Indonesia is a strong candidate to price the first bond transaction this year. The sovereign, rumoured to be raising $2 billion, will begin its roadshow for a benchmark 144A transaction on Tuesday. Barclays, HSBC and Lehman Brothers are managing the deal.
A number of syndicate bankers believe this will be too large a sum for the market to handle. ôI hope Indonesia doesnÆt raise the full $2 billion. WeÆve been advising our clients on how to build a good foundation for the market in early January: this means good issuers bringing to market transactions that are not too large, and pricing with a cushion to soften the impact of any negative headlines,ö says a syndicate banker. ôI think $2 billion is too large.ö
ôThe bookrunners for this deal have a heavy responsibility,ö says another. ôThe market needs to see it perform well to reassure investors that life is returning to the Asian G3 markets. A badly executed deal will delay a return to business.ö
Meanwhile, the Philippines is expected to price a $500 million transaction soon -- although the deal is as yet unannounced and the mandate still undetermined. However, the sovereign could price a deal as early as next week given its SEC shelf-registration. (This enables the country to fulfil all SEC registration-related procedures up to three years before the actual public offering, and to speedily tap the market. The Philippines is the only SEC shelf-registered sovereign in Asia.)
Outside of the sovereigns, a Korean issuer such as Korea Development Bank is also a potential candidate for opening AsiaÆs debt capital markets, according to one banker, but it is the sovereigns that high-yield borrowers will be watching closely.
ôIf the sovereigns go well, then high-yield corporate issuers will follow, opening the bond markets in earnest for 2008,ö says a banker.
The Singapore energy services group KS Energy Services has recently mandated ING for a high-yield trade, details of which are unknown. Meanwhile, the pipeline for Chinese property developers waiting to come to market now stands at between $5 billion and $6 billion. ôIn a strong market, this figure would be $10 billion. As things stand today, I donÆt think that more than $3 billion can realistically get done.ö
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