PSA announces price guidance for aquisition financing

Sole lead Morgan Stanley revises initial price guidance ahead of planned bond deal for Singapore port operator's purchase of stake in Hutchison Ports.
Sole bookrunner Morgan Stanley has released initial guidance for the bond portion of the $4.4 billion acquisition financing for PSA InternationalÆs purchase of a 20% stake in Hutchison Port Holdings.

The bond offering, spilt into two tranches released initial guidance on Wednesday (June 21). The five year tranche will look to price in the 10bp to 15bp over mid-swaps area. While a second 10-year tranche was marketed at the 20bp to 25bp over mid-swaps area.

Interestingly enough, once initial guidance was announced many market makers were surprised by the 5bp breadth on the five year tranche. The overriding perception is that such a highly-rated (PSA International is rated Aaa/AA) quasi-sovereign five year deal out of Singapore should only have a guidance differential of 1bp to 2bp.

Indeed, once the market reacted to the pricing differential, the lead manager released a revised guidance on the five-year tranche, eliminating the range and setting the price at around treasuries plus 65bp (which equates to 10bp over mid-swaps).

As yet the split in terms of size for the respective tranches has not yet been determined. However, in its entirety the two bond tranches are expected to be worth around $900 million to $1 billion overall.

As PSAÆs largest single investment ever, the overall purchase is worth $4.4 billion. The deal was initially expected to have been funded via a $2.6 billion term loan facility, and a $1.8 billion bond offering û in line with the $1.8 billion bridging loan provided by Morgan Stanley and the Royal Bank of Scotland.

However, the loan facility was upsized to $3.42 billion because of overwhelming demand, meaning that any subsequent bond deal would be downsized to the $1 billion region.

Roadshows are scheduled to wrap up in Europe and the US this week, and if market conditions are right, the deal is expected to price towards the end of the week.

In combination, Hutchison Port and PSA handle over 90 million twenty-foot equivalent units (TEUs), the mainstay of the shipping industry, a quarter of all cargo shipping worldwide.

In its biggest single investment ever, the Singapore port operator, the worldÆs second largest port operator behind Hutch purchased a 20% stake in Hutchison WhampoaÆs (HWL) portfolio of ports - Hutchison Port Holdings and Hutchison Ports Investments Sarl - for a total cash consideration of $4.4 billion.

The deal gives PSA a 20% stake in all HWLÆs 42 global port assets. The purchase increases PSAÆs stake in Hong Kong International Terminals to just over 30% and it also acquires interest in Yantian, GuangdongÆs primary deep-water port, and the second phase of ShanghaiÆs Yangshan project.

The sale and purchase agreement was signed on April 21 and the transaction was completed in mid-May.
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