The transaction, rated B2/B, managed to close soon after the Federal Reserve made positive statements about the US economy and announced its intention to maintain interest rates at 5.25%. Further, Bear Stearns managed to price a $2.25 billion five-year bond the previous evening, reassuring investors and spurring a tightening of credit spreads.
As the market window opened, a number of issuers across the US also rushed in to price their deals, marking the fourth busiest day this year in terms of issuance volumes.
A source says: ôThis was a tough market for issuing a deal, and clearly the key was simply to get it done. With spreads coming down so much over the last few months, it is difficult for issuers to accept these new pricing levels. And since risk aversion is so high, the challenge is for bookrunners to find a balance between what is acceptable for the issuer and what it acceptable for the investors. Mobile-8 found that equilibrium.ö
The deal priced at a yield of 11.25%, with 15 accounts participating in the transaction. A total of 18% of the bonds sold to the US, 30% to Europe, and 52% to Asia.
Another source states: ôI hope the bookrunners have distributed to end-investors and have not just taken the bonds on their book. And since the deal is small and illiquid, itÆs difficult to tell. But should this not be the case, it is clearly a good sign that an Asian high-yield deal has managed to price."
As to whether this transaction will allow other high-yield deals to price, market observers are sceptical. ôThis will not be a catalyst for currently frozen deals to get done. Such a trigger would have required a bigger deal size and a broader investor base,ö says a source.
On a positive note, the market opening allowed some thawing of the global pipeline. ôApproximately $16 billion worth of transactions priced overnight in the US, which has gone some way in reducing the overhang supply that is dogging the credit markets,ö says a syndicate banker not associated with the Mobile-8 deal. Globally, Mobile-8Æs transaction was reportedly the only high-yield bond to clear.
In terms of comparables, bankers quoted TrueMoveÆs 2013 (10.75%) which were trading at par at a yield of 10.75% at the time of pricing. The bonds were trading at a bid/offer of 100.5-101.75. ôThe deal priced 50bp back from TrueMove, which isn't that much bearing in mind that the Thai telecoms operator is a bigger company, and rated one notch higher by one of the ratings agencies,ö says a source.
TrueMove is also a well-liked and well-known credit, versus Mobile-8 which is still relatively unknown to investors.
Mobile-8 will use the proceeds to refinance, for the purchase of network equipment and for general corporate purposes. Possibly, the remaining $50 million dollars will be raised in euros or dollars at a later stage, or alternatively via a rupiah deal on the domestic Indonesian bond market.