Dim sum bonds

Dim sums keep pace as Axiata and Shinhan print deals

Bond markets go gangbusters as Axiata issues a debut sukuk, while RoadKing, Korea Hydro, Siam Commercial Bank and Nonghyup Bank raise $2 billion collectively.
<div style="text-align: left;">
Asian borrowers rushed to get deals done before Ben Bernanke and the Federal Reserve Board decide on US quantitative easing
<div style="text-align: left;"> Asian borrowers rushed to get deals done before Ben Bernanke and the Federal Reserve Board decide on US quantitative easing </div>

Despite disappointing China trade data, Asia’s dollar bond markets are off to a flying start after the summer, with four borrowers raising $2.1 billion so far this week. This included Chinese high yield borrower RoadKing Infrastructure and Korea Hydro & Nuclear Power, which raised $350 million and $750 million respectively on Tuesday night; and Siam Commercial Bank and Nonghyup Bank which collectively raised $1 billion on Monday.

Meanwhile, bond markets were also active in other currencies — particularly the offshore renminbi and Singapore dollar market — with dim sum bonds from Shinhan Bank and Malaysian telco Axiata, and India Eximbank printing its S$250 million bond. “Issuers are coming from all directions. There are a lot of companies on the road or doing non-deal roadshows,” said one syndicate banker.

“There is a lot of event risk this week,” a second banker added. “We have the Dutch auction coming up and the FOMC meeting on Thursday, so issuers are trying to come ahead of that.”

Axiata and Shinhan Bank dim sum
Of the two dim sum bonds in the market, Axiata was the more interesting. The Malaysian telco's deal was the second sukuk to be issued in the dim sum market after Khazanah Nasional’s Rmb500 million dim sum bond, which priced last October. The limited amount of issuance suggests that the sukuk structure has not exactly found favour with dim sum investors.

Axiata’s sukuk has a wakala structure and the underlying asset is airtime vouchers (representing an entitlement to a specified number of airtime minutes) from Celcom Axiata, a wholly owned subsidiary of Axiata Group. Celcom holds Axiata’s Malaysian wireless operations. The structure was unusual, as typically the underlying asset is a property and, according to a source, this is the first time that Axiata is using airtime as an underlying asset. He added that while a similar structure has been used for sukuk in the Middle East, it is not very common.

In contrast to Khazanah, which was forced to pull its deal in September due to volatile markets, before tapping the market the following month, Axiata’s debut transaction went more smoothly. The Malaysian telco closed a Rmb1 billion ($157 million) two-year deal, pricing at 3.75%, at the tight end of the final 3.75% to 3.8% final guidance, and about 25bp inside initial guidance.

According to a source, the company was targeting a Rmb500 million deal, but books were covered within an hour of opening and given the strong demand of Rmb3.5 billion, the company raised the deal size up to Rmb1 billion.

At the initial guidance of 4%, one rival commented the deal looked cheap. Axiata’s bonds, which mature on September 18, 2014, came about 5bp back of the closest comparable was the Khazanah October 2014s which were yielding 3.7%. Axiata had to pay up compared to the 2.9% pricing that Khazanah achieved for its Rmb500 million three-year bond — but that is an indication of how much expectations of renminbi appreciation have waned.

Hong Kong investors were allocated 55%, Singapore investors 28%, Malaysian investors 13% and the rest went to European investors and other investors. Fund managers were allocated 62%, banks 22%, private banks 14% and companies 2%. There was no breakdown on what proportion of the deal went to Islamic investors — though most of the participation from Malaysia is expected to be Islamic. A total of 82 accounts took part.

Rivals suggested that the deal was probably swapped out as Axiata does not have renminbi requirements. Bank of America Merrill Lynch, CIMB and HSBC were joint bookrunners. The issue is expected to be rated Baa2/BBB-. The bonds are listed on Bursa Malaysia and Singapore Exchange.

Meanwhile, Shinhan Bank also priced its Rmb600 million dim sum bond after attracting Rmb800 million of orders. The bonds priced at a yield of 3.5%, hardly budging from the initial guidance of mid 3% area. Hong Kong investors were allocated 45%, Taiwanese 26%, Korean 18%, Singapore and other investors 11%. The deal attracted strong participation from insurers and agencies, which were allocated 43%. Fund managers took 37%, banks 14% and private banks 6%. The bank swapped the proceeds. HSBC was the sole bookrunner.

Siam Commercial Bank
Earlier in the week, Thailand’s oldest bank, Siam Commercial Bank, also stood out for its opportunistic timing of a tap. The bank hit the market by surprise on Monday, soaking up liquidity ahead of its rivals Bangkok Bank and Kasikornbank, which are both on the road and expected to issue dollar bonds.

“I think it is a smart move,” said one Singapore-based investor on Monday. “It comes as a surprise that Siam Commercial Bank is tapping the market. Bangkok Bank and Kasikornbank are both meeting with investors.”

Siam Commercial Bank tapped its existing 3.375% 2017s for $500 million, taking the total deal size up to $1.1 billion. It was a sizeable tap — in excess of 80% of the original deal size and, on a spread basis, it reaped savings. Siam Commercial Bank had issued the $600 million bond at Treasuries plus 252.5bp, so it was tapping at a tighter spread. The bonds priced at Treasuries plus 215bp, about 15bp inside of the Treasuries plus 230bp initial guidance and over 35bp inside the original deal.

Based on the initial guidance, investors thought the deal looked attractive. “The outstanding 2017s are trading at a wide bid-offer spread of Treasuries plus 215bp/190bp, so at Treasuries plus 230bp there’s a generous pick up,” said the investor. “It’s a no-brainer.”

However, guidance was eventually tightened. According to one source familiar with the deal, the outstanding bonds were at Treasuries plus 210bp, and widened slightly which put the new issue premium at about 2bp to 3bp. Barclays and Deutsche Bank were joint bookrunners.

Kasikornbank is meeting with investors and conclude meetings within the next day or two. Citi and Standard Chartered are the arrangers. Meanwhile, Bangkok Bank started roadshows for its potential dollar bond on Monday. Morgan Stanley is the arranger.

¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media