In what is mostly still a volatile, unpredictable marketplace, an impressive number of landmark deals have been carried out by banks all over the world in the past 12 months. Here, The Banker recognises the best of them.

Africa

Bonds: Corporate 

WINNER: OCP $1.85bn inaugural issuance

Bookrunners: Barclays, JPMorgan, Morgan Stanley

Advisor: Rothschild

HIGHLY COMMENDED: First Rand Bank R2bn krugerrand-denominated bond

OCP, a primarily state-owned Moroccan fertiliser producer, tapped the bond markets for the first time on April 16, 2014, with a mammoth $1.85bn issuance. As well as being the first ever Moroccan corporate bond, it was also the largest and longest dated corporate bond to come out of any African country, excluding South Africa. 

Fertiliser may not be the most glamorous substance around, but there is no doubt that it is big business. The global industry is expected to hit a valuation of more than $180bn by the end of this decade, and OCP, rated at BBB- by Standard & Poor’s and Fitch, seems well placed to carve out a good position within it. Thanks to being 94.12% owned by the Moroccan government, it has exclusive rights to the massive reserves of phosphates located in the country’s soil, estimated by some to be 75% of the world’s total. OCP currently has 10 phosphate rock mines in operation, two processing plants, and an annual maximum production capacity of 32.2 million tonnes. 

The company took to the markets to help create a liquid presence in the global fertiliser benchmark space, and to establish its own credit presence in the eyes of investors by moving beyond its association as just a ward of the Moroccan state. 

Barclays, Morgan Stanley and JPMorgan operated as bookrunners on the deal, and staged investor roadshows targeting emerging market and investment grade accounts. One-on-one meetings were held with 84 investors. The deal came in a dual-tranche format – $1.25bn at a 10-year tenor with a coupon of 5.625% and $300m at a 30-year tenor with a coupon of 6.875%. The second tranche was tapped again on April 29 to bring the total issuance to $1.85bn. Significant portions of both tranches were taken up by US asset managers, with investors in the UK also taking 
a decent slice of the deal.

Bonds: SSA 

WINNER: Côte d’Ivoire $750m Eurobond Issue

Bookrunners: Deutsche Bank, BNP Paribas, Citi

Advisors: Bank of Africa, Rothschild

Throughout 2010 and 2011, things looked bleak in Côte d’Ivoire. In November 2010, 

a presidential election pitted incumbent Laurent Gbagbo against challenger Alassane Ouattara. The UN and most other observers declared Mr Ouattara the winner, but Mr Gbagbo had himself re-inaugurated, leading to mass unrest and, eventually, a second civil war that caused hundreds of deaths. 

The conflict was brought to a close relatively swiftly by intervention from French armed forces and the UN, with Mr Gbagbo arrested at his residence in April 2011. However, it had done immense damage to the Ivorian economy and civil society. The state defaulted on $2.3bn of Eurobonds in early February 2011, and was shut out of international borrowing markets. 

On July 23, 2014, the country issued its first Eurobond since the default, a $750m deal with Deutsche Bank, BNP Paribas and Citi acting as bookrunners (see Issuer Strategy, page 54). This was a huge achievement for the government, which has worked hard to reunite the country and rekindle economic growth. Ivorian gross domestic product grew by 8.7% in 2013, after tumbling by 4.4% in 2011. 

After a one-week roadshow in London, New York, Boston, San Francisco, Newport Beach and Los Angeles, demand for the debt was high, and the issuance was expanded from $500m to $750m to reflect this. The orderbook was eventually six times oversubscribed and recorded interest from more than 200 investors. The deal was prepared quickly in a three-month period, with rating workstreams with Moody’s and Fitch that resulted in an issue rating of B1/B. 

The bonds are senior unsecured instruments with a coupon of 5.625%, and will mature in 2024. The deal has opened up 
a new avenue of funding for the Ivorian government, giving it the option to issue further debt or tap existing investors for more funds. It has set a strong benchmark for further issuance of African sovereign debt.

Equities 

WINNER: Arabian Cement Company $110m IPO

Bookrunners: CI Capital, EFG Hermes

Instability is not an investor’s friend, and it is hard to think of a more unstable area of the world than the Middle East and north Africa (MENA) in recent years. After the 2011 Arab Spring first took root in Tunisia, Egypt soon found itself engulfed in a revolution. The long-standing autocrat Hosni Mubarak was swept from power, and since then power has swung back and forth between ex-military figures and Islamist politicians. 

The presidential election victory of Abdel Fattah el-Sisi in May 2014 provided some measure of calm, and allowed Egyptian companies to make a better case to investors. At around the same time, the Arabian Cement Company (ACC) launched 
a $110m initial public offering (IPO), the first from within Egypt since the revolution. The firm is the third largest cement producer in Egypt, with an annual cement production of about 5 million tonnes and a workforce of more than 1700. 

Assisted by MENA investment bank EFG Hermes, ACC successfully tapped into pent-up demand for Egyptian equity from investors all over the world. A number of high-profile investors took up a portion of the issuance, such as Franklin Templeton Investments and Coronation Fund Managers. Demand from high-net-worth individuals was also strong. The issuance as a whole was over-subscribed by 11.3 times in the private placement and by 18.5 times in the retail placement. The retail placement was therefore increased by 30% to meet demand. The total orderbook value eventually reached $1.5bn.  

The success of the placement proved the growing strength of the Egyptian economy, and led to a batch of new IPOs from other Egyptian corporates. This year, the value of Egyptian IPOs is expected to reach $1.75bn. 

In the aftermath of the issuance, ACC’s stock had increased by 93% by the end of 2014, significantly outperforming that of other publicly listed cement companies in Egypt, and the Egyptian Exchange’s EGX30 benchmark. 

FIG Capital Raising 

WINNER: Access Bank $400m inaugural subordinated debt deal

Bookrunners: Citi, Deutsche Bank, Goldman Sachs

The Nigerian economy endured a difficult 2014. The collapse in oil prices damaged exports and gross domestic product growth, and has deprived the government of a big chunk of its revenue stream. Although oil output has actually increased, analysts believe oil export earnings will drop by 20% to $67bn in 2015. This slump has instigated a nosedive in the value of the naira against the US dollar. Political turmoil and terrorist attacks in the country’s hinterland also damaged confidence. 

Despite these headwinds, it is still an attractive destination for investors’ cash. Access Bank, the country’s fourth largest bank by shareholder equity, took to the markets on June 17 last year and successfully executed an inaugural subordinated debt deal that will improve its capital adequacy. 

Opportunities for investors to get their hands on African subordinated debt do not come around frequently, making the bank’s $400m offering all the more noteworthy. It is the largest Tier 2 capital deal from a Nigerian bank. It is only the second time a Nigerian bank has gone to the market in this fashion, after First Bank of Nigeria’s $300m deal won in this category last year. 

Rated BB- by Standard & Poor’s, and B by Fitch, Access Bank brought in Deutsche Bank, Citi and Goldman Sachs as bookrunners and launched roadshows in London, New York and Los Angeles in the run up to the offering. The orderbook was eventually one-and-a-half times over-subscribed, and the deal as a whole achieved a coupon of 9.25%, with a single reset after five years. After that, the bonds will pay mid-swaps plus 767.7 basis points. The bonds will mature in 2021. 

Access Bank attracted investors from all over the world. Some 35% of uptake on the deal came from the US, 30% from within Nigeria, 26% from the UK and 9% from Europe and other regions. In terms of investor type, 70% of the deal went to fund managers, 20% to other banks and 10% to supranational agencies.

High-yield and leveraged finance 

WINNER: MetAir Investments R1.4bn preference shares and R750m credit facility

Bookrunner: Barclays

High-yield and leveraged finance deals have a reputation for complexity, and this example involving MetAir Investments does not disappoint, bringing in special purpose vehicles, Turkish subsidiaries, preference shares and credit facilities. 

In August 2014, the South African automotive parts manufacturer issued R1.4bn ($115.7m) in preference shares through its special purpose vehicle Inalex, the proceeds of which were used to repay the bridging finance used to fund the firm’s acquisition of Mutlu Aku, a Turkish battery manufacturer. 

A R750m senior revolving credit facility was also established via Nikisize, a wholly owned subsidiary of the firm. This will be used for financing the group’s working capital and capital expenditure. 

One of the main problems that needed to be addressed during the deal was equalising the ranking of claims under the preference shares and credit facility in the possible event of insolvency, and the legal treatment of any claims upon the receipt of partial payments. MetAir entrusted Barclays to deal with these issues as the sole bookrunner, sole advisor and sole global coordinator for the deal. Barclays also acted as the only counterparty to the foreign exchange hedging activity surrounding the deal. 

With this complexity in mind, the transaction was completed very quickly through a syndicate of three South African banks – Barclays’ Absa Bank, Standard Bank and Investec Bank. Demand for the deal was high, particularly considering the generally slow trading and investment backdrop at that time of year. The eventual price came in below the guidance set by Barclays. 

The preference shares come with a dividend rate of 69% of the South African prime rate. They are redeemable over five years with the first tranche redeemable only after three years and one month from the date of issue. The revolving credit facility will extend for five years and has an interest of 2.05% over the prevailing Johannesburg Interbank Agree Rate.

Infrastructure and project finance 

WINNER: Funding for the $623m Lake Turkana wind farm, Kenya

Mandated lead arrangers: African Development Bank, Nedbank, Standard Bank

HIGHLY COMMENDED: Cenpower Generation Company $900m financing for Kpone Independent Power Project, Ghana

Pitching a tent in a howling gale is difficult work. Tempers fray, fabric billows and poles go astray. It is not the sort of activity that typically inspires dreams of a massive wind farm exactly where the tent should be, but that is what it did for two Dutch farmers a few years ago when they attempted to camp out on the shores of Lake Turkana in Kenya. 

The wind in this area is so remarkable that in terms of direction, speed and consistency it is considered one of the best wind farm sites in the world. The raising of $623m for this project was completed in December last year, and though not a particularly large figure when compared with the sums raised for other infrastructure projects, it signifies an ambitious approach to green energy on the African continent. 

With a predicted energy production capacity of 310 megawatts, the wind farm promises to be the largest of its type in sub-Saharan Africa, and among the top 10 largest in the world. It is also the largest single private sector investment project in Kenya.

Nedbank, the African Development Bank and Standard Bank were appointed as mandated lead arrangers, with Nedbank executing all of the project’s interest rate hedges from its London trading room. The $623m finance package is comprised of equity, subordinated debt, senior debt and grant funding. The majority of the investment came from development banks and funds such as the Dutch development bank FMO, and the Eastern and Southern African Trade and Development Bank. 

The project will supply the cheapest energy in Kenya, and is projected to provide the equivalent of up to 20% of the currently installed energy generation capacity in the country. It is expected to save the Kenyan government more than €100m a year in fuel subsidies. The project involves upgrading 200 kilometres of roads around the wind farm site, and the establishment of an electric grid collection system, a village and 
a high-voltage substation.

Islamic Finance 

WINNER: South Africa $500m sovereign sukuk

Bookrunners: BNP Paribas, KFH Investment, Standard Bank

Islamic finance issuance is still a fairly niche market in countries outside the Middle East and wider Muslim world. But with the growing power of investment from countries in the Gulf, such instruments are becoming more commonplace. 

The $500m sukuk issuance by the South African sovereign capital fund in September 2014 was the first of its kind for the country. It was also only the third ever sukuk from a non-Islamic issuer into the Eurobond market, and, with a maturity date of June 2020, was the longest dated instrument of its kind from a new sovereign issuer in 2014. 

The deal had been in the works since 2010, when changes to the country’s tax law prompted the South African government to announce a new sukuk strategy. In 2011, Standard Bank, BNP Paribas and KFJ Investment were appointed as joint-lead arrangers, and the following three years were spent building the legal frameworks required for sukuk issuance in a non-Islamic country. For the South African national treasury, Islamic finance issuance presents an opportunity to diversify the sovereign’s funding sources, and establish it as a gateway for Islamic investment in the continent. 

Sukuk bonds are underpinned by a portfolio of assets that provide an income stream for the lender in lieu of interest payments. Finding a suitable collection of assets was 
a challenge for the South African authorities, with the country’s Department of Water Assets finally identified as a suitable source. 

Investors were courted during a week-long roadshow that took in London, Dubai, Abu Dhabi, Riyadh, Qatar and Kuala Lumpur. Many of the investors contacted had had no prior exposure to South African credit due to their Islamic finance mandates. The deal was eventually four times oversubscribed, with a rating of Baa1/BBB-/BBB and a coupon of 3.9%. This was at the tight end of prior guidance. Fifty-two per cent of the investment in the deal came from the Middle East, 18% from the UK and about 8% to 9% each from the US, continental Europe and Asia.

Loans 

WINNER: Ghana Cocoa Board pre-export financing facility

Mandated lead arrangers: Barclays, Commerzbank, Deutsche Bank, KFW Bank, Natixis

Serving the world’s sweet tooth is big business in Ghana. Cocoa is the country’s main cash crop, it is its biggest agricultural export, and by the end of this year Ghana is expected to become the largest producer of cocoa in the world. 

Such an industry, and the finance supporting it, is dependent on a good harvest. Fortunately, 2015 is shaping up to be a good crop year, with a forecasted yield of 900,000 tonnes, up from 800,000 tonnes in the last growing season. 

Since 1979, Ghanaian cocoa farmers have sold their produce at fixed prices to the Ghana Cocoa Board (Cocobod), a government-controlled body that then exports the crop to the international market. Depending on the quality of the annual yield, between 10% and 30% of the crop is sold internally by Cocobod to boost the Ghanaian economy. 

For the past 21 years, Cocobod has financed its purchase of the cocoa crop with a syndicated loan system arranged via a consortium of international banks. The most recent, signed in September 2014, reached $1.7bn in size, an increase of $500m on the previous year. Cocobod was also able to arrange an on-demand additional sum of $200m, which can be drawn between April and May 2015, for assistance in purchasing produce from the season’s secondary crop. 

With its default-free record, competition for this deal was intense, and in September it was 15% oversubscribed. As a consequence, the interest rate on the loan is just 1.2%.

Such is the heft of the cocoa industry in Ghana that the renewal of the deal helped stablise the country’s currency. From mid-July to late August 2014, the cedi lost about 30% of its value against the US dollar, then recovered swiftly at the beginning of September. The loan also increased the country’s supply of US dollars, and increased cedi liquidity, as Cocobod pays the proceeds of the loan out to farmers in a series of cedi-denominated tranches.

M&A 

WINNER: David Jones R21bn take over by Woolworths

Advisors to David Jones: Gresham Advisory Partners, Macquarie Capital

Advisors to Woolworths: Rothschild, Standard Bank

David Jones, an upmarket Australian department store chain, had already been the target of acquisition attempts when South African retailer Woolworths came calling in the early months of 2014. 

Woolworths had to put together an enticing offer in short order, as an offer from Australian retailer Myer had already been rejected in October 2013, and it was known that another offer from the same firm was in the pipeline. 

With Standard Bank and Rothschild acting as co-financial advisors, and the former as lead debt provider, transaction sponsor and joint bookrunner, Woolworths made 
a bid of R21bn ($1.73bn) for a full acquisition. This was comprised of rand-denominated debt, Australian dollar-denominated debt and a rand-denominated bridge loan to be repaid at a later date through a rights offer. Standard Bank provided a letter of support for R11.4bn, which added essential credibility to Woolworths’ position as a foreign bidder. Woolworths is one of the top 40 companies listed on the Johannesburg Stock Exchange, and had a market capitalisation of R63.5bn as of mid-July 2014. 

The original offer from Myer was structured as a merger of equals and valued David Jones at roughly A$1.5bn, thus offering A$85m ($64.41m) a year of cost savings for the firm. This was rejected, but Myer reiterated its interest in the acquisition in February 2014, pushing Woolworths into making the offer quickly. The offer was accepted in April, and finalised by the middle of the year. In August, David Jones’ chief executive officer Paul Zahra left the firm, and was replaced by Iain Nairn, who had previously led fashion retailer Country Road. 

The acquisition offers Woolworths the opportunity to establish itself as a leading retailer in the southern hemisphere and introduce greater efficiency to group activities – for instance, the ability to match seasonality across its own and David Jones products gives it a competitive advantage over entrants from the northern hemisphere. 

Woolworths hopes to gain annual pre-tax profits of A$130m from the acquisition within five years.

Restructuring 

WINNER: Alexander Forbes R6bn capital and corporate restructuring

Advisors: Deutsche Bank, Rand Merchant Bank

When Alexander Forbes was de-listed from the Johannesburg Stock Exchange (JSE) in 2007 and taken into the hands of private equity investors, it faced a host of problems. The South African financial services group, which provides employee benefits solutions to institutional clients, lacked strategic direction, had reputational issues thanks to a handful of scandals, and had accumulated an overleveraged capital structure.

A restructuring was obviously a top priority, but the requirement that any such process must ultimately allow the new private equity shareholders to exit in full was a significant hurdle. 

Rand Merchant Bank was brought in to advise on the process, with the eventual aim of placing the company back on the JSE. In 2013, one of the firm’s largest businesses, insurance provider Guardrisk, was sold to MMI Holdings for R1.6bn ($132.09m). Alexander Forbes’ balance sheet was then restructured via a complex debt-for-equity swap. Various debentures held by the firm were settled in cash, while preference shares were disposed of or redeemed through the release of new shares. This allowed the private equity investors to relinquish control and for the firm to launch an initial public offering (IPO). 

This took place in July with an issuance of R9.76bn. Much of the orderbook was comprised of institutional investors, with one of the original private equity investors, the Ontario Teachers’ Pension Plan Board, ending up with 5% of the total. In the month prior to the listing, UK-based global consulting firm Mercer acquired a 34% stake in Alexander Forbes. 

The IPO was enabled by the successful restructure and the clean private equity exit, which emphasised the group’s positive equity story and new, uncluttered capital structure, which allows the group to meet new requirements set by the local supervisory authorities.

Securitisation and structured finance 

WINNER: INT Towers $800m facility 

Bookrunners: Barclays, Citi, Ecobank Nigeria, Rand Merchant Bank, Standard Bank, Standard Chartered Bank, United Bank for Africa

HIGHLY COMMENDED: EcoBank Malawi $60m letters of credit for fuel importation for Reserve Bank of Malawi

Telecommunications is big business in Africa. In a continent largely lacking in landline infrastructure, mobile and wireless services rule the roost. More than half of Africa’s 1 billion people are now subscribed to 

a mobile network. At the turn of the millennium, that figure was just 16 million. 

Capital expenditure in this industry is expected to reach $145bn by the end of 2015, about double what it was in 2008. Much of that investment goes into constructing and maintaining the vast network of signal towers that are needed to bring phone and internet services to the bustling cities and far-flung reaches of the continent. 

As Africa’s most populous country, Nigeria has more need than most for such investment, and it has a number of domestic companies that focus on this area. INT Towers was created when IHS Holdings, one of Nigeria’s largest tower management companies, acquired 9000 towers from MTN Nigeria Communication. Both IHS and MTN are shareholders in INT, though IHS maintains effective managerial control. 

The acquisition involved a restructuring of tower assets by both INT and MTN to achieve capital and operational cost efficiencies. As part of this restructuring, a seven-year, $800m facility was raised from Rand Merchant Bank, Citi, Standard Chartered Bank, Barclays, Ecobank Nigeria, Standard Bank and United Bank for Africa. 

This is the largest tower-related financing deal in Africa to date, and is split into 
a US dollar and a naira tranche to minimise currency risks. Both tranches may be drawn out over a set period of time to reflect the long-term nature of cashflows in the telecoms tower industry. The repayment profile has also been designed to accommodate forecasted revenues. INT also has the option to introduce a bond tranche or extend the facility to a longer tenor. The facility will be primarily used for capital expenditure to support the power needs of the towers and to improve the surrounding infrastructure.

Americas

Bonds: Corporate 

WINNER: Pemex $6bn jumbo notes offering

Bookrunners: BBVA, Citi, HSBC, Morgan Stanley

Record-breaking deals hardly go unnoticed, particularly when they are delivered in a highly volatile environment. The $6bn of senior unsecured notes issued by Mexican oil giant Pemex falls in this category. It was the largest ever 30-year fundraising transaction for a Latin American corporate; the largest ever 30-year bond by an emerging market corporate; and the largest deal ever by a Mexican corporate.

Of the three tranches of the deal, the 30-year one was indeed the biggest, at $3bn. Its 3.125% yield was a relatively modest 330 basis points (bps) over the benchmark. The other two tranches of $1.5bn each have a five- and 10-year maturity and yields of 1.65% and 1.721%, respectively – 235bps and 280bps over their benchmarks. 

Mexico’s energy reform had opened up the local market to private sector investors and reinvigorated the country’s appeal to foreign capital. Plummeting oil prices throughout 2014, however, chilled much of the initial enthusiasm and as the fifth largest crude oil producer in the world, Pemex, was not immune to the price slide. The offering is particularly impressive as it was brought to the market while the price of crude oil was volatile early this year. Indeed, on the very day of announcement, after an initial rally with the price being more than $50 per barrel, crude oil closed the day at about $46 per barrel. 

That particular day, however, proved to be an astute launch date.  The deal bookrunners spotted a window in the market on January 15, with only one other trade taking place in the US dollar market and no competition from Latin America issuers. This allowed Pemex to soak up much of the liquidity available in the primary market.

Orderbooks filled up quickly and the interest from good quality investors encouraged Pemex to raise its initial $4bn offering. North American investors were the most populous group, covering between 60% and 68% across the three tranches, followed by European and Latin American money. Of these, fund managers placed the largest orders and banks secured about one-third of all tranches.

Bonds: SSA 

WINNER: CAF €750m notes

Bookrunners: BBVA, Crédit Agricole, Credit Suisse, Deutsche Bank, HSBC

HIGHLY COMMENDED: Chile €800m and $1.06bn notes

An established development bank that has achieved an AA rating is not the hardest of sales, but what deserves praise in CAF’s €750 notes offering is the main target market: sovereigns, supranationals and agencies (SSA), rather than the traditional investment-grade and emerging market investors – a strategy that has broadened the issuers’ funding options. 

The timing of the transaction is also noteworthy. Launched at the end of May 2014, the euro-denominated notes took full advantage of the anticipated quantitative easing programme by the European Central Bank, which would free up capital and spur investors’ search for further yield. While offering good returns to SSA investors, the notes were priced at a tight 75 basis points (bps) over the mid-swap reference rate, which went down to as low as 40bps in the secondary market, indicating the strength of the offer. 

The books were, unsurprisingly, flooded with interest. As CAF went to the market, total orders reached €2.5bn, three times the offer, with strong participation from central banks, agencies and sovereign wealth funds, as well as French and German real money accounts. The transaction highlights the good relations between the Latin American bank and European investors, in particular. 

The deal followed a number of successful private placements and roadshows across Europe, which reassured CAF about its appeal to good quality public sector investors in the region, as well as to private investors, who were already familiar with the issuer. Central banks and official institutions secured a 36% of the notes, highlighting the success of the SSA approach, while fund managers showed equally substantial interest and represented 40% of purchases.

Also of note are the  €800m and $1.06bn 10-year notes by Chile, the first Latin American sovereign to issue a simultaneous dual euro and US dollar debt transaction in both the European and US markets. The timing and structure of the deal resulted in a record low coupon for an emerging market issuer in the euro market and a very low spread for the US dollar notes.

Equities 

WINNER: Paramount $2.64bn IPO

Bookrunners: Bank of America Merrill Lynch, Deutsche Bank, Morgan Stanley, Wells Fargo

HIGHLY COMMENDED: Fibra Prologis $605m IPO; Fibra Uno $2.5bn follow-on offering

The real estate sector has generated some of the most interesting equity stories in the Americas of late. Paramount’s $2.64bn initial public offering (IPO) in November 2014 was the largest ever property real estate investment trust (REIT) listing in the US. The issuer is one of the largest real estate companies in the country and is heavily invested in the office space market of New York, with additional portfolios in Washington, DC and San Francisco. 

Despite general volatility in the property space, Paramount was able to generate an aggregate gross unlevered internal rate of return of 18.5% since 1995 – this is the ratio used to calculate the investments’ various future cash flows. 

Its IPO is 60% larger than the previous record-holder, real estate firm Douglas Emmett, which floated in 2006. Structuring agent Bank of America Merrill Lynch had started planning Paramount’s flotation a year earlier and provided intensive pre-marketing activities, which included a mix of individual meetings and property tours for sovereign wealth funds as well as high-quality long-only and REIT-specialist investors. An eight-day roadshow allowed Paramount to meet with a total of 175 investors. Such efforts resulted in demand from nearly twice as many investor accounts, an oversubscribed orderbook and an offer share price of $17.5, right at the middle of the $16 to $19 suggested range.

In Mexico, the relatively new REIT market, known as Fibra, had also delivered some impressive deals. Almost equal in value to Paramount’s listing was Fibra Uno’s $2.5bn follow-on equity offer. Even more impressive was Fibra Prologis’ $605m flotation, which re-opened the Latin American IPO market in June last year, after a number of first-time issuers had previously withdrawn. The deal attracted much interest from long-only international funds and real estate-focused investors, resulting in a $1bn orderbook.

FIG Capital Raising 

WINNER: TIAA Asset Management Finance Company $2bn five-year and 10-year senior notes

Bookrunners: Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley, RBC, RBS, UBS, Wells Fargo

Not only the largest asset management US dollar-denominated debt transaction of recent years, TIAA Asset Management Finance Company’s $2bn unsecured senior notes deal was very tightly priced. The five-year tranche was ultimately priced at a 150 basis points (bps) over the US treasury bills benchmark for a 2.95% coupon; while the 10-year notes secured a 187.5bps spread for a 4.125% coupon. The slide from initial to final pricing was particularly noteworthy in the five-year tranche, as it resulted in steeper five-year/10-year yield curves, which indicates better market expectations about the issuer’s future growth.

TIAA Asset Management Finance Company is a subsidiary holding company of the Teachers Insurance and Annuity Association of America (TIAA) and was created to hold the equity interests in Nuveen Investments, which TIAA had previously acquired. The funds have been used to repay the $382m intercompany cash advance from TIAA and fund the redemption of Nuveen’s existing notes.

The market’s positive price treatment was mirrored in Fitch’s AA- rating of the unsecured notes, in line with the rating agency’s view that Nuveen is of strategic importance to the buyer, providing synergies in areas crucial to TIAA, such as the mutual fund, asset management, and retirement services markets.

The notes were successfully placed thanks also to an extensive marketing campaign which resulted in 60 meetings with investors in New York, Boston and Chicago. This resulted in an oversubscribed orderbook and the size of the transaction was ultimately bumped up. More than half of allocations for both the five-year and 10-year notes went to asset managers, about 30% was taken up by insurance firms and the remainder split between hedge funds and other investors

High-yield and leveraged finance 

WINNER: Chrysler Group $2.755bn two-tranche, high-yield secured senior notes

Bookrunners: Bank of America Merrill Lynch, Barclays, Citi, Goldman Sachs, JPMorgan, Morgan Stanley, UBS

HIGHLY COMMENDED: Texas Competitive Electric Holdings Company $4.48bn senior secured super priority debtor-in-possession credit facilities; Union Andina de Cementos’s $625m seven-year 5.875% senior notes

A monumental transaction, the $2.755bn refinancing of Chrysler’s debt is not only the largest ever add-on deal in the high-yield market, it also marks a crucial milestone for the turnaround of the troubled car manufacturer. 

Along with new term loans, the proceeds of the $1.375bn five-year and $1.38bn seven-year secured senior notes, yielding 8% and 8.25%, respectively, were used to repay Chrysler’s $4.9bn debt owed to the Voluntary Employees Beneficiary Association (VEBA) Trust – such debt, known as the VEBA Trust note, was issued by the automaker as part of a settlement agreement with the United Auto Workers Trust in June 2009, which led Chrysler out of bankruptcy. 

The debt repayment, along with the sale of shares held by VEBA Trust to Fiat to grant full ownership to the Italian automaker, allowed the creation of a the Fiat Chrysler Automobiles group. This milestone transaction allowed the fully merged group to plan for future growth – rather than be preoccupied with past, outstanding debt.

The success of the high-yield notes was achieved also by a concise and comprehensive marketing strategy. Limited to two days with meetings in New York and Boston, Chrysler’s bookrunners generated a significantly oversubscribed orderbook from more than 170 investor accounts, which included established high-yield specialists.

Also of note are Competitive Electric Holdings Company’s $4.48bn senior secured credit facilities, which the company raised while still in bankruptcy, as well as Union Andina de Cementos’s $625m seven-year 5.875% senior notes, the company’s inaugural international bond offering and the largest high-yield notes by a Peruvian corporate in the US’s 144A market, which is open to foreign issuers that do not report financial statements under US rule.

Infrastructure and project finance 

WINNER: Freeport LNG Liquefaction Development , Trains 1 and 2 $11bn financing

Financial advisor: Macquarie Capital 

Bookrunners: Barclays, Bank of Montreal, Scotiabank, Bank of Tokyo Mitsubishi, BBVA, Crédit Agricole, CIBC, redit Suisse, Deutsche Bank, Goldman Sachs, HSBC, ICBC, ING, Intesa Sanpaolo, Lloyds Bank, Metropolitan Life Insurance Co, Mizuho, Natixis, RBC, RBS, Santander, SMBC, Société Générale, Standard Chartered

Ten years ago, prior to the shale gas revolution, the US was facing major increases in liquefied natural gas (LNG) imports. That is when construction had started on the Freeport LNG Development, which would serve national consumption. As new technology and geological discoveries turned this hypothesis upside down, making the US a potential exporter, rather than importer, of gas, Freeport decided to also look abroad. 

Such a plan resulted in the addition of a liquefaction development to Freeport’s Quintana Island terminal, in Texas, comprising two so-called trains to transport LNG and which would add 13.2 million metric tonnes per year of nominal liquefaction capability. It also resulted in the $11bn financing package for the two viaducts, the largest non-recourse project financing ever with no completion guarantee by the sponsor or cash equity provider on either train. 

This is the first ever LNG structure to use liquefaction tolling agreements where the project takes no upstream or downstream risk – so gas sourcing and shipping risks are removed from the equation. Another innovative aspect is that the entity behind each train only finances 50% of the facility but has the security from the other train that at least one LNG viaduct can be built. The project will be operated as one integrated plant with each train consortium having access to the entire facility to serve their customers.

Cleverly, the financing structure maximised available financing sources. In Train 1, Japan’s Osaka Gas and Chubu Electric Power provided both the off-take and cash equity, while Japan Bank for International Cooperation provided a direct loan and Nippon Export provided loan insurance to six financing banks. In Train 2, BP Energy was the off-taker, infrastructure fund IFM Investors the cash equity provider, while 25 lenders made available additional financing.

Islamic Finance 

WINNER: IFFIm $500m sukuk 

Bookrunners: Barwa Bank, CIMB, National Bank of Abu Dhabi, NCB Capital, Standard Chartered

The International Finance Facility for Immunisation (IFFIm) was formed a decade ago as a financing vehicle for the Washington, DC-based Global Alliance for Vaccines and Immunisation (GAVI), which provides immunisation to children in the world’s poorest countries. The vehicle, for which the World Bank serves as treasurer, dips into the international debt market to raise funds in support of GAVI activities – a trend followed by other not-for-profit organisations, which increasingly use bonds to fund their development and humanitarian projects. But what is impressive about IFFIm’s $500m sukuk is that, for the first time ever, it tapped into the Islamic investor community. Furthermore, the deal is the largest inaugural sukuk by a supranational organisation.

IFFIm’s sukuk is a natural fit with the Islamic investor community, which is forbidden from investing in ventures that are not deemed ethical, such as businesses connected to gambling, tobacco or alcohol. For the first time, these investors have been offered a debt instrument which not only would be allowed in Islamic investment portfolios, but which is ostensibly ethical. Furthermore, the deal provided IFFIm with a new investor base, something that can open the door to similar deals by other not-for-profit organisations – particularly for those that have substantial activities in countries with large Muslim communities.

Following a series of meetings with key investors in the United Arab Emirates and Qatar, the three-year floating rate instrument received significant interest from investors and was tightly priced at 15 basis points over the three-month Libor benchmark. Enthusiasm from Middle Eastern accounts was accompanied by a healthy take-up by Islamic investors elsewhere in the world. Besides the 68% secured by Middle East and Africa-based investors, Asian accounts took 21% of the oversubscribed book, followed by Europe’s 11%. Banks took 74%, and central banks and other official institutions locked down 26% of the offering. 

Loans 

WINNER: Medtronic $16.3bn acquisition finance and $3.5bn revolving loan 

Sole lead arranger and bookrunner: Bank of America Merrill Lynch 

Syndication (bridge, term and revolving loans): Deutsche Bank, JPMorgan, Barclays, Citi, Morgan Stanley MUFG, RBS, UBS, Mizuho Bank, HSBC Securities, US Bank, Wells Fargo

Syndication (term and revolving loans only): BNP Paribas, Scotiabank, Bank of New York 

Syndication (revolving loan only): Goldman Sachs

Lending to finance an acquisition that clearly improves the bidder’s market position, adds synergies and provides significant tax breaks is something of a no-brainer. Yet when the amount in question is a mammoth $16.3bn, both underwriting and syndication efforts must be applauded – especially if the underwriting has been carried out by one bank only. 

The $42.9bn acquisition of Covidien by the world’s largest standalone medical devices manufacturer Medtronic provided the Minnesota-based firm with Covidien’s portfolio of hospital equipment, from surgical staplers to ventilators. Run out of Massachusetts, Covidien is domiciled in Ireland, a status that provides Medtronic with a more favourable tax treatment. This status also required, however, evidence of a certain amount of funds from the bidder, which is why a heavyweight effort was required by Medtronic’s banks. 

Bank of America Merrill Lynch (BAML) solely underwrote a total of $16.3bn in senior unsecured bridge loans, which totalled the acquisition’s cash consideration. The client made full use of the debt available, which resulted in a $11.3bn 364-day bridge loan to capital markets, syndicated among 12 banks, and a $5bn senior unsecured three-year term loan, provided by the same group of lenders and the other three banks.

In addition to the acquisition financing, and supported by the syndication efforts of BAML, the company also managed to amend, extend and increase the value of its existing $2.25bn revolving loan facility to $3.5bn with the participation of all lenders that were part of the bridge and term loans. All syndications were completed with tight pricing and within the timeline required by the Irish takeover panel.

M&A  

WINNER: Telefónica 22.2bn reais acquisition of Global Village Telecom 

Advisor to Telefónica’s Brazil operations: Itaú BBA

Advisor to Telefónica: JPMorgan

Advisors to Vivendi: Credit Suisse, Goldman Sachs

Spain’s Telefonica has finally secured a larger chunk of Brazil’s telecom market after its earlier attempt to purchase Global Village Telecom (GVT) in 2009. At that time, it was France’s Vivendi that snatched the much-coveted firm. 

Merged with Telefónica’s existing operations in Brazil, its second largest market after Spain, the group is the new leader in terms of total accesses – mobile, landline, broadband and pay-TV. Indeed the combined entity has a broader service offering and penetration, a nationwide footprint, and a 29% share of the market’s total revenues. It also offers the bidder greater penetration in growing areas where Telefonica Brasil, the local business operating under the Vivo brand, was not hugely present. 

While Vivo is the largest provider of mobile phone services in Brazil, its internet presence has been more limited. GVT, however, has an extensive fibre network serving metropolitan areas, and this will boost Telefonica Brasil’s mobile connections outside of São Paulo, as well as combine and further develop the pay-TV business and achieve significant cost synergies for the new group.

The deal is a good fit with Telefónica’s growth strategy, as the company has been cutting back its presence across Europe and continues to expand in Latin America.

Under the terms of the sale, Vivendi has received 13.9bn reais ($4.56bn) in cash and 8.3bn reais in new shares issued by Telefônica Brasil, which represents about 12% of the combined entity. In addition, Telefónica committed to exchange its 4.7% stake in Telecom Italia, which also has operations in Brazil, with Vivendi’s new Vivo shares – an option that came in useful in anticipating any antitrust issues that could have delayed the deal, given that, on approving the acquisition in March this year, Brazil’s authorities requested the execution of such share exchange.

Restructuring 

WINNER: City of Detroit bankruptcy exit

Advisor to City of Detroit: Miller Buckfire

Advisor to Official Committee of Retirees of the City of Detroit: Lazard

Thanks to a cleverly executed plan, the City of Detroit’s restructuring is one of the most successful and high-stakes exits from bankruptcy in recent years. Detroit had been going through tough times. As it filed for bankruptcy in July 2013, it had the highest crime rate of any large US city, extremely low response times for both its police and fire services, many of its buildings were lying derelict, and its unemployment rate was rising. And in one of the most contentious issues of the restructuring, Detroit was set to become insolvent on its pension plans.

Detroit’s advisor, Miller Buckfire, successfully restructured a total of $16.7bn-worth of obligations and, along with the advisors to the city’s retirees, Lazard, negotiated a deal that satisfied the needs of the more than 20,000 retirees who had total claims exceeding $7bn. Other creditors’ expectations were also satisfied, allowing Detroit to reduce its financial burden and invest in its regeneration.

Of note is how the restructuring protected the Detroit Institute of Art (DIA), technically an asset and therefore under threat from creditors who wanted to sell its valuable artwork. 

Once sealed off from the bankruptcy claims, the DIA became an integral part of the negotiations with retirees. Along with a number of local and national foundations and the state of Michigan, the DIA joined a $816m fund to lessen the cuts to the city’s severely underfunded pension plan. 

Many other key achievements were reached during bankruptcy. A plan to fix the city’s troubled water system was put together, electrical operations were transferred to a more reliable and cost-effective platform, garbage collection was 
privatised, 23 new ambulances were added to Detroit’s emergency services and 100 new patrol cars were made available to the police department.

Securitisation and structured finance 

WINNER: RioPrevidência $3.1bn and 2.4bn reais oil royalties securitisation

Joint lead managers: BB Securities, BNP Paribas

HIGHLY COMMENDED: Toyota $1.75bn green asset-backed security

At a total value of $4.2bn, RioPrevidência’s inaugural issuance of three-tranche, US dollar and Brazilian reais-denominated senior secured notes is the largest ever emerging markets structured bond. 

RioPrevidência is an autonomous government agency handling pension benefits for the employees of Rio de Janeiro state – Brazil’s largest oil-producing state, which is responsible for more than 70% of the country’s total production. The notes were sold thorough a special purpose vehicle created by the agency, Rio Oil Finance Trust, and were secured by 100% of the oil royalties owed to Rio de Janeiro by oil and gas producers operating in the territory.

The first two notes were sold in parallel: $2bn, 10-year notes for a coupon of 6.25%, which targeted international investors; and 2.4bn reais ($787.7m), eight-year local bonds, known as debentures, with a 16.25% coupon. Both performed exceedingly well. The international offer, in particular, generated an orderbook three-times oversubscribed with 78% of allocations eventually being taken up by US investors, 16% by accounts from Europe, the Middle East and Africa, and 7% by Latin American and Asian investors. 

The notes were successful, making the sale of the subsequent notes even smoother. After a short, two-day roadshow that relied only on phone calls, the $1.1bn 12-year notes were sold with a coupon of 6.75%, a tight rate given the offering’s longer tenor, and an indication of investors’ confidence in the credit quality of the issuer.

Of note is also Toyota’s $1.75bn green asset-back security (ABS) debt offering, the first ever green bond to be backed by auto receivables and the largest ever ABS issuance for Toyota, which is a leader in the environmentally friendly car market. The deal is likely to encourage the growth of financing tools for green vehicles.

Asia-Pacific

Bonds: Corporate 

WINNER: Alibaba Group Holding $8bn bond

Bookrunners: Citi, Deutsche Bank, JPMorgan, Morgan Stanley

HIGHLY COMMENDED: EDL-Generation Public Company Bt6.5bn bond

Alibaba’s $8bn six-tranche corporate bond was a record-breaker. It marked the largest international bond issuance ever by an Asian issuer and the largest debut issuance of all time. Even its orderbook – which peaked at an impressive $55bn – was the second largest recorded book for a US dollar issue to date. The bond reached full subscription in only 90 minutes. 

What is even more impressive is that the company was able to raise this substantial sum only two weeks after its gargantuan $25bn initial public offering in November 2014 – the largest in history.

The transaction constituted six tranches – five fixed and one floating rate note (FRN) – which spanned across the maturity curve. The former were a $1bn, three-year tranche; a $2.25bn, five-year tranche; a $1.5bn, seven-year tranche; a $2.25bn, 10-year tranche and a $700m, 20-year tranche. They paid respective coupons of 1.625%, 2.5%, 3.125%, 3.6% and 4.5%.

The FRN had a three-year maturity and grew to $300m. It paid a spread of three-month Libor plus 52 basis points. Demand for the deal was strong to the point that Alibaba managed to avoid paying the premium that Chinese borrowers normally pay in the US dollar bond market.

Meanwhile, EDL-Generation Public Company’s Bt6.5bn ($200m) bond, though smaller in scale than the Alibaba behemoth, marked a significant step in the development of local capital markets in the Association of South-east Asian Nations (Asean).

The deal was the first corporate issuer from the CLMV (Cambodia, Laos, Myanmar and Vietnam) countries to enter Thailand’s local bond market, and the largest bond issuance to date by a Lao issuer. This is especially important since the CLMV grouping refers to the latest countries to have joined Asean that are deemed the least developed within the group.

As the Asean Economic Community (AEC) is set on liberalising and strengthening the region’s financial sectors, deals such as EDL-Generation’s are key to deepening Asean’s capital markets.

Bonds: SSA 

WINNER: Republic of Indonesia $4bn bond

Bookrunners: Bank of America Merrill Lynch, Citi, Deutsche Bank

HIGHLY COMMENDED: Republic of Indonesia €1bn bond, South Korea $2bn-equivalent dual-currency bond

Indonesia’s $4bn dual-tranche bond, which was priced in January 2014, was a turning point for the sovereign issuer in that it opened up the US dollar bond market for the issuer to price deals of significant size. Indonesia priced another $4bn dual-tranche bond via HSBC a year later, in January 2015, on the back of the 2014 deal. This helped it front-load this year’s international capital markets funding in a very cost-effective manner.

The 2014 deal marked the largest ever transaction and orderbook – orders grew to $17.5bn – for any Indonesian borrower. It was the largest ever transaction priced by an Asian sovereign at that time. It also matched the sovereign’s entire issuance volume in conventional US dollar markets in 2013, further underscoring the leap this deal represented in terms of Indonesia’s scope and traction in the dollar bond market.

The deal was even more significant considering the two tranches carried long-term maturities, which are not particularly popular. The bond included a $2bn tranche with a 2024 maturity and a 5.875% coupon, as well as a $2bn tranche with a 2044 maturity paying 6.75%.

Indonesia also showed strongly in the euro market in 2014 with its debut note in the currency – a €1bn bond managed by Citi. This also marked the first sovereign euro-denominated issuance from south and south-east Asia since 2006. The fact that 58% of the deal was bought by European investors is testament to Indonesia’s success in sourcing new buyers.

Elsewhere, South Korea’s dual-currency $1.8bn-equivalent bond in US dollars and euros is also noteworthy. This was the first dual-currency note for the issuer since 2006. It constituted a $1bn tranche with an unprecedented 30-year tenor for South Korea and a €750m 10-year tranche. Bank of America Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Korea Development Bank and Samsung Securities managed the deal.

Equities 

WINNER: Alibaba $25bn IPO

Sole advisor: Rothschild

Bookrunners: Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley

Lead managers: Bank of China International, CICC, CLSA, DBS, HSBC, Mizuho, Pacific Crest, Stifel Nicolaus, Wells Fargo

Senior co-managers: BNP Paribas, Evercore, Raymond James, SunTrust

HIGHLY COMMENDED: 7-Eleven Malaysia RM834m IPO

Alibaba’s deal made history as being the largest initial public offering (IPO) of all time, at $25bn. And regardless of what is to come, it will remain one of the most talked-about IPOs, involving investors from all over the globe. The deal was equivalent to more than 50% of all money raised in the US dollar IPO market in 2014. Though the final size is already impressive, the final book was 13 times covered and generated $275bn in gross demand. The deal was already covered shortly after its launch. Almost 2000 individual orders were generated during the deal’s marketing period. US investors accounted for most of the transaction, with the remainder split among Asia, Europe and the Middle East.

The deal also stood out for the high-quality, long-term professional investors involved. The IPO was priced at $68 per share, at the top end of the upwardly revised filing range. The price range increased from $60 to $66 per share to $66 to $68 per share three days prior to pricing.

In terms of equities deals in Asia-Pacific, it is also worth mentioning 7-Eleven Malaysia’s RM834m ($226.2m) IPO, since it represents a further step in developing local capital markets in the region. Arranged by Maybank, it was also the largest retail sector IPO in Malaysia to date. 

The deal included eight high-quality foreign and domestic cornerstone investors which subscribed to 50.5% of the total offering. Important for the market’s development, the transaction attracted five new cornerstone investors to Malaysia’s 
IPO sector.

FIG Capital Raising 

WINNER: Bank of China $6.5bn additional tier 1 offshore preference shares

Bookrunners: Bank of China, BNP Paribas, China Merchants Securities (Hong Kong), Citi, Citic Securities, Credit Suisse, HSBC, Morgan Stanley, Standard Chartered Bank

HIGHLY COMMENDED: Bank of Tokyo-Mitsubishi $23m multi-currency sukuk wakala, ICBC Rmb35bn triple-tranche additional Tier 1 preference shares

Bank of China’s $6.5bn preferred shares transaction marked the introduction of a new asset class in China. It was the debut offshore Basel III-compliant additional Tier 1 capital transaction issued directly by a Chinese bank, excluding Hong Kong.  It was the largest single US dollar bank capital tranche globally and the largest fixed-income offering out of Asia. Its orderbook reached $21.8bn, underscoring the deal’s rarity value and appetite for Chinese banks.

The deal is perpetual with a non-call period of five years. It was priced 12.5 basis points inside initial price guidance, at 6.75%. There is a compulsory conversion into H-shares at a fixed conversion price upon the trigger event (when the common equity Tier 1 ratio hits 5.125%, or when the bank is no longer viable). The deal increased the bank’s common equity Tier 1 capital adequacy ratio to 10.12% from 9.7%. 

Following Bank of China’s debut, ICBC priced a triple-tranche multi-currency Rmb35bn-equivalent ($5.7bn) Basel III-compliant additional Tier 1 preference share transaction in US dollars, euros and offshore renminbi (CNH) in a deal that is highly commended.

This was the first ever offshore renminbi and euro-denominated deal of this kind out of Asia. The largest recorded non-sovereign bond issue in the currency, the CNH12bn tranche added depth and variety to the market. ICBC’s deal was the largest multi-currency bank capital transaction ever completed out of the Asia-Pacific region.

BTMU’s $23m multi-currency sukuk wakala in yen and US dollars is highly commended too, as it broadened the sukuk offering in key Islamic finance market Malaysia. The deal marked the first ever yen-dominated sukuk and the first sukuk issuance from a Japanese commercial bank in the Malaysian market.

High-yield and leveraged finance 

WINNER: Greenko Dutch BV $550m high-yield bond

Bookrunners: Barclays, Deutsche Bank, Investec, JPMorgan, Standard Chartered

HIGHLY COMMENDED: Won1345bn leveraged buyout of ADT Korea by the Carlyle Group

Energy company Greenko became the first Indian renewable energy company to issue a high-yield bond to date. The $550m, five-year bond with a non-call period of three years and an 8% coupon is the largest inaugural bond printed by an Indian borrower.

The bond’s structure was also complex and unprecedented in the Indian market. The offshore issuer and special purpose vehicle (SPV) – Greenko Dutch – issued the US dollar-denominated bond and utilised these proceeds to buy Indian rupee bonds issued by two subsidiaries in the restricted group which have operational hydro and wind projects. The rupee bonds are backed by the subsidiaries’ assets.

Greenko Dutch essentially acted as a rupee lender to the firm’s subsidiaries, effectively replacing local banks as managers.

Greenko completed this exercise to circumvent India’s foreign exchange regulations, which do not allow companies to provide direct security over local assets to non-rupee-denominated funds. This transaction’s foreign exchange risk remained onshore as the SPV issued the international bonds from a tax-efficient jurisdiction and simultaneously subscribed to rupee bonds issued by Greenko’s Indian subsidiaries.

Strong demand squeezed the bond’s price by 50 basis points during bookbuilding. Books ballooned to $1.4bn. The leveraged buyout (LBO) of security products and services provider ADT Korea by the Carlyle Group was our highly commended in Asia-Pacific. The acquisition was financed by Won985bn ($890.93m) in senior facilities including a Won940bn five-year term loan, a Won45bn five-year revolving facility and a Won360bn five-year and one-month mezzanine facility. 

This is the largest LBO transaction completed in South Korea, the largest security service sector merger and acquisition in the Asia-Pacific, and the largest mezzanine facility in Asia, excluding Japan. UBS was Carlyle’s advisor and the sole mezzanine underwriter. 

Infrastructure and project finance 

WINNER: Pagbilao Energy Corporation 33.31bn peso project finance loan facility

Mandated lead arrangers: BDO Capital & Investment Corporation, BPI Capital Corporation, First Metro Investment Corporation

HIGHLY COMMENDED: Burgos Wind $312.6m project finance, Roy Hill $7.73bn project finance

The success of Pagbilao Energy Corporation’s 33.31bn pesos ($752.7m) 15-year project loan facility is testament to the Philippines’ energy sector privatisation, and to infrastructure development in the country specifically and in the Association of South-east Asian Nations (Asean) more generally.

Pagbilao Energy Corporation is a special purpose company and a partnership between TPEC Holding Corporation and Therma Power, which are wholly owned subsidiaries of Team Energy Corporation of Japan and Filipino Aboitiz Power Group, respectively.

The deal helped fund the Pag3 Project, which aims to add 420 megawatts (MW) by November 2017 to the 735MW capacity in the two existing coal power units in the municipality of Pagbilao.

The deal was the largest exclusively peso-denominated project finance facility in the Philippines with one of the longest tenors to date. It was even more significant considering all lead managers were local banks – foreign players were often required for these transactions prior to Pagbilao’s deal. 

It was a non-recourse term loan split into two tranches of 28.31bn pesos with a seven plus eight years maturity and of 5bn pesos with a straight 15-year tenor. Burgos Wind Farm’s $312.6m project finance deal managed by ANZ is highly commended. It was the first wind farm project financing in the Philippines to reach financial close and the first ever non-recourse project finance in the country.

The deal had a US dollar and a Philippines peso tranche to accommodate international and local loan payments. The highly commended Roy Hill $7.73bn deal, managed by ING, was also significant in that it was the world’s largest project financing for the development of a greenfield mining project. It included a $7.2bn fully amortising construction facility and a A$600m ($457.6m) corporate facility.

Islamic Finance 

WINNER: Hong Kong $1bn sukuk

Bookrunners: CIMB, HSBC, National Bank of Abu Dhabi, Standard Chartered

HIGHLY COMMENDED: EXIM Bank Malaysia $300m sukuk; Republic of Indonesia $1.5bn wakala sukuk

Hong Kong’s debut $1bn five-year sukuk was a momentous deal for the Islamic finance market as it marked the first dollar-denominated sukuk priced by an AAA rated government. Many market participants felt this was a key turning point for the sukuk market as it helped put this type of funding instrument onto the global stage. 

Last year was an important one for the sukuk market after the UK’s debut deal priced out of London in June, followed by Hong Kong’s transaction in September. These were two landmark headline transactions that helped sukuk more specifically and Islamic finance more generally increase its attractiveness and profile globally.

Strong demand allowed bookrunners to price Hong Kong’s deal seven basis points (bps) inside initial price guidance, at 23bps over US Treasuries. This marked the tightest spread ever achieved on a benchmark US dollar note by an Asian government (excluding Japan).

Due to its importance in the development of Islamic finance capital markets, EXIM Bank Malaysia’s $300m sukuk arranged by Maybank is highly commended. The borrower was the first export-import bank to issue US dollar medium-term notes in sukuk format. 

Demand for the transaction was significant. The deal was priced intra-day after orderbooks became 10.6 times oversubscribed and reached $3bn in orders from both Islamic and conventional investors.

Arranged by CIMB, Indonesia’s highly commended inaugural $1.5bn sukuk in wakala format was also key to the development of Islamic finance in Asia. In this format, the transaction was backed by an underlying asset portfolio including state-owned assets such as government land and buildings and project assets under development.

Investor appetite for the deal was remarkable, with books reaching $10bn and the price tightening to 4.35% from 4.375%.

Loans 

WINNER: Tata Steel $5.4bn-equivalent multi-currency syndicated loan facility

Mandated lead arrangers and bookrunners: ANZ, Bank of America Merrill Lynch, Bank of Tokyo Mitsubishi, BNP Paribas, Citi, Crédit Agricole, Deutsche Bank, HSBC, Rabobank, RBS, Standard Chartered

HIGHLY COMMENDED: RYK Mills Rs2.3bn syndicated term financing facility

Tata Steel’s loan facility stood out as a particularly large, structurally complex deal for the Indian market. 

Market participants considered it a landmark transaction in India for its multi-currency structure. The facility included a $1.87bn tranche, another for €1.87bn and one for £700m ($1.04bn). The US dollar and sterling clips were split into two pieces. All pieces have tenors of between five and seven years.

It was also unusual for the Indian market to have multiple borrowers be included in the same deal. The facility was granted to both Tata Steel Global Holdings and Tata Steel Netherlands Holdings, which signed up to separate facilities with no cross-guarantees.

The deal, one of the largest corporate syndicated loans out of India, was used to refinance the borrowers’ existing debt for capital expenditure and for working capital purposes.

It is also worth noting Pakistani sugar mill owner and operator RYK Mills’ Rs2.3bn ($23.47m) syndicated term financing facility, which was managed by MCB Bank. 

The deal helped RYK Mills make its sugar mills generate more power in a more sustainable manner using bagasse – a policy supported by the Pakistani government. It also helped RYK Mills diversify its revenue streams and decrease reliance on sugar revenues, which helped to minimise the impact of fluctuations in the price of sugar on the company. This transaction has set a regulatory precedent for future bagasse-based power projects in Pakistan.

M&A  

WINNER: OCBC $5bn acquisition of Wing Hang Bank

Advisors to OCBC: Bank of America Merrill Lynch, JPMorgan 

Advisors to Wing Hang Bank: Citi, Goldman Sachs, KPMG, Nomura, UBS

HIGHLY COMMENDED: ING Vysya Bank merger with Kotak Mahindra Bank; Transurban Led Consortium A$7.06bn acquisition of Queensland Motorways

OCBC’s $5bn full acquisition of Hong Kong-based Wing Hang Bank has provided the Singaporean bank with a platform within Greater China to take advantage of business opportunities in the area. 

This deal marked a momentous entrant into the Greater China banking sector, considering that OCBC is the second largest Singaporean bank by assets, according toThe Bankerdatabase. This makes OCBC geographically well placed to service business in Greater China, east Asia, south Asia and south-east Asia.

It was the largest merger and acquisition (M&A) transaction ever for OCBC, the largest Singapore cross-border M&A, and the largest bank M&A in Hong Kong since 2001. OCBC’s offer price was HK$125 ($16.12) per Wang Hing Bank share.

Volume also defined Transurban Led Consortium’s A$7.06bn ($5.48bn) acquisition of Queensland Motorways, our highly commended deal and the largest infrastructure transaction in Australia’s history. 

The consortium included Transurban, AustralianSuper and Abu Dhabi Investment Authority. Transurban is now responsible for the management and operation of Queensland Motorways on behalf of the consortium. Goldman Sachs and Morgan Stanley advised the consortium, while Lazard was an independent financial advisor to Transurban.

Significant to the development of India’s privately owned banking sector was ING Vysya Bank’s merger with Kotak Mahindra Bank, arranged by Kotak Investment Bank, and also highly commended.

This was the largest ever banking merger in India, one of the few voluntary mergers in India’s banking industry, and one of the few mergers between unrelated parties in the country. The deal has created the fourth largest private sector bank in the country, which is significant considering government-owned or controlled banks still dominate India’s banking market.

Restructuring 

WINNER: Mirabela Nickel debt-for-equity swap

Advisor: Rothschild

The restructuring of mining company Mirabela Nickel marked a series of firsts for the Australian market and established a new precedent in this market. 

The company, whose sole asset nickel mine is in Bahia State, Brazil, filed for administration on February 25, 2014, following drops in nickel prices, the loss of a 50% off-take counterparty, increases in capital expenditure requirements, operational constraints and a highly geared balance sheet, according to Rothschild.

The restructuring involved a debt-for-equity swap by holders of Mirabela Nickel’s $395m, 8.75% unsecured bonds due in 2018 and the provision of $115m in new convertible notes to Mirabela Nickel through an offer open to all bondholders.

This marked the first time an Australian company made a public, prospectus-backed offering of securities while under administration. It was also the first time a listed company in Australia implemented a transfer of shares, allowing its listed stocks to be transferred from existing shareholders to bondholders without shareholders’ approval.

What made the transaction trickier from a regulatory and legal point of view was the cross-border nature of the deal, given Mirabela Nickel’s sole operating asset was in Brazil while bondholders were mostly North American and European.

Securitisation and structured finance 

WINNER: Volkswagen Finance China Rmb799m auto asset-backed securities

Sole advisor: HSBC

Lead underwriter: China International Capital Corporation

HIGHLY COMMENDED: Diners Club S$223m securitisation

Volkswagen Finance China’s debut Rmb799m ($130.2m) auto asset-backed securities (ABS) issued via Driver China One were significant to the development, deepening and opening up of China’s auto ABS market.

The trade marked the first ever fixed-rate auto ABS in China and the first-ever onshore ABS deal carrying international credit ratings. The transaction was even more significant as the issuer’s strong name recognition and rating attracted foreign investor participation in a market segment that seldom sees strong international involvement. Strong demand allowed bookrunners to price Volkswagen Finance China’s 2020 deal at the tightest 2014 levels for auto ABS in the country.

The deal was backed by 13,696 loans to Chinese borrowers purchasing Volkswagen Group brand vehicles. It offered investors fixed-rate renminbi-denominated bonds. Highly commended is Diners Club’s S$223m ($162.75m) securitisation of credit and charge card receivables, which stood out for the rarity of its structure. Managed by DBS and ANZ, this is one of the few whole business securitisations in Asia, meaning the cash flows to pay Diners Club’s investors derive from the entire range of operating revenues generated by the whole business. 

Diners Club’s deal was also the only publicly issued securitisation deal in Asia in 2014. Nearly all other transactions of this kind were arranged bilaterally between the sponsor and a single buyer, who typically was a financial institution. The deal has a revolving period of 30 months and an expected maturity of September 2016. The legal final maturity is two years later.

EUROPE

Bonds: Corporate 

WINNER: Bayer €3.25bn dual-tranche hybrid

Bookrunners: Bank of America Merrill Lynch, Barclays, BBVA, BNP Paribas, Citi, Commerzbank, Crédit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Mitsubishi Finance, Mizuho, RBS, Société Générale, Santander, Sumitomo Mitsui, UniCredit

German pharmaceutical company Bayer is a well-known borrower in the international capital markets, but in 2014 it innovated with its euro-hybrid bond transaction, the dual-tranche hybrid to part-finance Bayer’s takeover of peer Merck & Co’s consumer care business.

Bayer used the hybrid capital structure to receive equity credit and maintain its high A3/A- respective ratings from Moody’s and Standard & Poor’s – a common reason for opting for a hybrid bond. The €3.25bn dual-tranche deal, however, was the largest ever euro-denominated hybrid bond and pricing at the lowest euro hybrid capital spreads at the time of issuing in June 2014.

The €1.75bn, 2075 non-call six-year bond came at mid-swaps plus 217.6 basis points (bps), with a re-offer yield of 3%, while the €1.5bn, 2074 non-call 10-year tranche came at 230bps over to yield 3.75%.

The bookrunners sold the hybrid significantly inside initial price guidance on both tranches, while the orderbook still reached more than €11bn. The UK, France and Germany were the largest takers of Bayer’s deals with 32%, 24% and 13%, respectively, in the non-call six-year tranche, and 30%, 12% and 33% of the non-call 10-year tranche. 

Moreover, the deal also performed well in the after-market. From a yield to call of 2.936% and 3.707% at the time of pricing, the yield on the two tranches decreased to 1.82% and 2.538% by mid-February. 

The hybrid formed the first part of Bayer’s $14.2bn acquisition financing package for Merck consumer care business alongside a bridge loan. The company’s bridge facility was later fully refinanced through a combination of $8bn senior bonds in dollars and euros and a four-year dollar term loan. 

The acquisition is expected to strengthen Bayer’s position in non-prescription drugs to number two globally, and it significantly enhances Bayer’s business across multiple therapeutic categories and geographies. In the first year after closing of the acquisition, Bayer expects a positive contribution of 2% to core earnings per share.

Bonds: SSA 

WINNER: Republic of Portugal $4.5bn long 10-year bond

Bookrunners: Barclays, Danske Bank, HSBC, Société Générale

HIGHLY COMMENDED: Spain €9bn 10-year benchmark and accelerated switch offer

After Portugal’s exit from the programme of financial support implemented by the European Commission, European Central Bank and International Monetary Fund, the country returned to sell its first dollar bond in four years in July 2014. 

The long 10-year bond was increased from an initially targeted $4bn to $4.5bn on the back of a significantly oversubscribed book. The transaction attracted $10bn of orders, which allowed Portugal to price it 10 basis points inside initial price thoughts, at 260 basis points over Treasuries. The bond was sold with a 5.125% coupon at a re-offer yield of 5.225%.

The bond was the largest ever dollar transaction for Portugal, which, together with its rarity value, saw a large share of investors (86%) attracted from North America, with some 90% of the investors being fund managers.

Portugal had been active in the euro-denominated bond market during its programme of economic support and conducted liability management exercises. Still, the dollar transaction paved the way for further, more opportunistic issuance from the country: September’s 15-year bond in euros and January’s €5.5bn dual-tranche bond in 10- and 30-year maturities. 

This year’s highly commended deal is Spain’s €9bn benchmark and accelerated switch offer. The purpose of the transaction was to move some of Spain’s 2015 financing needs on to later years by giving investors in three transactions due April, July and October 2015 the opportunity to switch some or all of their holdings into new 10-year notes. Investors holding bonds worth €3.66bn did so and, together with a new cash component, Spain reached an €18bn book and finally priced €9bn of new notes with a 2.75% coupon.

Equities 

WINNER: Fiat Chrysler $3.975bn concurrent offering

Bookrunners: Bank of America Merrill Lynch, Barclays, Citi, Goldman Sachs, JPMorgan, Morgan Stanley, UBS

HIGHLY COMMENDED: €4.73bn rights issue for the Numéricable-SFR combination

Fiat Chrysler Automobiles’ (FCA’s) concurrent equity offering of about $4bn in December isThe Banker’s European equity deal of the year. FCA placed $2.875bn of mandatory convertibles due in 2016 and $1.1bn of common equity concurrently on December 10, after the market closed.

The concurrent transaction was the first for the seventh largest carmaker in the world since the merger between Fiat and Chrysler, which was completed in October 2014. 

Italian investment company Exor, which is controlled by the heirs of Fiat-founder Giovanni Agnelli, still has approximately a 30% fully diluted stake in FCA after it purchased $886m of the mandatory convertible offering. 

The mandatory converts include an innovative structure that will allow investors to benefit from the planned spin-off of FCA’s 80% stake in Ferrari, which is expected to be completed by the end of 2015. The structure of the mandatory convertible will provide a yield pick-up after the spin-off, as the coupon will continue to be paid as a percentage of the full, unadjusted notional amount.

The convertible was marketed during a four-day roadshow in the US and priced at a 7.875% coupon and a 17.5% conversion premium.

Meanwhile, 100 million common shares were offered at $11 a share, at a 4.1% discount compared with the closing price on the last day of the offering. Some 35 million common shares were held by the FCA treasury, while the remaining 65 million were newly issued common shares, a portion of which will replenish FCA’s share capital after some 54 million shares were cancelled in the cross-border merger exercise between Fiat and Chrysler in October.

The offering was primarily aimed at US investors, as one of FCA’s objectives was to create additional liquidity in the US after the primary listing was migrated to the New York Stock Exchange in October.

FIG Capital Raising 

WINNER: Banco Santander €7.5bn capital increase accelerated bookbuild

Bookrunners: Goldman Sachs, UBS

HIGHLY COMMENDED: Piraeus Bank €500m 5% senior unsecured notes

In an effort to increase its capital base, Banco Santander sold its largest ever equity deal in January – in what was the largest accelerated bookbuild (ABB) ever placed outside of the US.

Santander got its timing just right. After its share price had traded up by 3% intra-day, the bank launched the transaction at market close on January 8 with price guidance of a 9.9% to 5.2% discount. Open to institutional investors only, the book was covered after only one hour and closed after four hours. Santander sold €1.215bn of shares (a 9.6% stake) at €6.18 per share, which was a discount of 9.9% from the last intra-day trading price and a 6.9% discount from the previous day.

With €7.5bn of proceeds, the deal was the largest ever equity capital market transaction in Spain. For the bank it meant a 140-basis-point increase in core equity Tier 1 (CET1) and a fully loaded ratio of about 10% for 2015, giving it a phased-in CET1 ratio of 11.2% – 320 basis points more than currently required. For 2016, this means that expectations are now for a fully loaded CET1 ratio of 10% to 11%, compared with the previous expectations of 9% to 9.5%, while the phased-in ratio is forecast at 12% to 12.5%, compared with guidance of more than 11% previously.

The transaction further allows Santander to invest in organic growth, which is ultimately aimed at gaining an increased market share. Moreover, the ABB came alongside a new dividend policy, which allows an increase in the cash compensation from about 20% to between 30% and 40% of recurring profit from 2016. 

Piraeus Bank’s €500m three-year bond is this year’s highly commended financial institutions group capital raising. The transaction was the first bond issuance by a Greek financial institution in five years. The Caa1/CCC/CCC rated bond was six times oversubscribed with nearly half of the orders from fund managers.

High-yield and leveraged finance 

WINNER: Sig Combibloc €3.69bn LBO financing

For the bond component:

Global coordinators: Bank of America Merrill Lynch, Barclays, Goldman Sachs

Bookrunners: Crédit Agricole, Mizuho, Nomura, RBC, RBS, UniCredit

For the loan component:

Mandated arrangers: Bank of America Merrill Lynch, Barclays, Crédit Agricole, Goldman Sachs, Mizuho, Nomura, Rabobank, RBC, RBS, UniCredit

HIGHLY COMMENDED: Wind four-tranche €10.2bn bond offering and capital structure optimisation

The €3.69bn acquisition of food packaging producer SIG Combibloc by Canadian private equity firm Onex was financed across the bond and loan markets in Europe and the US with the largest ever new covenant-lite loan in Europe: the €1.05bn term loan B was sold with only incurrence covenants. 

Covenant-lite loans are less stringent for borrowers by only requiring them to adhere to a leverage incurrence-related commitment, while senior loans typically have incurrence and maintenance covenants. The deal came alongside a $1.225bn covenant-lite loan, both of which have a seven-year tenor and are priced at 425 basis points (bps) over the respective interbank rate at an original issue discount at 99.5bps with a 100bps floor.

SIG Combibloc also raised €675m of eight-year high-yield bonds with a 7.75% coupon. The bond was the largest Caa1 rated high-yield bond deal for a sponsor-backed company in Europe since the credit crisis and represented the largest euro-denominated high-yield bond for a sponsor-backed leveraged buyout in Europe in that time.

Aside from the traditional leveraged finance deal example for SIG Combibloc, Italian telecoms company Wind’s €10.2bn equivalent refinancing and capital structure optimisation is this year’s highly commended transaction. The issuer, owned by Russian peer VimpelCom, needed to refinance its whole ring-fenced capital structures including some €1.3bn of payment-in-kind (PIK) debt. The PIK part was especially tricky to refinance and holders of the debt were previously wondering how Wind would be able to pay them back.

The result was a four-tranche high-yield bond transaction in euros and dollars, and the cancellation of some existing notes, plus a €500m capital injection by VimpelCom to push the refinancing over the line.

Infrastructure and project finance 

WINNER: Budapest Airport Refinancing

Advisor: Rothschild

Senior lenders: BBVA, BNP Paribas, Crédit Agricole, Deutsche Bank, EDC, HSH-Nordbank, ING, K&H, KBC, Natixis, RBC, Siemens, SMBC, Société Générale, UniCredit Hungary Junior lenders: Caisse de Dépôt et Place ment de Québec, Credit Suisse, Deutsche Bank, GIC, Macquarie, Park Square, PSP Investments

Swap coordinator: BNP Paribas

The largest Hungarian airport with a passenger volume of about 8.5 million a year was highly leveraged but needed to refinance some €1.4bn of debt by 2014. Refinancing efforts were launched in 2012, when the external financing environment in central eastern Europe (CEE) was still under pressure, which meant a deal with about 11 times leverage proved challenging. With a view at both restructuring and refinancing options, the agreed refinancing transaction was a great success. 

The refinancing involved a large and diverse group of stakeholders of about 30 existing lenders, 15 refinancing senior institutions, four junior institutions, 12 new and existing swap providers and five shareholders. The refinancing required 100% consent from the exiting lenders to transfer their debt into a new facility rather than receive a cash refinancing, while government consent was also required to execute final implementation steps and to maintain an existing government guarantee.

The new structure included €1.1bn of five-year senior bank facilities provided by the 15 lenders, €300m of junior debt, which comes with a ‘pay-if-you-can’ structure and is provided by four lenders and three of its sponsors, as well as a restructuring of its existing notional interest rate swaps into new swaps, which ensure that 75% of the new facilities are hedged.

The new financing puts senior net leverage at seven times, junior net leverage at 9.2 times and net leverage including the mark-to-market of the swap agreements of 11 times.

The Budapest Airport refinancing is innovative in the way that the deal spans across the global infrastructure finance market, as well as the leveraged loan and CEE loan market, derivatives and the world of restructuring – all in a deal that had initially threatened to be a drawn-out restructuring.

Islamic Finance 

WINNER: UK £200m five-year sukuk

Bookrunners: Barwa Bank, CIMB, HSBC, National Bank of Abu Dhabi, Standard Chartered

It was a tight race between the UK and Luxembourg regarding which country would issue the first sukuk outside of the Islamic world. Luxembourg was the first to start preparations but the sukuk by the UK Treasury beat Luxembourg by four months. The £200m ($298.7bn), five-year sukuk al-ijara for the UK was the first for a sovereign outside the Islamic world, and thus earned the title ofThe Banker’s Islamic finance deal of the year in Europe.

Islamic finance made huge progress in Europe in 2014 and the UK sukuk played a large part in integrating this form of finance into the mainstream and creating wider awareness of the industry.

The sukuk, which is based on a sale-and-leaseback approach, attracted strong demand from a broad geographical base of investors and had a significantly oversubscribed book of £2.3bn. The deal was divided between UK investors (39%), those from the Middle East (37%), and investors from Asia (24%).

The large orderbook allowed the bookrunners to price the sukuk flat to the UK’s existing government bonds, keeping pricing in line with aims to deliver value for money for the UK taxpayer. The Islamic bond will pay an annual profit of 2.036%, which is set at the same rate as the yield on equivalent five-year Gilts.

The transaction was not only the first sukuk by a non-Islamic sovereign, but also the first public sterling-denominated sukuk. The deal further demonstrates that the sukuk law passed by the UK government in 2009 is effective and is aimed at attracting further issuance of sukuk in the UK.

In October 2014, the UK Treasury held a private seminar largely aimed at UK corporates in which it laid out the basics of sukuk structuring, with the aim to attract corporates to follow its example and use the sukuk framework.

Loans 

WINNER: Imperial Tobacco £7.855bn equivalent multi-tranche loans

Underwriters: BNP Paribas, RBS, Santander

In the largest underwritten financing syndicated in the UK loan market in the past few years, Imperial Tobacco’s £7.855bn ($11.73bn) multi-tranche loan isThe Banker’s loans deal of the year in Europe. 

The financing for one of the largest international tobacco companies was split into a bridge loan, two term loans, a backstop revolving credit facility (RCF) and two additional RCFs. The extensive structure provided the BBB rated UK-based firm with the required funds to finance the $7.1bn acquisition of four cigarette brands (Winston, Maverick, Kool and Salem) as well as international e-cigarette brand Blu from Reynolds American, while also refinancing its existing core bank borrowings and necessary working capital requirements.

Despite the additional debt burden related to the takeover of the six brands, Imperial was able to maintain its Baa3/BBB/BBB ratings.

The loans were underwritten in July 2014 and syndicated to a wider group of banks during July and August. Some existing relationship banks were replaced by new lenders that matched Imperial’s new expanded geographic footprint. Imperial, which is already a market leader in the EU and has strong positions in west Africa and Asia, has also been targeting the US, with its market share in the country now estimated to be about 10%.

The financing for the loan was split between a $4.1bn bridge loan with a one-year tenor and one-year extension possibility at a 60-basis-point (bps) margin, a $1.5bn, three-year term loan at 55bps, a $1.5bn, five-year term loan at 100bps, a €1bn backstop RCF maturing after 18 months with three available six-month extensions, as well as a €2.385bn and £500m RCF both with five-year maturities and extension options of two times one year.

During the syndication process, 15 mandated lead arrangers each committed £675m and two additional lenders committed £225m, which led to a strong oversubscription and an approximate 35% scaleback, leaving the largest allocations at about £500m equivalent.

M&A  

WINNER: AstraZeneca defence of $118bn Pfizer approach

Advisors to AstraZeneca: Evercore, Goldman Sachs, Morgan Stanley, Robey Warshaw

HIGHLY COMMENDED: Acquisition of Sky Deutschland and Sky Italia by British Sky Broadcasting Group

US pharmaceutical company Pfizer approached AstraZeneca in late 2013 and then made continuous attempts to take over the UK’s second largest pharma business in early 2014. AstraZeneca rejected the endeavours in late May and finally terminated them, in what was a high-profile defence in the European pharma industry.

Pfizer’s plans to acquire 100% of AstraZeneca in a cash and stock transaction were widely publicised and scrutinised, as there was widespread fear about job losses in the UK, as well as concerns over a potential hit to the country’s reputation as a leader in scientific research.

During the six-month discussion process, the CEOs of both companies were summoned before a committee of the UK parliament, while Pfizer’s CEO sent a letter to prime minister David Cameron regarding his fears over job retention in the UK.

The acquisition would have brought obvious benefits to Pfizer, including an increase in estimated total annual net income of about $2.4bn; the opportunity for an unwind of $19.4bn in liabilities relating to unremitted earnings; and additional future benefits arising from a lower ongoing corporate tax rate. There were also several risks to AstraZeneca shareholders, especially the risk of an undervaluation of the business.

Pfizer made an initial preliminary and conditional proposal at £46.61 ($69.63) per AstraZeneca share in cash and stock in January, and gradually raised this to a final offer of £55.00 per share in May, all of which were rejected. The final offer, valued at nearly $120bn, was the largest ever takeover attempt of a UK company.

Pfizer’s takeover attempt and inversion plans were considered to be mainly focused on achieving tax benefits, which also came under scrutiny in the US. A number of senators spoke out against the inversions, and legislation was introduced in May 2014 in order to tighten rules around corporate tax avoidance.

Restructuring 

WINNER: Punch Taverns Group £2.5bn restructuring

Advisors: Moelis (junior note holders ‘G7’), Rothschild (senior note holders ‘ABI Committee’)

The drawn-out restructuring of Punch Taverns’ two whole business securitisations (WBSs) equalling a total of £2.5bn ($3.73bn) was finally concluded in 2014. It was one of the largest debt for equity swaps undertaken within a WBS in Europe.

London-listed leased pub company Punch Taverns first came into difficulties in 2008 when the group’s performance began to deteriorate, largely related to the UK’s smoking ban in indoor public places and the general economic slowdown. Punch undertook unilateral measures to reduce its over-indebtedness and avoid covenant breach but those were not sufficient to bring it back to health.

Between 2011 and 2013, Punch further attempted to save the company unilaterally through the demerger of its managed pub division, as well as by way of several equity injections and amend-and-extend proposals that did not have the support of lenders.

In an attempt to resolve the situation, in May 2014 the G7 junior noteholders, the ABI Committee (mainly consisting of senior note holders), and some other creditors came to a debt-for-equity swap agreement between some 54% of the senior notes across Punch A and Punch B, approximately 62% of the junior notes across the two WBSs, and about 54% of the equity share capital of Punch. Lock-up agreements were put in place and the noteholder-led proposal received more than 95% approval through all of the 16 bonds and over 99% approval from the shareholders of Punch. The remaining stakeholders gave their credit approval in October.

The new structure sees Punch’s net leverage reduced from about 11 times to 7.5 times post-restructuring due to the equitisation of about £600m of junior debt and a £100m cash contribution from the shareholders of Punch (balance sheet cash and a £50m equity placing). This resulted in a dilution of existing shareholders to 15% of the post-transaction equity. The senior notes did not take any losses but had their maturities extended and the amortisation profile rescheduled – all of which created a more viable future capital structure for Punch.

Securitisation and structured finance 

WINNER: Sale of RBS £15bn structured retail investor products and equity derivatives business to BNP Paribas

Advisor to RBS: Moelis

In an effort to refocus its operations, RBS revealed in June 2013 that it would exit equity derivatives and structured retail products. The quest to find the right buyer at the right price was finalised a year later in the sale of approximately £15bn ($22.4bn) of assets to French peer BNP Paribas, making itThe Banker’s securitisation and structured finance deal of the year in Europe.

More than 30 bidders submitted initial indications of interest to acquire RBS’s equity derivatives and structured notes-related trading books and over-the-counter options and swaps. In an assessment process, the execution certainty (ie, the commitment to the process, timing, rating and regulatory relationship) were considered, as well as customer focus, including the commitment to the franchise and expertise, and the value to shareholders. By November 2013, BNP Paribas was selected as the preferred buyer.

In the following months, an interim joint-project organisation was established to help with the integration of workstreams, management meetings were held between the two banks on individual trading books, and conclusions from additional due 
diligence was incorporated into legal documentation.

In February 2014, the transaction framework was agreed, including its mechanisms and parameters as well as the approach to issues such as human resources, infrastructure and IT. The final deal included about £15bn of liabilities to be transferred to BNP Paribas over time, amounting to some 20,000 deals equally balanced between retail listed products and structured retail investor products. The sale represented the transfer of one of the largest non-distressed derivative portfolios and provides a blueprint for further markets disposal processes.

For RBS, the transaction means a reduction of the balance sheet of its markets division to below £80bn on a Basel III basis by the end of 2014 and a chance to refocus operations on its interest rates, foreign exchange, asset-backed securities, credit and debt capital market capabilities.

Middle East

Bonds: Corporate 

WINNER: Etisalat €3.1bn inaugural Bond offering

Bookrunners: Deutsche Bank, Goldman Sachs, HSBC, Mitsubishi UFJ, Morgan Stanley, National Bank of Abu Dhabi, Natixis, RBS

The Emirates Telecommunications Corporation (Etisalat), a diversified telecoms operator from the United Arab Emirates, is one of a number of Gulf-based corporates that has pushed into north Africa in recent years. In one of its more notable acquisitions, 

Etisalat secured a 53% stake in Moroccan telecoms group Maroc Telecom for $5.7bn in May 2014, providing the Emirati group with significant exposure to both the Moroccan market as well as much of francophone west Africa. 

In order to finance a bridge loan taken out to fund this acquisition, the telecoms giant executed its first ever bond issuance in June 2014, a deal which scooped the award for this year’s corporate bonds category in the Middle East. The transaction was structured in four tranches – a first for the Middle East and north Africa (MENA) region – in a dual-currency euro and US dollar facility. 

The five- and 10-year US dollar tranches achieved the tightest pricing by a Gulf Co-operation Council issuer since 2009. Meanwhile, its 12-year euro tranche was the longest such euro-denominated tenor for the region. As such, this will act as a benchmark for future issuers looking to secure long-term euro-based funding. The shorter seven-year euro tranche saw significant participation from MENA investors, which is a rare outcome for regional investors better known for their appetite for US dollars. 

Not only was this the largest corporate issuance in the region, at a combined value of €3.1bn, but it also represented the largest orderbook from a non-sovereign MENA issuer with a combined equivalent value of close to $19bn. Total subscriptions for the US dollar tranche hit $8.2bn while the orderbook for the euro tranches reached €7.9bn, which allowed pricing to tighten between 12.5 basis points and 20 basis points from the initial guidance. In addition, Etisalat’s bonds enjoyed strong trading in the secondary market.

Bonds: SSA 

WINNER: State of Israel €1.5bn notes offering

Bookrunners: Barclays, Citi, Goldman Sachs

After a four-year absence from the euro market, Israel returned with a €1.5bn, ten-year transaction in January 2014. The offering was notable as it represented Israel’s lowest ever coupon in the international capital markets, at 2.875%, while enabling the country to establish its position in the euro market by setting a new liquid benchmark and enhancing the depth of its curve and liquidity. 

Following a two-day roadshow which covered Paris, Amsterdam, the Hague, Munich, Frankfurt, Zurich, Geneva and London, a 10-year tenor was released to the market, which generated €800m of ‘soft orders’. Initial price thoughts were released in the euro mid-swap plus 95 basis points (bps) area, for a new 10-year euro benchmark. 

Strong demand from German, French and UK real money accounts saw the orderbook surge to €3.5bn. The price guidance was then revised, to mid-swaps plus 90bps to 95bps, before the issuer was ultimately able to launch and price a €1.5bn new issue at mid-swaps plus 90bps.

The final orderbook for the transaction hit €5.7bn, meaning the deal was 3.8 times oversubscribed. This points to the strong relationships built with European investors in the four years since Israel last tapped the euro market, as well as the success of the roadshow in communicating the strong position of the Israeli economy. 

The strength of the transaction was also signified by the minimal new issue concession compared with Israel’s existing euro market 2020 bond. Prior to the offering, Israel’s existing note was trading at mid-swaps plus 70bps with a 10-year ‘fair value’ level of plus 85bps. As such, the 5bps new issue premium was considered a marginal increase. 

This was Israel’s fifth bond issue in euros. The last time the country issued a hard currency bond was in January 2013 in a $2bn transaction. 

Equities 

WINNER: National Commercial Bank $6bn IPO

Financial advisors and lead managers: GIB Capital, HSBC

HIGHLY COMMENDED: Emaar Malls Group Dh5.8bn IPO

The initial public offering (IPO) market enjoyed a strong year in 2014, which was widely regarded as the best year for new stock offerings since the early 2000s. While the standout deal globally was Alibaba Group Holding’s $25bn offering, the second largest IPO came from Saudi Arabia’s National Commercial Bank at $6bn. NCB is Saudi Arabia’s largest lender by both Tier 1 capital and total assets, with an 18% market share in the retail sector and 16% in the corporate space. 

This offering was the largest in the history of the Middle East and north Africa region, with HSBC and GIB Capital acting as financial advisors and lead managers. The IPO positioned NCB as the third largest company listed on the Saudi Tadawul by market capitalisation with a 5% weight of the index. Moreover, this was the first IPO by a Saudi bank since Alinma Bank executed its own offering in 2008. The offering represented 25% of NCB’s share capital, with 15% allocated exclusively to retail investors and the remaining 10% going to Saudi Arabia’s Public Pension Agency.

Notably, the retail tranche of the IPO, valued at $3.6bn with a pricing of $12 a share, attracted demand of $82.9bn, making it 23 times oversubscribed. The listing occurred between October 19 and November 2, 2014, as global oil prices were enduring a major price slump. As such, this strength of demand occurred as bearish sentiment around Saudi equities dominated the investment climate. 

Moreover, the resilient secondary market for NCB stock points to healthy demand from institutional investors who were precluded from an initial purchase. Further gains are expected to be made once the Saudi Tadawul opens up to foreign investors later in 2015. 

Nevertheless, the IPO was not free from controversy. A number of Saudi religious clerics claimed that any purchase of NCB stock would violate sharia-compliant financial principles, given that some of the lender’s operations were executed along conventional financial lines.

FIG Capital Raising

WINNER: Al Hilal $500m Tier 1 RegS sukuk

Bookrunners: Al Hilal, Citi, Emirates NBD, National Bank of Abu Dhabi, Standard Chartered

HIGHLY COMMENDED: National Commercial Bank $1.3bn sukuk

As Gulf-based lenders continue to impress in terms of their asset and profit growth, they are simultaneously looking to meet Basel III requirements and bolster their capital ratios. Al Hilal Bank, based in the United Arab Emirates and wholly owned by the government of Abu Dhabi, is no exception, and successfully raised $500m in a Tier 1 perpetual RegS sukuk issuance in June 2014. 

The transaction was notable for being the first ever US dollar bank capital sukuk issuance with Basel III-compliant mechanics. It also achieved the lowest coupon and lowest credit spread on a bank capital issuance with Basel III-compliant features in the US dollar RegS market. 

Following investor meetings in Dubai, Abu Dhabi, London, New York, Hong Kong, Singapore, Zurich and Geneva, the price guidance was set in the 6% area. As the books opened and the transaction was capped at $500m, the orderbook quickly surged to $3bn, with the transaction ultimately pricing at the tight end of the guidance at 5.5%, representing one of the lowest ever yields for a Tier 1 transaction. 

The highly commended deal in this category went to Saudi Arabia’s National Commercial Bank’s (NCB’s) Tier 2 subordinated sukuk issuance executed in February 2014. This was the bank’s debut Saudi riyal issuance and, at SR5bn ($1.3bn), the largest ever debt capital market issuance in the country. 

It was also the largest ever subordinated debt instrument issued by a financial institution in the Middle East and north Africa region. The deal has allowed NCB to augment its Tier 2 capital base under new Basel III regulations in Saudi Arabia, while supporting the lender’s growth plans in the retail space. 

High-yield and leveraged finance 

WINNER: Bahrain Steel $340m seven-year senior secured term and revolving facilities

Mandated lead arrangers: Al Khaliji Commercial Bank, Arab Banking Corporation, HSBC, BNP Paribas, Doha Bank, Mashreq Bank, Qatar National Bank

Bahrain Steel successfully closed the syndication of its $340m senior secure term and revolving credit facilities in September 2014, in a well-structured deal that marks it out as this year’s winner for the Middle East in the high-yield and leveraged finance category. The transaction was the first syndicated corporate financing to emerge from Bahrain in recent years and was 1.3 times oversubscribed, accompanied by a healthy geographic diversification of commitments with the Middle East and north Africa representing 67%, Europe 26% and Asia 7%. 

The seven-year financing was split between a $40m revolving credit facility and a $300m loan with an amortising structure. Moreover, the transaction’s strong reception demonstrates the healthy appetite for well-structured deals involving regional credit. For Bahrain Steel, this transaction will position the company strongly for future incremental capital raising initiatives as it seeks to build on its recent growth. 

Wholly owned by Foulath Holding, a noted holding company and investment vehicle with a focus on the Gulf Co-operation Council’s steel industry, Bahrain Steel was established in 1984 and produces iron ore pellets for use in the steel-making process. At present, the company operates two pellet plants in Bahrain with a total capacity of 11 million tonnes per year. 

The facilities will be used by Bahrain Steel to refinance an earlier syndicated facility from 2007 as well as for general corporate purposes. The transaction was a significant step for the company, as it seeks to better align its capital structure with its business strategy. It will also provide appreciable longer term benefits to Bahrain Steel by 
substantially reducing borrowing costs.

Infrastructure and project finance 

WINNER: Ma’aden Wa’ad Al Shammal Phosphate Company $5.6bn financing

Mandated lead arrangers: HSBC, Samba Capital

The development of one of the world’s largest integrated phosphate mines and fertiliser complexes in Saudi Arabia, known as the Ma’aden Wa’ad Al Shamal Phosphate Company, was the outstanding entry in this year’s infrastructure and project finance category for the Middle East. Not only were the financing requirements of this project extensive, with a total of $5.6bn of debt financing issued, but so too was the diversity of this financing, with $1.9bn of this sum being sharia-compliant. 

The Saudi Arabian Mining Company (Ma’aden), the Mosaic Company and the Saudi Basic Industries Corporation (Sabic) are jointly developing the integrated phosphate mine and fertiliser complex, located in the Umm Wu’al region in the north of Saudi Arabia, and Ras al-Khair in the east of the country, respectively. As such, the project will benefit from the low cost of feedstock, including sulphur and gas, which are plentiful, as well as proximity to markets in Asia and the developed transportation infrastructure in Saudi Arabia. 

At the time of execution, the $5.6bn deal represented the largest project financing in Saudi Arabia, as well as the second largest globally, in the mining and metals sector. Financial close was achieved in 12 months from the launch of financing, with strong interest coming from commercial banks producing an oversubscription of 70% during this period. 

The financing included the participation of 17 domestic, regional and international lenders as well as the Korean Export-Import Bank, Korea Trade Insurance Corporation and Saudi Arabia’s Public Investment Fund. The project financing had a debt-to-equity ratio of 70:30 with total senior debt comprising of $4.67bn, with bank-funded facilities constituting the remainder of the sum. With both conventional and sharia-compliant tranches included in the financing, the transaction was complex. In terms of the Islamic funding component, three distinct term finance tranches were developed under wakala and ijarah structures, while a separate working capital facility was included as a murabaha facility.

Islamic Finance 

WINNER: Saudi Electric Company $2bn sukuk

Bookrunners: Deutsche Bank, HSBC, JPMorgan

The global sukuk market continues to go from strength to strength. Total issuance reached $116.4bn in 2014, up from $111bn in the previous year. These positive numbers are going hand in hand with a growing sophistication and maturity in the market. Against the backdrop of this competitive environment, Saudi Electric Company’s (SEC’s) $2bn sukuk issuance in April 2014 was the clear winner for this year’s Islamic finance category in the Middle East. 

The SEC issuance was notable for a number of reasons. It was the first global 30-year senior unsecured US dollar sukuk, and it was also the longest and largest Saudi issue providing a unique 30-year reference point for the country and a US dollar yield curve for future issuers from Saudi Arabia.

The issuance was structured as two $1bn tranches, with the first given a tenor of 10 years, and the second 30 years. They were priced at 155 basis points (bps) and 190bps over US Treasuries, respectively, a considerable tightening from initial price estimates of 175bps and 210bps. The combined orderbook reached $13bn.

Meanwhile, the transaction was structured under the 144A/RegS format, allowing for the participation of US pension funds and insurers. As such, the SEC issuance not only provided these entities with an exceptional opportunity to access sukuk paper but, in tandem, exposure to a Saudi Arabian state-linked entity. 

On the landmark 30-year offering, fund managers accounted for 64% of the uptake, with commercial and private banks accounting for another 16%, while pension, insurance funds and other entities booked the remaining 20%. Geographically, investment was fairly evenly split between Europe (33%), the US (27%), the Middle East (25%) and Asia (15%). Meanwhile, the 10-year offering was dominated by investors from the Middle East, who accounted for 49% of the take up, while European and US investors accounted for 21% and 15%, respectively.

Loans 

WINNER: Dubai Aluminium $1.8bn loan

Mandated lead arrangers: Citi, Emirates NBD, Société Générale Corporate & Investment Banking

In December 2014, Dubai Aluminium (Dubal) secured a seven-year $1.8bn loan that was the largest underwritten deal in the Middle East for the year. The deal was the result of the successful merger between Dubal and Abu Dhabi’s Emirates Aluminium (EMAL) to create a new entity known as Emirates Global Aluminium (EGA), the world’s fifth largest aluminium company by production capacity. 

As EGA sought additional financing for its various operations and projects, it decided to secure a loan through Dubal off the back of the entity’s strong standalone credit profile, including its low leverage and low borrowing rates. 

A tailored financial and legal structure based around Dubal was therefore established to secure the loan. The final deal included a seven-year door-to-door maturity in a sector better known for shorter term conventional maturities of about five years. The deal also attracted a good spread of both regional and international lenders, achieving a book of $3bn, exceeding EGA’s target of $1.8bn. 

Though the initial underwriting was executed by Société Générale Corporate & Investment Banking, Citi and Emirates NBD, the deal achieved notable success in syndication, securing the support of 12 banks on the loan. These were Abu Dhabi Commercial Bank, BTMU, Commercial Bank of Dubai, Crédit Agricole, Export Development Canada, First Gulf Bank, Intesa Sanpaolo, National Bank of Abu Dhabi, Natixis, Samba Financial, SMBC and Union National Bank. 

For EGA, which is owned by the respective investment funds of Abu Dhabi and Dubai, the loan was notable for sending 
a signal to the market that the company could secure financing independently of its shareholders’ oil revenues. As such, the deal stood out for laying the groundwork for regional government-backed entities to secure future financing initiatives based on their standalone value.

M&A  

WINNER: BRS Ventures & Holdings $1.1bn acquisition of Travelex Holdings

Advisors to BRS Ventures & Holdings: Evercore, Standard Chartered Bank 

Advisors to Travelex Holdings: Goldman Sachs

The acquisition of Travelex Holdings, a leading foreign exchange company, by BRS Ventures & Holdings, was the standout winner in this year’s mergers and acquisitions category for the Middle East. The deal was notable in that it merged a foreign exchange operator with one of the world’s largest retail remittance businesses in the form of UAE Exchange, also owned by BRS Ventures & Holdings. 

BRS Ventures & Holdings was attracted to the acquisition based on a number of key criteria. These included the breadth of Travelex’s operations across the foreign exchange value chain, combined with a track record of innovation. Similarly, Travelex’s significant emerging market exposure and existing global footprint, in conjunction with a strong culture of compliance and risk management, also marked it out as a strong candidate for acquisition.   

This is the first time that a money transfer specialist and a foreign exchange specialist have merged. Impressively, the deal was executed in less than 12 months despite a high degree of complexity. In total, 10 different regulators were involved in the acquisition with the change of control process being completed in eight months. 

This required the deal structure to be changed on one occasion, to meet specific regulatory requirements. Moreover, the regulatory complexities placed additional strain on the proposed deadlines in light of the multiple negotiations required. 

Adding to the difficulty of the deal, Travelex was independently completing two further acquisitions at the time of the transaction in Brazil and Turkey. Both deals were closed alongside the main acquisition. In addition, Travelex has a secured bond listed on the Irish Stock Exchange. As part of the deal, consent was required from the bondholders as a feature of the change of control process, which was achieved on time. 

Perhaps most impressively, the deal team were able to convince the Travelex shareholders of the benefits of pursuing an acquisition route, at a time when the company was preparing for an initial public offering.

Restructuring 

WINNER: Al Jaber Group $4.5bn restructuring

Advisor: Rothschild

The $4.5bn financial restructuring of one of the United Arab Emirates’ leading corporates, the Al Jaber Group, was one of the longest and most complex restructuring operations to come out of the region in recent years. Established in 1970 and based in Abu Dhabi, the company emerged as one of the largest diversified conglomerates in the region and the largest private employer in the UAE. Nevertheless, with heavy 
exposure to the UAE real estate market, Al Jaber Group was hit hard by the global financial crisis. 

In February 2011, Rothschild was appointed by Al Jaber Group following a default on its debt repayment the previous month. The lack of a corporate insolvency law in the UAE, coupled with the intricacy of the restructuring, meant that it took more than three years of negotiations with the group’s lenders to agree to the proposed restructuring and associated documentation. On June 16, 2014, the company secured the signing of its financial restructuring. This included an extension and amendment to its existing bank debt involving overdraft facilities, funded debt, trust receipts, hedging facilities and unfunded bonding lines. 

Rothschild worked in partnership with Al Jaber to define a long-term business plan against a backdrop of an evolving market environment, to analyse various restructuring scenarios and to design a comprehensive restructuring plan, among other tasks in the preparation and execution phase. 

The key objectives of the restructuring included the preservation of Al Jaber Group as a going concern, the repayment of all lenders in full over time, the return to a normalised trade creditor position and normalised access to bonding. 

Much of the bank’s work was beset by key challenges, including securing the consent of a diverse range of 34 local and international lending institutions across multiple syndicated and bilateral facilities (both conventional and Islamic). In addition, the restructuring included more than 800 facilities involving 50 Al Jaber Group entities in various jurisdictions, including Malaysia, Qatar, Singapore and the UAE, among others.

Securitisation and structured finance 

WINNER: Oman Oil Refineries and Petroleum Industries Company $2.8bn financing

Mandated lead arranger: National Bank of Abu Dhabi

The $2.8bn raised by Oman Oil Refineries and Petroleum Industries Company (Orpic) for the Sohar Refinery Improvement Project (SRIP) clinched the Middle Eastern deal of the year award for the securitisation and structured finance category this year. The size and structure of the deal, as well as the speed of its implementation and the number of local, regional and international players involved, were all notable elements in this year’s winning entry. 

In June 2003, the state-owned Sohar Refinery Company (SRC) secured $1.3bn in financing for the construction of the Sohar refinery. The arrangement featured $1.17bn in debt sourced from a group of local and international lenders. When SRC merged with the Oman Refinery Company to form Orpic in 2007, this debt was refinanced. 

The current deal includes a further refinancing of the approximately $1bn of this debt still outstanding, as well as an additional $1.76bn to expand and upgrade the existing refinery facility. This will include a significant capacity increase of about 70%, permitting output of about 198,000 barrels per day once complete. More importantly, the upgrades will adjust the refinery’s ability to handle heavier crude, meaning that more domestic production can be used, thereby reducing Oman’s reliance on foreign imports.  

Notably, the deal was achieved in a very short space of time. The engineering, procurement and construction contract was signed in November 2013, while the financing agreement was structured and secured just five months later on June 1, 2014. A total of 21 local, regional and international lenders were involved in the deal. Local and regional banks committed about $1.4bn, while their international counterparts contributed about $1bn in covered and uncovered facilities. The remaining sum was provided by the Export-Import Bank of Korea via a $400m direct loan. The total debt has a door-to-door tenor of 12 years. 

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