Nan Ya Plastics flexes bond credentials

HSBC, Citi and Deutsche price accelerated and upsized FRN for Taiwanese plastics producer.

HSBC, Citigroup and Deutsche Bank priced a rare floating rate note deal on Friday for Taiwanese corporate Nan Ya Plastics on Friday (October 28). The senior unsecured deal, rated BBB+ by S&P, is a $350 million Reg S transaction with a five-year maturity. The deal was launched through the group's wholly owned Hong Kong unit, Nan Ya Plastics (HK) Corp Ltd, in order to avoid Taiwan's 20% withholding tax on coupon payments.

The deal priced at the tight end of the indicative range on a coupon of 50bp over six-month Libor with a re-offer price of 99.7785 to yield 55bp over. Fees were 23bp.

The leads opted to accelerate and upsize the deal as momentum grew for the rare Taiwanese corporate deal. It was originally slated to price in the middle of this week and was initially market to investors at a size of $300 million.

Despite the market's recent 'softness', the deal still garnered an impressive order book. Based on the original size, the deal had an oversubscription ratio in excess of two times.

Overall 46 accounts took part in the deal with the majority coming from Asia, of which Singapore taking up the lion's share. Asian accounts made up 82% of the total book, with Singapore accounts allocated 35%. Taiwan-based investors took 13%, Hong Kong 16%, Japan 9% and Korea 8%. Europe was allocated 9%, with North American investors picking up the remaining 9%.

In terms of investor type, banks took up the majority of the overall book on 58%, fund managers 40%, with retail buying accounting for the remaining 2%.

Due to the rarity of the deal type, direct comparables are thin on the ground. Nan Ya Plastics has an outstanding $250 million exchangeable into Formosa Petrochemical.

This has a 2011 maturity date and put options in 2006 and 2009. It is currently bid at 116% on a CB asset swap of 65bp over Libor. At launch in June 2004, the deal was valued on a credit spread of 100bp over.

In the straight bond market, the only other corporate deal from Taiwan is a $325 million ten-year issue for Baa2/BBB rated shipping firm, Wan Hai Lines.

Instead, bankers quote a $350 million 5.1% deal due June 2015 for Thai Oil. The Thai petrochemical company has a similar rating of Baa1/BBB although it is rated one notch lower than Nan Ya from Standard & Poor's.

Having been priced at 120bp over Treasuries, or 79bp over Libor, it is currently bid at 82bp over Libor. On an implied five-year curve that equates to mid-sixties over Libor.

This means Nan Ya has come at an implied 10bp premium to Thai Oil even though it has a slightly higher rating. Nan Ya is part of the Formosa Group's assortment of chemical and plastics companies. Primarily manufacturing plastics, fibers, and electronic materials, Nan Ya is Taiwan's largest plastics maker and the world's largest processor of plastics for pipes and imitation leather.

The company will use the proceeds from the sale of the bonds to help fund the expansion of its petrochemical division. Nan Ya's expanding petrochemicals and electronics business contributed to record profits the company in 2004. The company has reported that it will invest some NT$10 billion in the construction and operation of two petrochemical plants in Taiwan.

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