Indonesia pushes out punchy $2.5 billion bond sale

While China Shanshui Cement, Hana Bank and Beijing Enterprises all market Asian dollar bonds on Wednesday.

The Republic of Indonesia early Wednesday morning priced a $2 billion 10-year bond and a $500 million tap of its 2042s, in an aggressively priced deal. The initial guidance for the 10-year tranche was 4.05% and the bonds priced to yield 3.85% at the final guidance, while the initial guidance for the 2042s was 4.98% and the bonds priced at a yield of 4.95%. The 10-year bond attracted more than $5.9 billion worth of demand, while the tap of the 2042s attracted more than $2 billion of demand.

For the 10-year tranche, asset managers were allocated 50%, banks 38%, insurers and pension funds 5%, private banks and other investors 7%. Asian investors were allocated 66%, European investors 17% and US investors 17%.

For the tap, asset managers were allocated 62%, banks 24%, insurers and pension 9%, private banks and other investors 5%. Asian investors were allocated 35%, US investors 34% and European investors 31%. J.P. Morgan and Standard Chartered were joint bookrunners.

One rival banker observed that the distribution of bonds into the US was skinny. “I was surprised to see how little of the bonds went to US investors — particularly for the 10-year tranche. I think Asian investors were over-allocated and the deal was too big, and as a result the bonds have traded poorly in secondary,” said the rival.

In secondary, Indonesia’s 2022s were at 98.75/98.85, below the 99.176 reoffer, while the 2042s were at 104.75/105, slightly above the 104.636 reoffer.

One person familiar with the deal said that Indonesian investors came into the book early and supported the deal, so the leads chose to allocate more bonds to them — which resulted in a heavy Asian allocation. Indonesian investors were allocated 23% of the 10-year bonds and 9% of the tap. Also, he added that some global investors found the new issue premium too aggressive, which resulted in lower allocations to the US.

“ROI paid a new issue premium of 3bp for the 10-year and 8bp for the 30-year, which some global investors might have found too aggressive, especially in the context of other sovereigns such as Russia offering a 20bp new issue premium,” said the person.

Away from Indonesia, it was a busy Wednesday night for Asia’s debt markets. No less than three Asian dollar bonds were being marketed to investors on Wednesday. “People see a window. They’ve seen the IMF report and US data,” said one syndicate banker. “We’ve seen volatility but for people who have been waiting, today is the day to hit the market.”

Beijing Enterprises early this morning closed an $800 million 10-year bond. The guidance was at Treasuries plus 275bp and the bonds priced at Treasuries plus 260bp. Bank of America Merrill Lynch, HSBC and Morgan Stanley were global coordinators and bookrunners. DBS, ICBC International and Standard Chartered were joint bookrunners.

China Shanshui Cement was also in the market with a five-year bond. Credit Suisse, Deutsche Bank, HSBC and J.P. Morgan are the arrangers. The deal was being marketed at 10.5% to 10.75%

Korean lender Hana Bank was in the market with its five-and-a-half-year dollar benchmark. The initial guidance was Treasuries plus 280bp. BNP Paribas, Citi, ING, Royal Bank of Scotland and UBS were joint bookrunners.

A number of other borrowers were also on the road. Bank of Ceylon, which is wholly owned by the government of Sri Lanka, mandated Bank of America Merrill Lynch, Citi and HSBC to arrange fixed income investor meetings in Asia, Europe and the US. The bank is eyeing an debut US dollar bond. Elsewhere, Bank Negara Indonesia has mandated Credit Suisse and Deutsche Bank for a potential dollar bond.

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