set by Maxis has established.

$600 million financing package arranged for KKRÆs acquisition of MMI Holdings

Arrangers: Credit Suisse, Deutsche Bank, JPMorgan
Legal advisers: Allen & Gledhill, Simpson Thacher & Bartlett, WongPartnership, White & Case

Some might say the KKR financing for MMI was less noteworthy than packages closed in the third and fourth quarter when financial sponsors were feeling the effects of the credit crunch. However, on balance, structuring and closing a financing package that met the financial sponsorÆs objectives with respect to the target asset deserves credit, even if the deal was done in a somewhat easier credit environment than later in the year.

MMI Holdings is a contract manufacturer of precision-engineering components and specifically a market leader in supplying hard disk drives, with operations spanning Singapore, Thailand, Malaysia and China. Its fortunes are closely linked to the information technology industry. Indeed, from a lenderÆs perspective MMI could be perceived as having a single-customer concentration and operating in a highly cyclical industry, and yet KKR still wanted to raise financing at an aggressive leverage level for Asian deals.

The leads used a $600 million term loan A and B structure, which they pre-funded. The debt was then syndicated among 19 banks. The fact that 39% of lenders were Asian is a strong reflection of how quickly the regional banking market is maturing. And market observers have commented favourably on the terms and conditions on which the leads syndicated the debt, including a $490 million senior secured term loan and a $110 million working capital revolver facility.

MBKÆs $1.4 billion takeover of China Network Systems

Buy side adviser: Merrill Lynch
Sell side adviser: Morgan Stanley
Legal advisers: Debevoise Plimpton, Paul, Weiss, Rifkind, Wharton & Garrison

China Network Systems (CNS) is the largest cable television multiple system operator in Taiwan, measured in subscriber terms. The auction Morgan Stanley conducted for CNS followed on the heels of cable TV deals by both Macquarie and Carlyle in Taiwan. But the adviser still achieved the highest price on a per-subscriber basis for CNS. The pricing represents not only the attractiveness of the asset but also the aggression of winning bidder, MBK Partners, to emerge victorious.

Others in the fray for CNS at various stages included TPG, Goldman Sachs, Macquarie, KKR and CVC Asia Pacific. MBKÆs winning bid was, sources say, only marginally higher then the second bidderÆs, giving it just the edge it needed in an extremely competitive process while not putting too much on the table.

MBKÆs adviser, Merrill Lynch, also had to structure the deal to comply with TaiwanÆs regulations with respect to foreign ownership of cable assets and antitrust regulations.

MBK Partners characterises a growing trend of Asian home-grown private equity firms that are willing to take on the more established players head-on. And both sellers and advisers recognise that they will play a larger role going forward. Local private equity firms are already strong competitors in both Korea and India and are expected to play a defining role in China û an emerging trend that was also captured by this deal.

Please go to the next page for more deal awards...BEST EQUITY DEAL, BEST IPO
Alibaba.comÆs $1.5 billion IPO

Lead managers: Deutsche Bank, Goldman Sachs, Morgan Stanley
Legal advisers: Fangda Partners, Freshfields Bruckhaus Deringer, Haiwen & Partners, Simpson Thacher & Bartlett, Slaughter and May, Sullivan & Cromwell

What a deal! This IPO from one of ChinaÆs best-known internet business-to-business companies has done a lot to reposition Hong Kong as the new tech centre in Asia.

The final price of HK$13.50 saw the company raise HK$11.6 billion ($1.5 billion), making it the largest technology sector IPO in Hong Kong ever and the second largest globally after GoogleÆs $1.7 billion offering in 2004. Some specialists speculate that the deal heralds a new era, namely that the fertile crop of internet and tech companies gushing out of China can now find a home in Hong Kong rather than be compelled to undergo the expensive and alien process of listing in New York.

Everyone was a winner in this deal: the charismatic founder, Jack Ma; the Hong Kong stock exchange; and international investors û while ChinaÆs private sector proved yet again that it can produce world-class companies. Indeed, Alibaba has reaped the reward of developing a genuine global franchise and the leading online marketplace for connecting Chinese manufacturers and international importers. The success of this deal puts Chinese tech and the countryÆs internet sector firmly on the map û again. Recall that during the tech bubble, Chinese internet companies were the hot new thing, at least until the bubble deflated. Contrary to those early, somewhat fragile, shoots, Alibaba shows the sturdiness to be an evergreen winner.

ICICIÆs $4.6 billion simultaneous follow-on of ADRs and domestic shares

Lead managers: DSP Merrill Lynch, Goldman Sachs, JPMorgan, on the ADR tranche; DSP Merrill Lynch, Enam, Goldman Sachs, JM Financial on the domestic tranche
Legal advisers: Amarchand & Mangaldas & Suresh A Shroff & Co; Davis Polk & Wardwell, Latham & Watkins

ICICIÆs follow-on offering was the largest deal in this category this year and the largest equity offering out of India ever, which in itself makes it a bit of an achievement û especially since it came during the busy six-week period in June/July when the market also had to absorb six other Indian issues raising $6.4 billion between them. The ICICI offering accounted for 23.5% of market cap and about 40 trading days.

However, we are not only awarding size here, but acknowledging a deal that was well-structured and successfully marketed to achieve the best possible outcome for the issuer.

JPMorgan laid the groundwork in the weeks leading up to the transaction by arranging a private placement of shares in ICICIÆs insurance subsidiary. The placement was done at a price that almost doubled the perceived value of the subsidiary, which effectively lowered the valuation of the banking business and allowed ICICI to pursue a more aggressive valuation with the follow-on.

The interest stirred up during the six-day roadshow pushed the ADR price 6.5% higher, while the domestic price moved up 5%. Even so, the deal was heavily oversubscribed, allowing the ADRs to be priced at a 0.8% discount to the latest close and the domestic shares at a 1.4% discount.

As proof of the good distribution, the share price traded up in the month following the deal and after a dip during the subprime crisis in August staged a significant rally that saw it hit an early November high at 40% above the placement price.

Tata MotorsÆ $490 million equity-linked Cars

Lead managers: Citi and JPMorgan
Legal advisers: Sullivan & Cromwell

The convertible alternative reference securities, or Cars, structure was designed to give the issuer the flexibility to avoid diluting the voting rights of the Tata Group when the bonds are converted into equity. The threat of dilution is a common problem in India where companies are often tightly controlled by families and attempts have been made before to come up with a solution using non-voting shares.

What makes the Cars solution stand out is that, aside from allowing for conversion into shares with reduced or no voting rights, it also addresses the lack of liquidity that would typically result from the conversion into a separate class of non-voting shares. This in turn allowed the bonds to be priced more closely in line with a plain vanilla deal, avoiding significant additional cost for the issuer.

Despite the complex structure, the deal was 3.8 times covered and the bonds traded up in the aftermarket, giving Tata Steel the confidence to use this same structure six weeks later as part of the financing of its acquisition of Corus.

HopsonÆs Rmb1.83 billion ($235 million) convertible

Lead manager: Credit Suisse
Legal advisers: Freshfields, Haiwen & Partners, Linklaters

This year has seen several large transactions, including SinopecÆs record-breaking $1.5 billion convertible bond. On top of that, Khazanah issued another successful sukuk exchangeable, CapitaLand moved the maturity borders with a 15-year/10-year put issue and SM Investments completed the first CB out of the Philippines in more than 10 years. All of these were noteworthy and well-executed, but none of them matched Hopson in terms of the buzz it created and the copycats it inspired.

Breaking new ground as the first CB denominated in renminbi and settled in US dollars, the bond is structured to deal with an accounting change that requires the embedded equity option of a CB to be treated as equity, which in turn means it must be marked to market. Unless, that is, the CB is issued in the companyÆs functional currency. Since HopsonÆs functional currency is renminbi, which isnÆt fully convertible, the bonds are designed to settle in US dollars so that they can be sold to international investors. A simple but elegant solution to a problem that is affecting a large number of Chinese companies that want to raise money offshore.

The structure also addresses the fact that the renminbi swaps curve is currently significantly lower than the US dollar curve, meaning the issuer is able to achieve a lower yield than if the bonds were denominated in dollars. This trade is exceptionally well suited for Chinese companies, given that most people believe the renminbi is going nowhere but up in the near future û thus reducing the potential currency risk.

Since the Hopson trade in January the structure has already been replicated by 10 other issuers, which better than any awards proves the brains behind it got it right.

AjisenÆs $210 million IPO

Lead manager: Cazenove Asia
Legal advisers: Herbert Smith, Kirkpatrick & Lockhart, Preston Gates Ellis

The IPO of a fast-food noodle operator may not sound especially exciting û at least, until you look at its amazing growth rate in greater China, its skilled management and its healthy profit margins. Ajisen pulled off a smart little IPO, with the aid of mid-cap specialist Cazenove Asia. As such, itÆs a great reminder of another important capital markets theme this year û Chinese retail.

Investors bought into the stockÆs potential, with the retail portion 190 times oversubscribed and the institutional tranche achieving a coverage ratio in the double digits, according to bankers at the time. And for any investor out there concerned about an equity slowdown, a good quality, inexpensive restaurant chain is likely to be a good spot to park your funds. Indeed, the share price direction has been pretty much straight up: after debuting at HK$5.47, itÆs now at HK$12.

Please go to the next page for more deal awards... BEST SOVEREIGN BOND
Sri LankaÆs $500 million bond transaction

Lead managers: Barclays Capital, HSBC, JPMorgan
UnderwritersÆ advisers: A&O, advisers for Sri Lanka: Milbank

After a succession of fits and starts, Sri Lanka finally pulled off its debut in the international bond market with this benchmark $500 million deal during a period of calm in October.

Sri Lanka mandated a group of banks to handle its inaugural offering in 2005, only to pull out when it decided to seek cheaper funds through loans. As a result, market observers were doubtful the country would go ahead with its planned offering, but were impressed when Sri Lanka did finally come to market.

The deal fought off considerable domestic resistance, with the leading opposition party, the United National Party (UNP), holding a number of press conferences and public demonstrations objecting to the offering. It also wrote letters of protest to the three leads, threatening to not honour payments on the bond, should the party come into power.

Moreover, the country has to contend with the ongoing civil war between government forces and the Tamil Tigers, which led Fitch Ratings to place the sovereign on a negative outlook in 2006. Despite all of this, investors gave a vote of confidence for the deal, giving little credence to the threat of default, and arguing that the political risk in Sri Lanka was less volatile than in Pakistan. The countryÆs excellent debt servicing record also played a big role, and Sri Lanka succeeded in attracting 136 investors to the deal.

ICICI's $2 billion offering

Lead managers: Deutsche Bank, Goldman Sachs, Merrill Lynch
Issuers legal advisers: Davis Polk
UnderwritersÆ legal advisers: Latham & Watkins

ICICI faced more than just challenging market conditions when it brought this deal to market in September. The Indian bank also had to contend with very dissatisfied investors. Prior to pricing, elements on the buy-side were sounding off that ICICIÆs lack of transparency in its borrowing strategy had prevented them from accurately pricing in forthcoming supply to the borrowerÆs bonds. In attempting to fund its huge loan growth, ICICI was this yearÆs primary culprit for creating a supply overhang and subsequent underperformance of Indian bank paper, and investors were justifiably hostile.

In order to pull off the deal, bookrunners advised ICICI to address investor and trader concerns by providing clarity regarding their borrowing strategy. In order to deliver on that promise, the bank needed to raise a substantial amount in order to limit the frequency with which it was accessing the market - and pay up.

As a result, after weeks of inactivity, AsiaÆs bond market sprung to life with this $2 billion five-year single tranche offering, which priced at170bp over mid-swaps. This compares to ICICIÆs January offering, which priced at 75bp over mid-swaps, and a second deal in June that achieved a startling 50bp over mid-swaps.

As a syndicate banker stated at the time of the offering, out of the banks that could have priced, this credit was the most difficult to bring to market. It also impressed us by opening the market after a period of considerable instability, by its size, and by succeeding in convincing highly sceptical û and anxious - investors to participate in the offering.

DBS Bank LimitedÆs $2 billion dual-tranche offering

Lead managers: DBS Bank, Deutsche Bank, JPMorgan
IssuerÆs legal advisers: Allen and Gledhill
UnderwritersÆ legal counsel: Linklaters

In May, DBS Bank succeeded in raising the largest bank capital deal in Asia ex-Japan with a $1.5 billion lower tier-2 floating-rate and a $500 million lower tier-2 fixed-rate note. The deal was the first to price in this format after the Monetary Authority of Singapore expanded its issuance guidelines to include lower tier-2 bonds. Previous tier-2 issuance from Singapore banks had all been upper tier-2 notes with 15 non-call-10 structures.

The deal (rated Aa2/A+) is notable for succeeding in pricing without the premium that investors typically require from Asian issuers. The $1.5 billion tranche priced at a spread of 70.3bp over US Treasuries, or 22bp over mid-swaps. Comparable European and American banks, which priced around the same time, include JPMorganÆs 10-year non-call-five Ç1 billion issue (rated Aa1/AA-), which priced at 26bp over mid-swaps, and BarclaysÆ 10-year non-call-five Ç1.5 billion transaction (Aa2/AA-), which priced at 23bp over mid-swaps.

The bookrunners structured the deal to cater for banks and SIVs, who were big buyers of lower tier-2 bonds and who had a preference for FRNs given their structure. The fixed-rate was ideal for investors such as US asset managers, who generally work with fixed-rate issues.

The books, which opened on the morning of May 10 Asia-time, closed 40 hours later, helping to minimise DBSÆs market exposure ahead of potential volatility resulting from the FOMC meeting due the following week. The transaction was executed without a roadshow.

We felt that the size of this deal, its timing and speed of execution, as well as the price it achieved marked this transaction out for winning this award.

Indika Inti EnergiÆs five-year $250 million bond

Lead managers: JPMorgan, ING
Legal advisers: Latham & Watkins, Melli Darsa & Co, Mochtar Karuwin Komar, Sidley Austin

Indika achieved the lowest ever coupon and spread by an Asian single-B credit at 8.5%. But this wasnÆt a simple case of selling a credit from a booming sector. Indika only owns 46% of its main asset, the Kideco coal mine in Indonesia, leading many investors to consider the transaction as more of a margin loan. Furthermore, $100 million of the proceeds were earmarked for unidentified acquisitions, making it more difficult for buyers to understand the credit.

The bookrunners convinced investors by explaining the shareholdersÆ agreement that allows Indika to effectively control Kideco, and reassured them with a security package that required the proceeds for the blind acquisitions to be placed into pledged accounts. These will be released only for cash-generating assets or acquiring majority stakes in other coal-mining businesses. Moreover, the standard covenant for a high-yield deal was enhanced with a two-level debt test. One required Indika to meet a fixed-charge coverage ratio of 2:1, while the other stipulated that Kideco itself has to maintain a coverage ratio of 20 times, which provides an incentive for Indika to keep Kideco cash-rich and under-levered.

Furthermore, bookrunners enhanced the standard high-yield change-of-control covenant to address any concerns relating to Indika losing Kideco or its control over it.

The deal marks the first bond financing in Asia for a less than 50%-owned subsidiary. It showed considerable structuring effort and innovation in addressing buy-side concerns, attracting 170 investors to the deal. Moreover, the bonds have performed exceptionally well, having traded above par for two months after it was issued, and maintained a mid-90s level throughout the subprime turmoil.

VinashinÆs 10-year Vnd3 trillion senior unsecured notes

Lead manager: Deutsche Bank
Legal advisers: Johnson Stokes and Master

Vietnam Shipbuilding Industry GroupÆs Vnd3 trillion ($187 million) transaction was noteworthy for succeeding in delivering 95% of its bonds to offshore investors who banked on VietnamÆs ongoing growth story and were keen to get their hands on rare Vietnamese assets.

Although not the first issuer to sell dong-denominated bonds to offshore investors, the deal was important in terms of its size, the degree of offshore participation, and the number of investors who participated, marking a significant development in the liquidity of Vietnamese bonds.

The deal was VietnamÆs largest corporate bond issue to date, three times the size of Electricity of VietnamÆs Vnd1 trillion offering in November 2006, which previously held that accolade. That deal, which was the first corporate offering to sell mainly to offshore investors, succeeded in placing 75% of the bond offshore. Ten foreign investors were allocated bonds.

By contrast, a remarkable 60 accounts participated in the Vinashin transaction, all of which were first-time buyers of Vinashin. About 83% of the participants in the transaction also gained exposure for the first time to Vietnamese debt. Thirty percent of the bonds sold to offshore US buyers, another 33% to Europe and 29% to the rest of Asia.

SealaneÆs $3 billion trade finance securitisation

Lead managers: Lehman Brothers and Standard Chartered
Legal advisers: Linklaters

Asset-backed deals that happened before and after the summer are hardly comparable thanks to the fallout from the subprime turmoil. Securitisation was at the heart of that crisis and the cross-border market was closed for a long time as a result, so it is no small feat that the regionÆs biggest deal by far came to market in November.

Lehman and Standard Chartered's $3 billion Sealane deal was not remarkable for its size alone though. It is the first time globally any bank has securitised such a large portfolio of trade finance loans - and, despite introducing an unfamiliar asset class into markets that one banker described as "dysfunctional", the deal was upsized twice in response to good vibrations from investors.

A lot of that success came down to the quality (and rarity) of the underlying assets û a dynamic portfolio of StanChart's trade finance loans û and the strong execution that the two leads brought to the deal. Coming on the heels of its successful series of balance sheet deals through the Start programme, the Sealane deal further cements StanChart's reputation as one of the most committed and innovative asset-backed originators in Asia.

Melco PBL GamingÆs $1.75 billion senior secured credit

Lead arrangers: ANZ, Bank of America Securities Asia, Barclays Capital, Citi, Deutsche Bank, UBS; with Deutsche Bank acting as agent; and DB Trustees (Hong Kong) acting as security agent
Legal Counsel: Clifford Chance

Yet another casino project and, fortunately, yet another milestone project financing that will permit it to be built - despite the tough market conditions prevailing soon after the deal kicked off in June. Melco GamingÆs project, known as the City of Dreams, is being built on the proceeds, which are also being used for working capital requirements for the Crown Macau and Mocha Slots.

The leads successfully re-worked the arrangement after one of the original term loans (for $1.5 billion) out of the US was withdrawn soon after the onset of the credit crunch. Certain lower-yielding and less attractive assets were also taken out, reducing the need for funding. Many of the banks on the syndicate were not traditionally gaming financiers, and included key regional and international players. The transaction is the largest pure Asian syndicated finance deal ever completed, setting a benchmark for investor appetite for properly structured deals, but nevertheless offers yield protection for investors during difficult market conditions.

M$7.9 billion ($2.4 billion) Islamic sukuk for Nucleus Avenue

Lead manager: CIMB

MalaysiaÆs MMC Corp, which has interests ranging from transportation to energy to construction, acquired Malakoff Corp, MalaysiaÆs largest independent power producer, through an innovative structure. It set up Nucleus Avenue as the funding vehicle for MMC CorpÆs acquisition and did an all-cash transaction that was the largest leveraged buyout ever undertaken in the countryÆs corporate history.

The debt portion of the acquisition was funded entirely by the issuance of Islamic bonds. This was in line with the governmentÆs call to promote Malaysia as a hub for Islamic debt securities û but it also used a hybrid sukuk that helps add greater depth to the Islamic debt capital markets.

At the heart of the structure is the M$1.7 billion junior sukuk, which was structured to achieve 100% equity treatment. This was achieved with a long tenor (50 years legal maturity with a call option in year 10, and at every interest payment date thereafter) and a replacement-capital provision. The full equity treatment of the junior sukuk enabled MMC to maintain a majority stake in Nucleus without leveraging its own balance sheet and provided support to the credit rating of the senior sukuk. The junior sukuk was also structured as a liability instrument and profit payments under it are tax deductible, making it a cheaper form of capital for Nucleus.

Adding further testimony to the deal, it attracted local and foreign investors alike. The senior sukuk and junior sukuk drew 5% and 21% participation from international investors respectively.
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