Indonesia Eximbank's $500 million debut attracts exuberant demand

Indonesia Eximbank takes its place as one of Asia’s benchmark borrowers, while China Shanshui Cement's dollar bond is delayed due to documentation issues.

Indonesia Eximbank on Thursday night priced a $500 million inaugural dollar bond, attracting exuberant demand from investors. The five-year bonds priced at a yield of 3.9%, at the tight end of the final guidance, which was 3.9% to 4%, and about 22.5bp inside the initial guidance of 4.125%.

Indonesia Eximbank is 100% owned by the Indonesian government through the Ministry of Finance. The bank is rated Baa3 by Moody’s and BBB- by Fitch, which is the same as the Indonesian sovereign, as the bank is expected to receive a high level of state support if needed.

The deal attracted an order book of $5 billion from more than 230 accounts and the book held together despite the bonds pricing at the tight end and concerns that this would strain pricing. The bonds were predominantly allocated to Asian accounts and fund managers.

Investors viewed Indonesia Eximbank as a proxy for the Indonesian sovereign. While the deal was being marketed on Thursday afternoon, investors felt it offered a decent pick up over the sovereign. “We like the deal. It’s offers reasonable premium in the Indonesia space,” said one Hong Kong-based investor.

According to a source, a new Indonesian five-year bond would probably be yielding about 3.1% and, depending on the new issue premium, the fair value could be around 3.2% to 3.25%, which meant that at 3.9%, the bonds offered a pickup of about 65bp. Quasi-sovereign bonds such as the outstanding PLN bonds were yielding about 4%.

“It was a very impressive inaugural offering by Indonesia Eximbank. Investors were impressed with the credit story and the proximity of the Eximbank credit to the sovereign,” said a source. “A yield of 3.9% prices Eximbank inside all other Indonesian quasi-sovereigns, just 65 basis points over the sovereign curve. Indonesia Eximbank takes its place as one of Asia’s benchmark borrowers and we expect the spread to the sovereign to continue to contract as they issue more and establish a curve.”

Indonesia Eximbank has a policy role to promote and provide financing for Indonesian exports. It started operations in September 2009 and at that time its predecessor, Bank Ekspor Indonesia, transferred all its assets, liabilities and obligations to the bank. 

“Apart from the reestablishment by law of its position as a sovereign entity, there is other evidence of [Indonesia Eximbank’s] strong ties to the government: its ownership structure, its board of directors is appointed by the Minister of Finance, and various legal acts provide support to the bank, including capital, liquidity and funding,” said Moody’s in a report.

The coupon was fixed at 3.75% and the notes reoffered at 99.325 to yield 3.90% or a spread of 306bp over five-year Treasuries. HSBC, Mitsubishi UFJ Securities and Standard Chartered were joint bookrunners.

China Shanshui Cement gets stuck
China Shanshui Cement was expected to price its five-year dollar bond on Wednesday night but there was no deal-print come Thursday morning. The lack of a clear explanation for the delay apparently did little to cement ties with investors.

According to one investor, the official word was that the pricing of the deal was delayed due to documentation reasons. “Maybe the issuer needs to make a few more disclosures. Nothing is clear and investors are speculating, while the salespeople have no idea,” said the investor on Thursday afternoon. A second investor speculated that the delay was due to “some legal issue in the US”.

According to a source, the delay is not related to disclosures and the issuer wanted to make sure everything was in order before printing the deal. “We need to make sure that all the i’s are dotted and the t’s are crossed. That’s all. It should be on track to price,” said the source.

Still, it would probably have been a good idea to sort all that out before the marketing of the deal started. China Shanshui Cement’s bond, which was being sold to professional US investors, was marketed at 10.5% to 10.75% on Wednesday and expected to raise about $400 million. Credit Suisse, Deutsche Bank, HSBC and J.P. Morgan are the arrangers.

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