Stats ChipPAC returned to the international bond markets for the second time in under a year on July 12 with a $150 million 144a deal via Credit Suisse First Boston. The Ba2/BB rated credit's five-year bullet offering received an extremely strong market response in contrast to the most recent Asian high yield tech deal from the region by Hynix Semiconductor.
Backed by an order book of $1.2 billion, the lead was able to leverage pricing down from 7.7% to 7.5%. Final pricing came at par on a coupon of 7.5% to yield 358bp over Treasuries. Fees were 1.6% and CSFB was joined by Deutsche Bank as joint-bookrunner and Bank of America as co-manager.
Stats ChipPAC has an existing bond outstanding due November 2011 with a call option in 2008 at 103.375%, declining to 101.688% in 2009 and par in 2010. At the time the new deal priced, the old one was trading at 7.6%.
Bankers estimate the curve is worth about 20bp, which means the new deal has come at a 10bp premium to the old on a like-for-like basis. This will be viewed as a good result given the torrid time that most Asian high yield tech bonds have had.
International bond issues from this sector are a rarity, although there have been three in the past year. Two of the three - for Magnachip and Hynix - have been highly volatile. Stats ChipPAC's outstanding deal has been less so.
Its 66% ownership by Singapore government investment arm Temasek is viewed as a credit buffer. But it has nevertheless traded down since launch. Backed by Deutsche Bank and Lehman Brothers as lead managers, the group priced the first deal on a yield of 6.75%, or 294bp over Treasuries.
Specialists say the new deal attracted a very strong following in the US. "The order book was covered when US roadshows began, but it then jumped from $150 million to $800 million in the space of a day," says one commentator.
Final allocations to 100 accounts saw 61% placed in the US, 30% in Asia and 9% in Europe. By investor type, funds took 70%, insurance companies 10%, banks 10% and retail the remaining 10%.
Stats ChipPAC's bond comes against a background of credit tightening and strong momentum. This has helped the B+/B1 rated Hynix bond trade in from a launch yield of 10.491% at the end of June to a current yield of 9%.
During the first day of trading yesterday, Stats ChipPAC also saw the new deal trade up to 100.75%/101.25%, while its old bond was up to 96.25%/97%.
Proceeds are primarily being used to take out short-term debt used to redeem a convertible that was put back to the company by investors in March. The group redeemed $168.5 million in aggregate principal amount via internal cash and short-term borrowings from Bank of America and OCBC.
Equity analysts welcome the new deal because it has removed the likelihood of an equity issue and the dilution that would entail.