Thanks to an aggressive pricing strategy by joint arrangers Barclays Capital and Credit Suisse, Indonesian power producer PT Cikarang Listrindo managed to execute a sizeable deal at the end of last week, despite weakening market conditions.
The $300 million high-yield Reg-S deal was issued with a final coupon of 9.25%. The initial yield guidance was 9.75%, but the arrangers managed to tighten that by setting the reoffer price at 99.106bp for a final yield of 9.5%. The bonds mature on January 29, 2015.
The final demand was approximately $1.65 billion from 142 accounts, leaving the deal 5.5 times covered. The majority of participation came from high-quality buy-and-hold investors. Seventy-two percent of the notes were distributed to asset managers, 15% to banks, 8% to retail investors and 5% to insurance and pension funds. In terms of geographical distribution, 51% went to US investors, 33% to Asia 16% to Europe.
Scott Bennett, fixed-income fund manager with Aberdeen Asset Management, said he was confident with the particulars of the deal.
"Cikarang Listrindo was exactly the type of investment opportunity we were looking for in 2010. The company operates in a defensive industry in a high-growth country, and has managed its finances particularly well in the past several years. Seeing the bonds also yield 9.5%, we naturally put in a big order with the expectation that the price would pop at the break, and it did."
Arrangers had been on the road rallying investor interest in Hong Kong, Singapore, London and the US. From the perspective of an investor, Bennett commented that, "the bond terms were improved during the roadshow without a decrease in the coupon and that just made this security all the more attractive".
"We expect the bond's yield to tighten to 8.5% over the next six to nine months as the cash flow from [the company's] increased electricity production helps improve its credit profile."
Moody's rated the notes Ba2 and Standard and Poor's gave a BB- rating to the issue.
Cikarang Listrindo was established in 1993 as an independent power producer based in Java. It owns and operates a 518 megawatt natural gas-fired power station and currently has plans to increase output to 646MW. Cikarang has a customer base of 1,559 industrial companies spread across five industrial estates just outside of Jakarta and holds an off-take agreement with Indonesia's state-owned electricity giant PT Perusahaan Listrik Negara.
This week will see the pricing of a quasi-sovereign Reg-S bond from the Export-Import Bank of India and a sovereign issue from Vietnam. The lead arrangers for Vietnam's $1 billion bond (Barclays Capital, Citi and Deutsche Bank) opted to delay pricing until early this week due to the volatility in the markets. Vietnam last issued a sovereign bond back in October 2005.
India Exim Bank will end its three-day roadshow today. There has been no indication of the size or the tenor as yet.