Rival banks challenge Goldman's TSMC transaction

Complaints concern whether the $1.75 billion deal is eligible for league table credit. If included, the sell-down by Philips will push Goldman to number one.
Frequent readers of this website may notice that the league tables provided by Dealogic on a weekly basis weren't updated on Friday as usual and no league table roundup is included in this morningÆs newsletter.

The reason, according to Dealogic, is that a number of investment banks have challenged the inclusion of Royal Philips ElectronicsÆ $1.75 billion sell-down in Taiwan Semiconductor Manufacturing (TSMC) last Monday. While such challenges are by no means unusual, the sheer size of this trade and the fact that it will in one go propel Goldman Sachs (as the sole bookrunner of the transaction) from seventh to first in the Asia ex-Japan ECM ranking has prompted Dealogic to hold off on updating the numbers until this issue has been settled.

The root of the complaint appears to be a suggestion that the transaction lacked an underwriting agreement and that it was carried out by GoldmanÆs trading desk, rather than the ECM desk. This is sometimes done on block trades, especially when the seller is a client of the investment bank's trading desk, and Dealogic as a rule doesnÆt include these transactions in its rankings.

Typically though, such an approach is used for smaller transactions of below $100 million. And several bankers noted on Friday that it would be ôalmost impossibleö to do a deal the size of the TSMC transaction from the trading desk.

This is also what Goldman says and, according to sources, the bank plans to show the underwriting agreement it signed with Philips to Dealogic as proof that the deal does indeed qualify for league table credits.

A similar ôdefenceö was used by UBS on the one hand and Citigroup on the other with regard to two separate sell-downs in Shinhan Financial by Korea Deposit Insurance (KDIC) in April last year and in February this year. Both deals were challenged by rival investment banks on the basis that the great majority of each deal went directly to strategic investors and that this portion therefore shouldnÆt be counted as part of the underwritten transaction.

However, after showing their respective underwriting agreements to Dealogic, the compiler of capital markets data accepted both transactions in full.

The challenge to the TSMC deal, which sources say was made by several banks together in order not to single out any one complainant, highlights how competitive the banks really are with regard to the league tables. Even this early in the year they are seemingly prepared to take every chance they can to prevent other banks from getting ahead. The situation may have been aggravated by the fact that it involves Goldman Sachs, whose solid track-record of being in the top three makes it a favourite bank to beat.

As of March 9, UBS topped the Asia ex-Japan ECM table, having arranged $2 billion worth of deals. It was followed by JPMorgan and Citigroup. Goldman was seventh with $1 billion of league table credits.
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