In a year that many analysts expect to be a breakout year for the Asian high-yield debt market, JG Summit has opened the corporate space pricing an upsized $300 million offering last night (January 11). Under the sole lead of Credit Suisse First Boston, a $200 million issue was upsized to $300 million after the book closed at $1.4 billion.
The notes are issued via a wholly owned offshore special purpose vehicle JGSH, and are fully guaranteed by the parent.
The unrated issue has a seven-year maturity with a five year put option and was priced at par on a coupon of 8%. At these levels the deal came through initial guidance of 8.25%.
On a like-for-like basis, bankers say the new deal has priced inside of JG Summit's outstanding $300 million 8.25% June 2008 bond, which was trading in the 7.45% area following a rally leading up to yesterday's pricing.
The order book closed with 125 accounts, selling heavily into Asia. In terms of geographic distribution, Asia bought up 76% of the deal, which is not surprising considering it is an unrated credit that has a strong track record within the region. The deal was further sold down to European investors at 14% and US investors at 10%.
By account type, retail investors and public banks bought out the majority at 42%, with asset managers buying up 38%, banks at 17% and insurers with 3%.
The funds will be used to repay a $100 million bond maturing in February and pay down dollar and peso-denominated loans that mature later this year. The additional $100 million will be put into short-term maturities, with the option of paying down further debt.
Observers were quick to point out the astuteness of the timing of the trade, following so closely on the success of the Philippine sovereign's deal. In addition to benefiting from the abundance of liquidity usually available at the beginning of the New Year, it tapped into the positive tone set by the Philippines.
Despite its unrated status, specialists accredit the deal's success to strong appetite for high yield paper. They also hope it will last given that JG Summit subsidiary Univeral Robina Corp (URC) was the only Philippine's corporate to tap the US dollar market in 2005.
In addition to URC, the group also owns Robinson Savings Bank, Robinson Land, Singapore's Universal Industrial, Cebu Pacific Airways and Digitel - the number three wireless provider in the Philippines. Analysts say the group is fairly highly leveraged, running debt to EBITDA of about 7.5 times pre deal. However, this is somewhat balanced by the fact that its cash reservers cover almost 50% of outstanding debt.