Indian, Southeast Asia trio join bond glut

After a week of heavy bond supply from Hong Kong and Chinese credits, Jubilant Pharma, Kasikornbank and RHB Bank added some variety — and all got a strong welcome.

Indian generic drug maker Jubilant Pharma, Malaysian lender RHB Bank and Thailand’s Kasikornbank turned to the debt markets near the end of the week, joining a throng of regional credits that have tapped the markets on a jam-packed week.

The borrowers came after deals from a mix of Chinese and Hong Kong issuers, as well as a bond from an Indonesian property developer. This deluge of issuance was generally received well by investors. But when they were given the chance to expand their geographical exposure, they jumped at the chance.

"The current market conditions have encouraged a variety of issuers to raise fresh funds or refinance their existing debt," a syndicate banker said. "Today's primary market reflects the fact that yield-seeking sentiment has expanded from Chinese credits into other parts of the region."

Emerging market funds hit 12 straight weeks of net inflows, bringing net inflows into emerging markets to more than $30 billion so far this year, according to a Bank of America Merrill Lynch report. Investors think that — although there are some signs of indigestion in the Asian bond market — this is not likely to be a short-term shift.

"Asian and Latin American credit markets are major beneficiaries of the ultra-low interest rates in developed markets," said a Singapore-based fund manager. "The prolonged low rate environment has failed to boost growth and jobs in the developed world, so investors are fleeing into Asia and LatAm for yield-paying instruments."

A Jubilant response

Jubilant Pharma, an Indian generic drug maker, priced its debut US dollar bond on Thursday night, raising $300 million through the sale of a five year non-call three bond.

The Reg-S deal was launched following a runaway success of the company’s larger peer Glenmark, which completed its maiden debt sale in July. Glenmark, a BB/BB -rated company, built a final order book of $1.7 billion for a $200 million print.

Despite having a smaller revenue base, Jubilant also got a strong response from investors, generating orders of $1.2 billion before the release of final price guidance, a syndicate banker said. 

"The pricing proved to be successful for Jubilant Pharma as it is a relatively small player in the highly competitive generic market when compared with its peers," the banker commented, adding that institutional funds were the main source of demand for the new issue.

The final order book came down to $550 million from 87 accounts. By geography, Asia took up 66%, while EU 29% and US offshore/Middle East 5%. By investor type, funds represented 70%, while private banks 23%, bank/corp/others 6% and the remaining 1% went to sovereign wealth fund.

Initial guidance was set at the 5.25% area before being narrowed to 4.875% area. Final pricing of the October 2021 note was priced at par on a coupon of 4.875%, according to a term sheet seen by FinanceAsia.

The closest comparable was Glenmark's outstanding 4.5% five year non-call three bond, which was trading on a cash price of 101.25%, equivalent to a yield-to-call of 4.21%. That implied Jubilant has offered a decent new-issue premium to investors

According to a September 23 report by S&P, the company is expected to receive product approvals at a healthy rate and successfully commercialise them over the next 12 months. It should also be able keep up a positive operating cash flow and leverage ratio over the same period, the report claims.

Citi, Credit Suisse, DBS, HSBC and JP Morgan were the joint bookrunners of the bond.

RHB upsizes amid strong demand

RHB Bank, Malaysia's fourth-largest lender, priced an upsized $500 million five-year bond, the first senior US dollar bank issue out of Malaysia in almost two years.

The Reg-S deal captured more than $2 billion of orders, according to a syndicate banker running the deal. "There is a lot of demand for senior bonds from a wide range of different investors," the person said.

The deal was upsized from $300 million originally planned due to frenzied demand. The leads — RHB Investment Bank, Credit Suisse and HSBC — initially went out with a guidance of five-year Treasuries plus 165bp, but later tightened that to 2.5bp each side of 140bp.

Final pricing of the Singapore-listed 2021 note was fixed at par on a coupon of 2.503%, or a Treasury yield plus 137.5bp, a term sheet shows.

The nearest comparable was the bank’s own outstanding 3.088% October 2019 note, which was trading on a G-spread of 125bp. But according to analysts at Mizuho, fair value of the new print should be at Treasury plus 135bp, based on the spread between ICBC Asia's five and three year bonds.

The final order book stood at $1.9 billion from 90 accounts. By investor type, fund managers were allocated 66%, insurance companies 6%, banks 24%, private banks 3% and other investors 1%. By geography, Asian investors were allocated 84% while EMEA investors took the remaining 16%.

RHB plans to use the new proceeds for general working capital and other corporate purposes.

Kasikornbank keeps it tight

Kasikornbank, meanwhile, issued a $400 million 5.5 year bond.

The issuer — rated Baa1/BBB+/BBB+ by Moody's, Standard & Poor’s and Fitch — captured more than $1.1 billion of orders for its Reg-S deal, according to a syndicate banker.

The issuer went out with initial price guidance of Treasuries plus the 145bp area. But final pricing of the deal, which was issued by Kasikornbank PCL Hong Kong branch, came at a spread of just 127.5bp. The bond was fixed at 99.8% on a coupon of 2.375% to yield 2.419%, according to a term sheet seen by FinanceAsia.

The obvious comparable was its outstanding $350 million 3.5% October 2019 note, which was trading on a G-spread of 107bp.

Taking other three-to-five year senior bank curves into consideration, analysts at Mizuho pinpointed the fair value at a G-spread of 115bp or Treasuries plus 127bp. This implied the new deal was priced fairly, without leaving much on the table for investors.

"The aggressive pricing was justified by the rarity value of an international deal from a Thai lender, which had not tapped the dollar market in two years," a syndicate banker commented.

The final order book closed at $950 million from 76 accounts. By geography, Asia took up 75% and Europe 25%. By investor type, asset managers accounted for 69%, banks 14%, public 7%, insurance 6% and private bank/others the remaining 4%.

Citi and Deutsche Bank were the joint bookrunners of the deal.

The story has been updated with final deal stats from first publication.

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