The Reg-S only deal was announced just after Asia opened yesterday morning via joint bookrunners Deutsche Bank and Goldman Sachs and closed at 6pm with an order book that was 2.5-times oversubscribed and priced at the tight end of revised guidance.
Deutsche and Goldman Sachs announced the Baa1/BBB+ deal early Tuesday with an indicative pricing of 114bp to 117bp over 10-year US Treasuries, however as the book built up momentum throughout the afternoon, the leads opted to tighten guidance to the 114bp to 115bp range. When pricing was finalised after Asian market close, the deal came in at a re-offer of 98.98% on a 6% coupon yielding at 6.138%; equivalent to 114bp over Treasuries.
Despite the success of last weekÆs Philippine sovereign deal and a secondary market that has been much more positive in recent sessions, AsiaÆs debt capital market had not yet seen a deal from the high-grade space. Indeed, after months of relative scarcity and an environment that was less than confident about the direction of US Treasuries, GS Caltex is the first issuer to test AsiaÆs investment grade bid since Hong KongÆs Hang Seng Bank priced a Aa3/A+ rated $450 lower tier 2 subordinated offering in late June.
However, some confidence should be gained by the market that this deal was able to advance from initial announcement to final pricing in just under eight hours.
For example, Korean steel manufacturer Posco, which has a deal in the market at the moment led by ABN AMRO, HSBC and UBS, should be feeling rather optimistic following the outcome of this transaction.
The deal closed with an order book worth over $500 million on the back of 41 accounts. In terms of geography, domestic Korean accounts bought 31% of the deal, with the rest of Asia picking up 50%. The remaining 19% was allocated to European accounts.
By investor type; banks bought the majority of the deal picking up 53%, fund managers followed with 30%, insurers grabbed 15% and the remaining 2% went to retail accounts.
However, even in lieu of a $500 million order book, the dealÆs size was never going to be increased since board approval would have been required.
As a regular issuer in the international markets, GS CaltexÆs best comparable are its own existing 10-year offerings. When the new transaction priced, GS CaltexÆs 2014Æs were quoted to yield 105bp over Treasuries. Concurrently its 2015Æs were quoted at 110bp over. Given that the 8-year to 9-year spread is worth 5bp, the new deal prices inside-to-flat to CaltexÆs own curve.
The credit is viewed by many investors as a leveraged play on Chevron Texaco, which own 50% of GS Caltex. Korea's GS Holdings owns the other half.
In its recent ratings report S&P stated that, ôGS CaltexÆs earnings and cashflow are supported by high refinancing margins and controlled competition in the Korean market. Although GS CaltexÆs capital structure has improved in recent years, some slippage in debt is expected in accordance with the companyÆs substantial capital investment plans for the next few years. Still the debt to Ebitda ratio is expected to remain below 1.5-times.ö
Seoul-based GS Caltex is a leading oil refining and marketing company in South Korea. Last year the company generated sales revenue of W16.234 trillion.
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