Indonesian real estate developer Lippo Karawaci yesterday launched and priced a $125 million tap of its outstanding 9% bond due April 30, 2015.
The deal was launched at about 11am Hong Kong time and closed at around 3.30pm after a quick bookbuild. Investor demand from Asia was so strong that the leads didn't see the need to leave the books open for long, and the early close meant that European accounts had to make their decision by 7.30am London time.
Citi and Deutsche Bank were global coordinators. Bank of America Merrill Lynch was a joint bookrunner and joint lead manager.
The robust demand came in spite of weak credit markets. The iTraxx Asia Investment Grade Index and sovereign credit default swaps widened by about 5bp to 10bp yesterday, while bonds in the high-yield sector closed about 0.75 points lower.
The initial price guidance was a cash price of 107 to 107.5, which represented a slight discount to the 108.5 bid of the outstanding bond in the secondary market at the time of launch. The guidance was tightened to 107.5 to 108 and the deal eventually priced at 108 to yield 6.776%.
The deal amassed an order book of $790 million. Asia took 94% of the deal and Europe 6%. In terms of investor type, fund managers and hedge funds were allocated 90%, banks 9% and others 1%.
The deal gathered strong momentum because it was an Indonesian credit and offered diversification away from the China property sector. Lippo Karawaci is also viewed as a good high-yield name and has not defaulted on any bonds in the past. The bonds are rated B1/B+/B+ by Moody's/S&P/Fitch (all stable).
The April 2015 bonds were first issued in May last year in connection with a bond exchange. The initial issue size was $270.6 million and this tap will increase the total outstanding amount to $395.6 million.
The proceeds of the tap will go towards repaying practically all of the company's existing bank debt and its outstanding 2011 notes. Lippo Karawaci will repay $66.2 million of the 2011 notes and loans worth $49.8 million from Bank Negara Indonesia. The remaining $9 million will be used for interest, transaction fees and expenses.
According to Standard & Poor’s, the issue allows Lippo Karawaci to ease its debt maturity profile. After the transaction, the company will have only $395 million of senior unsecured notes due 2015 and about $1.3 million of secured debt owed to Bank Agroniaga.