The BBB-/Baa3-rated transaction attracted $1.6 billion in demand, under the lead management of Barclays and Citi. The roadshow encompassed Singapore, Hong Kong and London. In Asia, the issuer conducted an ôunprecedentedö 20 one-on-one meetings over two days, eventually taking orders from 18 of those investors.
Bookrunners allocated 63% of the bonds to Asia, 32% to Europe, and 5% to US offshore. With Thai paper typically selling to Asia, leads achieved a high level of diversification across Europe and the US.
Meanwhile, banks bought 30% of the bonds, funds and asset managers 52%, insurance companies 12%. Retail and other purchased 6%. The biggest ticket came in at $100 million, the smallest at $100,000, with 10 orders of $50 million.
In terms of comparables, bankers quote PTTCHÆs Baa3/BBB-rated June 2015s, currently trading at 93bp over Libor. Additionally, Aromatics Thailand's July 2012s are also relevant. These are trading at 68bp over Libor.
Some sources raised concerns about the secondary market, fearing that IRPC was pricing too tight after China Property, NACF and GS CaltexÆs underperformance in secondary trading. However, the bonds tightened by two basis points last night.
The success of the transaction relied heavily on PTTÆs 31.5% stake in the company. Rated A2 stable by MoodyÆs, the state-controlled company is ThailandÆs dominant producer and supplier of natural gas, petroleum and petrochemical products. A covenant of the transaction requires its ownership not to descend below 25%. PTT and Thai government agencies - Government Pension Fund, Government Savings Bank, and Vayupak Fund (a Thai government mutual fund initiative) - hold a total of 61.5% of the shares of the company.
Some say a price of 113bp over mid-swaps for a triple-B, government-majority held company is a cheap asset-class compared to other opportunities currently available to investors.
However, these government shareholders may sell their stock after the expiration of a lock-up period ending in December 2007, leading to potential changes in management, policies or direction. Nonetheless, PTT has stated its intentions as a long-term strategic partner, and holds first rights to purchase any shares sold by the other strategic investors.
Other risk factors investors contended with include the price of crude oil, which has shown volatility during the past year. According to the offering circular, this is expected to continue throughout 2007, with uncertainties over continual global inflation, production levels, and continuing hostilities in post-war Iraq. In addition, the volatility of international market prices for petrochemical products, as well as the cyclical nature of the petrochemical industry, may affect the companyÆs performance.
Founded in 1978, IRPC is the only fully integrated refinery and petrochemical company in Thailand, involved primarily in refining crude oil and selling petroleum products. The company also produces and sells upstream petrochemical products. Petroleum and petrochemical products represented 70% and 30% of its total operating revenues respectively for 2006, with other products and services representing 1%, compared with 71% and 29% for the three months ending March 2007. Total operating revenue in 2006 stood at Bt205.3 billion, with a net income of Bt3.52 billion. Domestic sales of petroleum and petrochemical products amounted to 65% of IRPCÆs total operating revenue in 2006, and 71% to March 2007.