Day 4: Awards for Achievement 2007

Today we announce some of our House Awards for FIG, GIG, TMT and Real Estate. We also award the best houses for Leveraged Finance, Financial Sponsors and Islamic Finance.
Goldman Sachs

Think of FIG this year, and Goldman springs to mind. It was on key deals across regions. Most notable was its role as adviser for Industrial and Commercial Bank of ChinaÆs purchase of a 20% stake in South AfricaÆs Standard Banking Group for $5.4 billion. Goldman describes it as a deal that ôcaptured the attention of the world by taking the first big step in bridging the booming BRICs nationö. It sure did. When we asked other bankers what deal they wished they were on in this space û an overwhelming number said this was the one. It was not only trailblazing for China, but also opened the minds of bankers, and executives of widget companies, that the opportunities for mergers are endless.

But Goldman didnÆt stop there. It also advised ICBC on its $586 million acquisition of MacauÆs third largest lender, Seng Heng Bank û which was the largest ever M&A transaction in Macau.

On the equities side of the equation it was a bookrunner on the largest ever insurance company initial public offering globally, Ping An InsuranceÆs $5 billion A-share IPO. And it was behind the $547 million Shenzhen stock exchange A-share IPO of Bank of Ningbo, making it the first ever sole-book A-share IPO by an international investment bank for a Chinese financial institution. Finally, Goldman was on a number of India deals, including ICICI BankÆs $4.9 billion dual tranche follow on offering, which was the largest ever follow-on offering in Asia ex-Japan.

The challenge for GoldmanÆs FIG team next year, is to outdo this year.

Morgan Stanley

Morgan Stanley has had a great year in equities, and a healthy portion of that was underpinned by Kate RichdaleÆs leadership role with the GIG team in Hong Kong. Fresh to the SAR after her work in Singapore, Richdale and the Morgan Stanley team made sure they rode the crest of what this year, in particular, was a rather large wave.

Morgan StanleyÆs GIG performance did well on a composite basis across M&A, ECM and DCM, but equity was clearly the stand-out. Richdale steered her crew towards landmark deals such as Anta, Belle International and China Molybdenum as well as important M&A transactions. Many of the deals the team worked on revealed an impressively diverse geographical and industry footprint from China Resources Power and Citic Resources to deals involving Singapore Power, AGA, CitiSpring, Temasek, and Coca-Cola bottlers in the Philippines and Korea.

Transactions in India were also important and helped burnish the franchise in this massively important market, involving customers such as Sterlite Industries and Fortis Healthcare. Morgan Stanley also made the right call to focus resources on Chinese equities û clearly once again a massive theme over the past 12 months. On the DCM side, the team focused on Hong Kong this year, and revealed the same ability as in other sectors to satisfy issuers and investors, largely thanks to its skill in picking the right client. Overall, the team showed a keen appreciation of where markets were trending and the ability to make outstanding execution across all products its trademark.

Goldman Sachs

GoldmanÆs competitors suggest that the sell-down of PhilipsÆ stake in TSMC, which the investment bank executed in tranches over the course of 2007, is the only real claim it has to this award. And they scoff at that trade because it was driven by the bankÆs relationship with the seller in Europe and also because part of it was placed with domestic investors.

But we beg to differ.

Most global investment banks have the same advantage of global relationships to help them build their Asian franchise, thus we see this as a relatively level playing field. With respect to TSMC specifically, we find the quality of advice (including the use of a multi-year buy-back program), the transparency and execution exemplary and the fact that the shares were targeted at different groups of investors helped the share price hold up despite the large pool of supply in the pipeline.

Other trades Goldman closed during the course of the year were equally as compelling as TSMC. And in many cases, they were deals that defined the 2007 TMT landscape.

Goldman acted for Hutchison in the sale of its India telecom business to Vodafone. Even if ôthe asset sold itselfö, as one banker commented, the $18 billion valuation it commanded was significantly higher than what analysts initially estimated and must have earned Goldman a very satisfied client (not to mention blockbuster fees).

The buy-side role Goldman played for Saudi Telecom on its acquisition of a stake in newly delisted Maxis in Malaysia demonstrated that the US investment bank was early to realise the potential of Middle Eastern companies to provide capital to help build high-investment Asian businesses.

Goldman was also present on the IPO, a deal that defined the Hong Kong equities market this year.

Many market participants see GoldmanÆs role advising Temasek on the attempt to take private Singapore-listed STATS ChipPac as a blot on its copybook. We recognise that the outcome was sub-optimal for Temasek as it ultimately ended up with 83% - 10% shy of what it needed to delist. But weÆd note that a savvy operator like Temasek knew the pros and cons of the route adopted. Considering both advisers to the delisting, Goldman Sachs and Morgan Stanley, continue to win business from Temasek, the argument that there was a dissatisfied client seems shaky to us.

Morgan Stanley

As Singapore real estate investment trusts (Reits) suffered from a complete reversal of sentiment in the wake of the subprime crisis in August, the most consistent property theme this year was that of Chinese developers seeking capital in the international markets. India saw DLF pull off the largest property IPO in the region, but remained largely an up and coming market with other issues either small or struggling on LondonÆs AIM board.

Indeed, 2007 is likely to be remembered as the year when China real estate came of age through the completion of the first few $1 billion plus IPOs.

Morgan Stanley has been on top of that theme for some time already, and this year has been instrumental not only in seeking out and bringing more quality developers to the market, but also in helping to lift the valuation benchmark for the sector by successfully convincing investors to focus on P/E to growth multiples. This was first applied on Country GardenÆs $1.9 billion IPO in April, allowing it to price at a premium to its major comps and prompting a re-rating of the sector. It also helped Country Garden to set a new record as the largest real estate IPO globally.

Including Country Garden, the Morgan Stanley acted as a bookrunner for three of the four largest real estate IPOs out of China this year, missing out only on Soho ChinaÆs $1.9 billion listing in September, which was happening at the same time as it helped bring Sino-Ocean Land and smaller player China Aoyuan to market.

Outside of IPOs, the bank also helped arranged a convertible bond for New World Development, which at $768 million was the largest CB for a Hong Kong issuer ever; worked on the combined follow-on and CB offering for Singapore-listed Yanlord Land; a follow-on for Shimao Property and a QIP from Mumbai-based Phoenix Mills. It is also the only bank to have successfully lobbied for investment grade ratings on behalf of Chinese property developers and has shown its willingness to break new ground by introducing the first Singapore Reit both to be backed by Japan assets and to focus on residential properties (Saizen Reit).

The fact that Morgan Stanley was able to complete SaizenÆs listing and raise the capital needed to grow its business even as the weak market was forcing other Reits and business trusts to cancel their listing plans is testament to the bankÆs strong distribution capabilities. The firmÆs tendency to stick by its property clients and proceed with listings during difficult times in the past û notably for Guangzhou R&F Property and Shimao - has also ultimately proved to be the right decision and has ended up making a lot of money both for its clients and for investors. And that is part of the reason why Chinese developers continue to seek out Morgan Stanley when they want to approach the international capital markets for the first time.


This award was introduced in 2007 to reflect the growing importance of leveraged finance for both financial sponsors and strategic acquirers. We were surprised during the course of discussions how one bankÆs name was always mentioned in the context of the product: Citi. There were a number of complimentary references to the team Citi has set up. Almost everyone we spoke to agreed that private equity firms generally call the US bank to discuss their leveraged finance needs.

Indeed, the roster of financial sponsors the US bank has worked with during 2007 reflects this strength, as it secured a financing role on a number of deals. For example, Citi had a financing role on both OaktreeÆs acquisition of Fu Sheng as well as MBKÆs takeover of CNS, although different investment banks provided the M&A advice in both instances.

The business Citi has done during the year is a healthy blend of sponsors and strategics, lending further weight to its submission. Citi has had a role on the largest leveraged finance deals across markets. Tata Steel called Citi to restructure the financing for their acquisition of Corus and replace the originally agreed structure with a more cost-effective and higher flexibility package. To CitiÆs credit they put together a financing package that met its clientÆs objectives û to boot, it arranged this within a short timeframe. Citi also participated in the bridge loan facility for Ananda KrishnanÆs holding company Binariang to delist Maxis. This kind of relationship building will stand Citi in good stead as Asian businesses grow via M&A.

We occasionally heard criticism of how aggressively Citi is pitching this business, although in some instances this was from players who were not as willing to lend balance sheet to support their clientÆs growth aspirations. Our own view is that in a more difficult credit environment, Citi will continue to stand out as a firm willing to help its clients grow and this will continue to win it notable business.

CitiÆs single-minded focus on growing its financial sponsors business is also likely to see the US bank playing a larger role across the spectrum of advisory services, as indeed the bank's mandates on hand confirm. Watch this space.

Merrill Lynch

Last year everyone was chanting the financial sponsors mantra suggesting that in 2007 private equity investing in Asia would finally take off. For the first few months of the year they were right. Then things started unravelling. Here we are at year end with far fewer completed deals than anyone would have forecast.

But market participants remain optimistic that private equity will continue to play a defining role in the region, especially with local firms also becoming active.

This has been an exceptionally difficult category to judge because financial sponsors have this year spread mandates across firms. Most private equity firms are staffed with ex-investment bankers thus few of them have a strong affinity for any one firm over another; as long as the adviser brings one or all of strong ideas, non-auction investment situations and a relationship with the target, they can win the business.

But the one name that shows up on closed deals across sponsors and regions is Merrill Lynch. Merrill advised Affinity on its LBO of shipbuilding firm, Jaya. It advised Carlyle on its first private equity investment in India in HDFC and it advised Korea's MBK on the buyout of CNS. Merrill also has a healthy pipeline of announced deals including working with Permira on its first Asia investment in Macau and Blackstone on its first China investment.

Merrill is building relationships with investors across the region via its unique privately placed structured transactions. Its success in leveraging these relationships seems to prove the wisdom of adopting a ôcollaboration rather than competitionö model.

A mention of the year would be incomplete without writing about the $1.7 billion LBO of UTAC by Affinity and TPG on which ABN AMRO, JPMorgan and Merrill advised. This deal was announced mid-year and became a casualty of the subprime situation. This has given other firms ammunition to suggest the advice was lacking. But we would suggest few of the critics would have turned down an opportunity to work with the blue chip sponsors involved in the first half of the year when the deal was awarded to banks (even if they now say otherwise). And we also note that anyone could have been left holding that particular bag. Finally, we observe that investment banking is about building enduring relationships and the dividends are never short-term, as Merrill and the other advisers are, weÆre sure, well aware.


Once again the award for the best Islamic Finance House was a close call between two dynamos in the industry, CIMB, which has an overwhelming presence in its domestic market and HSBC, which as an international bank has a big machine backing it up.

CIMB edges out the competition this year in part because itÆs hard to consider this bank just a local bank anymore û it now has a strong track record of successful capital markets issues for corporate, government and quasi-government entities in 12 regional countries. Indeed, CIMB Islamic controls a commanding 21% of the global market share of sukuks, based on the value of sukuks that it had issued up until October of 2007. And in the same period it also retained its number one position in the domestic sukuk manager league table, according to Rating Agency Malaysia and the Malaysian Rating Corporation, which track these deals.

For the period under review, CIMB has once again participated in several deals which are landmarks in the development of Islamic finance, such as the $850 million exchangeable trust sukuk for KhazanahÆs Cherating Capital, which surpassed KhazanahÆs own $750 million Islamic exchangeable that CIMB had worked on (and which was groundbreaking) a year earlier. CIMB it also helped list this sukuk on the Dubai International Finance Exchange, or DIFX, making it the first from outside the region to list on the Middle East exchange, which is noteworthy for its importance in building alliances between Malaysia and the Middle East for Islamic financial work.
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