Joint leads CIMB Niaga, JPMorgan, and UBS priced a B1/BB- rated $250 million bond issue for PT Excelcomindo Pratama early Friday morning (January 13). Despite building a book that was 14-times oversubscribed at $3.2 billion, the leads opted to keep the deal to its original size.
Final pricing of the seven non-call four transaction was settled at 99.323% to yield at 7.25% or 288p over Treasuries. This was at the low end of revised guidance of 7.25% - 7.375% and down from initial yield guidance of 7.5% that had been set earlier in the roadshow. Fees were 55bp.
The deal had a geographical split that saw 48% placed in Asia, 27% in Europe and 25% in the US. By investor type, asset managers took 60%, retail 11%, banks 21% and insurance companies 8%.
There had been some concern early on that the deal could find the going difficult because of noise following Excelcomindo's troubled tender process last year. However, that proved not to be the case.
"When investors look at a tender offer, they're primarily concerned with the value attached to the particular structural amendment," says one investment banker. "Whereas when they look at a new deal, it comes down to where they value the credit. This is an attractive bond with an attractive underlying credit story and not surprisingly the market has a short memory."
In terms of primary comparables, the leads looked at Excelcomindo's existing January 2009 deal. That deal, an upsized $350 million tender, priced to yield at 8.125%.
At the time the new deal priced it was trading around 6.85%. However, the main target for the borrower was to price as close to, if not flat to rival Indosat's June 2012 deal.
This latter deal was priced at par with a 7.75% coupon. Last Thursday it was quoted around the 7.06% range. This means Excelcomindo has only had to pay about 19bp for a six-month extension.
The deal appears to have benefited from the January liquidity effect. "It's your usual start of the year scenario," says one specialist. "Buyers need to get invested for the year and Excelcomindo has a relatively strong yield compared with what may come in later months.
"Investors that take risk tend to load up in the early stages of the year, so they can get out of it later if they have to. Many accounts are also quite familiar with this credit and have lines in place."
As Indonesia's third largest cellular phone operator, Excelcomindo has a much smaller market share (12%) than market leaders: Telekomsel (50%) and Indosat (30%). The company has, however, benefited from the support it now garners from majority shareholder Telecom Malaysia, which along with parent Khazanah increased its stake in Excelcomindo to 74% last years. Based on the new ownership structure, S&P upgraded Excelcomindo from B+ to BB- in December.
Bankers say this is one of the main reasons why it has been able to close the pricing gap with Telkomsel and Indosat, both of which have long enjoyed the halo effect of their Singaporean parents. When Excelcomindo launched its debut international bond in January 2004, for example, it had to pay a 40bp to 50bp premium over Indosat for a deal that was also two years shorter.
Funds from the new deal will be primarily directed towards upgrading and expanding Excelcomindo's cellular coverage and for general corporate purposes.
