International Container Terminal Services Inc (ICTSI) returned to the Asian bond market yesterday with a $200 million tap of its recent 2020 bonds that were issued on March 14 this year. With an original issue size of $250 million this brings the total deal size to $450 million.
The bonds pay a coupon of 7.375% and yesterday's re-offer was set at 102.627 for a yield of 7%. This was equivalent to a spread of 322.9bp over 10-year Treasuries. The original issue in March was priced to yield 7.375%, which at the time translated into a spread over Treasuries of 365.4bp.
For the original deal, the Philippine ports operator employed a group of seven banks to arrange the transaction. This time around it chose only HSBC and UBS to manage it. Notably, UBS was not part of the original group of bookrunners. With only two banks coordinating the sale, this allowed for the quick and quiet execution.
ICTSI announced a deal size between $150 million to $200 million and initial guidance for a yield in the area of 7.125% on Thursday morning. This was revised in the afternoon to a deal size of no greater than $200 million with a yield between 7% and 7.125%. By then the arrangers had already secured an $850 million order book.
One source close to the deal referred to the small window for pricing as a good thing. "Market volatility reduced what would have been an even bigger European book in a normal market but also meant the deal could price through that volatility and get ahead of competing Asian deals such as China Orient and Canadoil that were announced today (Thursday)," he said.
The deal priced just after the Asian close right on $200 million and with the yield at the tight end of guidance at 7%.
Through the nine-hour bookbuilding, the arrangers were able to secure a $1.5 billion order book from over 100 accounts. Onshore Philippine borrowers took 25% of the deal with the rest of Asia accounting for 57%. European accounts bought the remaining 18%.
Fund managers took the bulk of the debt, or 48%. Banks were allocated 35%, private banks 12% and insurance/pension houses the remaining 5%.
The strong demand was underpinned by the scarcity of corporate Philippine issuers this year. Also, the Philippines is not expected to issue another sovereign until after the May 10 elections. Therefore, investors who were hungry for Philippine debt, particularly onshore investors, drove the sale and size of the order book.