Vinashin attracts new investors to bond

Vinashin prices 50bps tighter than initial guidance and sells 95% of its bonds to offshore investors.
VinashinÆs 10-year VND3 trillion bond priced 50bps tighter than initial guidance, building an order book that was three times oversubscribed and selling 95% of the bonds offshore. The benchmark deal is likely to create a precedent for the country, opening doors for local companies and considerably increasing Vietnamese bond liquidity.

At 9%, the bond priced flat to EVNÆs 2016 10-year bond, a remarkable achievement in view of the considerable size of the deal - the transaction is three times the previous largest Vietnamese corporate bond. Investors were clearly undeterred by VinashinÆs high gearing ratio and unaudited accounts. 100% of the investors were first-time buyers of Vinashin, including 83% who had never bought Vietnamese debt.

Deutsche Bank, which lead managed the deal, initially set guidance at 9.25%-9.50%. It built a VND9 trillion order book, and later revised guidance to 9%-9.25%. However, the deal was not upsized, due to Ministry of Finance restrictions.

The company may have achieved a pricing of around 140bp over next weekÆs 10-year government bond auction, which is estimated to price at 7.6%. VinashinÆs 10-year VND1 trillion bond issue priced in January at 10.5%, equating to 200bp over 10-year government bonds - trading then at 8.5%. This implies a 60bps improvement in credit spread.

A total of 35 accounts were allocated bonds, with one-third sold to Asia (primarily Hong Kong and Singapore), one-third to the offshore US market, and one-third to Europe. In terms of investor type, 15% of the proceeds came from buy-and-hold investors, 15% from insurance companies, 15% from banks and the balance went to private banks.

The deal, which took only four days from the release of the offering circular to pricing on Friday, reflects the exceptional offshore interest in this burgeoning market. Its success will no doubt help the country position itself in the international capital markets, on a par with Russia, Turkey and Brazil.
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