psa-wraps-up-acquisition-financing-with-new-1-billion-bond-deal

PSA wraps up acquisition financing with new $1 billion bond deal

Sole lead manager Morgan Stanley prices new dual tranche $1 billion bond deal, effectively completing the $4.4 billion acquisition financing for PSA's 20% purchase of Hutchison Ports stake.
On early Friday morning (June 23), PSA International (PSA) priced a $1 billion bond offering that effectively completes the $4.4 billion financing for the 20% acquisition of Hutchison Ports and pays down the outstanding $1.8 billion bridge loan. The deal, led by sole lead manager Morgan Stanley, comes inside of revised price guidance. Royal Bank of Scotland which also underwrote the bridging loan with Morgan Stanley acted as senior co-manager.

The Aaa/AA rated deal was split into a five-year $500 million tranche and a 10-year $500 million tranche.

The five year tranche was marketed to investors initially at 10bp to 15bp over mid-swaps area. While a second 10-year tranche was marketed at the 20bp to 25bp over the mid-swaps area. However the guidance on the five-year was later revised to 65-68bp over Treasuries while the 10 years was pushed out to 83bp over. That equates to 13bp to 15bp and 25bp over mid-swaps, respectively.

The shorter tenor notes priced at 99.572% with a coupon of 5.75% to yield at 5.85%, a spread of treasuries plus 68bp or 14bp over mid-swaps. The 10-year notes priced at 99.093% with a coupon of 5.90% offering a yield of 6.022%. This equates to a spread of 83bp over treasuries or 24.5bp over mid-swaps.

The deal built up a very strong order book considering the recent volatility in the global debt markets. The final order closed Thursday afternoon at $1.6 billion. A total of 63 investors took part in the deal û 36 on the five-year and 27 on the 10-year. In terms of splits, the orders were virtually evenly divided between the two tranches.

In terms of geography, the five-year tranche was sold 53% into the US, 14% into Europe, and 33% into Asia, including a number of Asian based-European banks. The 10-year was sold 51% into the US, 4% into Europe, and 45% into Asian-based accounts.

By investor type, insurers and fund managers both bought up 22% of the five-year deal, with banks picking up 22% and government entities buying 14%. Banks bought the majority of the 10-year tranche at 31%, with insurers buying 30%, fund managers 25% and 14% going to government entities.

Well noted comparables for the deal are the outstanding Singapore Power 2013s and TemasekÆs 2015s.

Singapore Power æs deal were trading at a bid/offer spread of Libor plus 23bp-17bp, equivalent to 78bp-72bp over Treasuries. Bankers estimate that a new 10-year would probably price around Libor plus 32bp to 35bp with a new issue premium.

Temasek started the week in the Libor plus 5bp to 6bp or 62bp to 63bp over Treasuries range, but had widened out over the week and was quoted at a bid/offer spread of Libor plus 11/7bp or 68bp/64bp over Treasuries.

In terms of the five-year tranche, PSAÆs credit default swaps were trading at 14bp to 19bp.

PSA has a total debt to Ebitda of 1.9%, and an Ebitda interest coverage ratio of 13.2%.

In combination, Hutchison Port and PSA handle over 90 million twenty-foot equivalent units (TEUÆs), 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.


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