The Banker’s Deals of the Year for 2011 celebrate the most impressive transactions in FIG capital raising, M&A, corporate bonds, SSA bonds, infrastructure and project finance, loans, structured finance, equities, restructuring and Islamic finance. Reflecting wider banking trends, the emerging economies excelled, though there was still a lot of noteworthy business being done in the much-maligned Western markets.

AFRICA:

FIG: CAPITAL RAISING

Winner:United Bank for Africa’s N20bn Tier 2 capital notes due 2017

Lead managers: UBA Capital, Greenwich Trust, Stanbic IBTC and BGL Securities.

The past couple of years have been tumultuous for the Nigerian banking sector. The financial crisis, a stock market crash and soured loans have all taken their toll. As a result, the Central Bank of Nigeria (CBN) carried out an audit of the country’s 24 banks in 2009, which culminated in nine banks receiving a cumulative injection of N600bn ($4bn). CBN has since pushed through further measures, such as accounting and reporting standards, and a 10-year limit on the tenure of CEOs.

United Bank for Africa – whose own CEO, Tony Elumelu, fell foul of the 10-year rule – is one of a handful of the country’s banks to be given a clean bill of health following the audit, and it has since posted strong growth. In the third quarter of 2010, the latest financial results available, it grew pre-tax profits by more than 225% compared with the same period in 2009. Profit before tax and exceptional items was N16.9bn, compared to a loss of N13.5bn in the same period the previous year.

This positive outlook gave the bank a sound footing to raise new capital and break new ground for a Nigerian bank. In September 2010 it launched the first naira-denominated Tier 2 capital issuance – the first subordinated and unsecured bond in the Nigerian cash market. This served as a clear demonstration of the growing confidence in the bank and the country’s banking reforms among local investors.
The N20bn issue – with a coupon of 13% and a bullet repayment structure – is the first in a series of a N400bn medium-term note programmes approved by shareholders in 2009. The bond – which was sold solely to Nigerian institutional investors – attracted nearly N30bn of demand.

M&A

Winner: Bharti Telecom’s $10.7bn acquisition of Zain Africa

Lead financial advisor, mandated lead arranger and global coordinator: Standard Chartered.
Financial advisors to the seller: UBS, BNP Paribas.
Regional financial advisor: Global Investment Bank.
Financial advisors to the bidder: Barclays, State Bank of India.

HIGHLY COMMENDED: R30bn merger of Monument and Metropolitan.

Zain Africa’s sale to Indian telecom firm Bharti Telecom was one of last year’s key M&A deals on the African continent. Another example of the growing trend for south-south expansion and consolidation, Bharti’s winning deal bid bodes well for future growth between the BRIC countries (Brazil, Russia, India and China) and Africa.

Bharti will pay Zain Africa $10.7bn (comprising $9bn in equity and $ 1.7bn in debt) in three stages. The price – at a multiple of 10 times Zain Africa’s enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA) versus Bharti’s 7.2 times enterprise value to EBITDA – has been described as high by some analysts, but others argue that it reflects the real potential for Africa’s ever-expanding telcoms market. The sale creates a stronger brand and will boost organic growth. In addition, Zain’s balance sheet has been de-levered from a net debt to EBITDA of 2.0x to -0.6x.
This transaction is a landmark deal – with the target operating in 15 countries – but this also meant that a number of regulatory issues had to be overcome. Nonetheless, the deal was executed within a tight timetable with due diligence conducted in six weeks.

Judges also noted South Africa’s largest M&A deal as a highly recommended contender. Rand Merchant Bank’s corporate finance team advised First Rand and Momentum Group on the R30bn ($4.48bn) merger between Momentum and Metropolitan Holdings to form the third largest insurance company listed on the Johannesburg Stock Exchange.

BONDS: CORPORATE

Winner: Afren’s $500m debut high-yield bond

Joint global coordinators and joint lead bookrunners: Goldman Sachs, Deutsche Bank.
Bookrunner: BNP Paribas.

Afren’s $500m debut bond scores a host of firsts and stands out as one of the most notable of bond issues on the African continent. It is a rare high-yield bond issue by a European-listed company, which has all of its exploration and oil production assets in Africa, and the first corporate bond issued by a sub-Saharan Africa-focused corporate. It attracted interest from across the board and was substantially oversubscribed.

Despite the unrest unfolding in north Africa and the Middle East – which many thought would have derailed the deal entirely – the bond was priced to yield 11.75% and traded up one to two points in the first day of trading, remaining beyond the re-offer price. Capitalising on the strong secondary market, Afren decided to re-enter the market with a further $50m tap.

Proceeds from Afren’s senior secured notes, rated B-/B (S&P and Fitch) and priced at $450m, will be used to refinance existing debt facilities and for ongoing development, including capital expenditure. This transaction enabled the African oil company to move to a more flexible incurrence-based covenant structure while reducing near-term amortisation and lengthening its debt profile.

The company has traditionally sought financing from the equity market but given the imminent completion of the Ebok development, which is Afren’s principal asset, the company sought to take advantage of its larger production base and stronger cash flows to access the debt markets. The company also saw the issuance as an opportunity to raise additional financing to fund potential acquisitions and to expand its pan-African exploration programme.

BONDS: SSA

Winner: PTA Bank’s $300m Eurobond

Joint bookrunners: Standard Bank, HSBC.

HIGHLY COMMENDED: Nigeria’s $500m dual-tranche sovereign Eurobond.

When opportunities arise, it takes a nimble operator to take advantage. PTA Bank, a trade and development bank active in eastern and southern Africa, leapt at one such opportunity to successfully price its debut $300m Eurobond, attracting an orderbook of $650m. This is the first Eurobond ever from an east African issuer and is the only Eurobond from sub-Saharan Africa in 2010 aside from single-sovereign issues. It is expected to set the tone for further issues by sub-sovereign or sovereign issuers – such as the Kenyan government, which shelved plans for a similar sized Eurobond in 2007 because of a volatile political environment and the onset of the global economic recession.

PTA Bank’s offering priced 200 basis points tighter than its closest comparable, Afreximbank’s investment-grade bond which was issued 12 months before, but because investor allocations had to be scaled back at launch the bonds have performed well in the aftermarket.

The marketing effort surrounding the deal was critical to the successful execution of this debut issue – with more than $350m of orders originating from investors that participated in PTA’s roadshow.
Another strong contender was Nigeria’s debut Eurobond, which was central to the country’s strategy to establish a liquid benchmark offering on the African sovereign curve and will serve as a new measurement of risk for the international investor community interested in Nigerian assets. Bookrunners Citi and Deutsche, together with financial advisors Barclays Capital and FBN Capital, helped the sovereign showcase its strong credit profile relative to other issuers from the region and globally.

INFRASTRUCTURE AND PROJECT FINANCE

Winner: DPW Dakar Senegalese €100m public-private partnership

Sole structuring banks, co-underwriters and mandated lead arrangers: Standard Chartered, African Development Bank.
Other participating banks: Proparco, IDC, FMO, EAIF.

In its capacity as structuring bank, Standard Chartered led a group of development finance institutions in providing the financing for DP World Dakar to refurbish and expand an existing container terminal in Dakar, Senegal. The development – the first public-private partnership (PPP) concession project entered into by the Senegalese ports authority – is key to the country’s economic growth as the terminal is the only gateway into the country for imports and exports.

While the size of the deal is relatively small, at €100m, its strategic importance as well as its success (twice oversubscribed) made this the undisputed winner of The Banker award.

Given the lack of benchmark projects and general lack of liquidity in the international banking market at that time, Standard Chartered teamed up with the African Development Bank to initially underwrite the deal.

The deal was structured to allow the sponsors and client to form a banking group and sign loan documentation on a completely non-recourse basis, even though the client had not yet finished awarding the contracts for the six construction work packages and was taking on full market risk during a period of global economic uncertainty.

This transaction enabled sponsors to optimise their investment in the port by ensuring that they could extract maximum leverage while maintaining a sound equity investment. Standard Chartered was instrumental in negotiating the documentation and ensuring all parties involved came to a prompt agreement.

The non-recourse nature of the transaction – DP World’s first concession in west Africa – is in line with the company’s strategy for new investments. The deal structure involved one commercial and one development finance institution tranche of senior debt, with a sculpted maximum eight-year repayment term.

LOANS

Winner: Petra Diamonds’ R450m dual-currency loan

Lead arrangers: Rand Merchant Bank, First National Bank.

HIGHLY COMMENDED: BP Angola’s $2.5bn term loan.

In order to grow its operations and become a 3 million-carats-per-year diamond producer, South African Petra Diamonds needed additional funding – and it needed funding in both dollars and South African rand. Moreover, lenders would have to be comfortable with the supply-demand dynamics of the sector and the limited opportunities to offer downside price protection, because of the non-hedgeable nature of future rough diamond prices. This required a different type of thinking for this relatively higher risk sector. The company approached Rand Merchant Bank, a subsidiary of First­Rand bank, for inspiration.

The subsequent transaction proved that the diamond sector can be ‘project fundable’ through innovative structuring, and is a landmark transaction in South Africa.

It had a few unique features aimed at adequately mitigating the transaction risk while maximising the rewards. It offered different currency tranches to allow Rand Merchant to price competitively in rands and the International Finance Corporation to price competitively in US dollars. This managed to address the currency mismatch issues for the client – where some of the capital costs were in rands and others in dollars.

The judges were particularly impressed with how the transaction offered potential equity upside through the granting of warrants to lenders by the sponsor. This served to fill a small equity gap in the funding plan and aligned the interests of the lenders with those of the sponsor.

The client further benefited from First National Bank’s working capital offering, which meant that it only needed to deal with credit committee approvals and conditions from two financing institutions, reducing complexity and risk.

Another worthy contender in the loans category is BP Angola’s $2.5bn term loan, one of the largest pre-funded underwritings in sub-Saharan Africa, the proceeds of which will be used to develop further offshore oil fields and boost local production.

STRUCTURED FINANCE

Winner: Absa Homes’ R2.358bn retail mortgage-backed securities

Arranger and sole bookrunner: Absa Capital.

South African investment bank Absa Capital acted as sole arranger on the R2.358bn ($352.5m) for the Absa Homes retail mortgage-backed securities (RMBS) deal – the largest securitisation deal in South Africa since the onset of the financial crisis in November 2007.

The aim of the transaction was to refinance R1.24bn of maturing notes, but the transaction was upsized to R2.35bn due to strong investor demand and a high-quality orderbook.

Absa Homes had R1.25bn of notes maturing on July 19, 2010. The maturity date was extended to August 19 to allow Fitch to assess the transaction under its revised RMBS rating methodology and affirm the rating of the notes. Rating affirmation is required for redemption and re-financing of the notes.

On August 17, Absa Capital successfully re-financed the maturing notes as well as sourced new financing resulting in a total issue size of R2.358bn. Pricing came in at the tight end of guidance.

Given the virtual lack of supply of structured note issuance since 2007, Absa tailored the notes and auction to achieve maximum impact and attract investor appetite. There were 11 tranches of fixed and floating notes across two scheduled maturities – a combination of three-year (R1.869bn) and five-year (R489m) listed notes – to cater to both short- and medium-term investors.

But in a sign of the recovery of the securitisation market, this deal was Absa Capital’s fourth securitisation deal of 2010. It has already raised funds for Eskom Finance Company through a RMBS and twice for Edcon through the On-The-Cards II structure, which is backed by store card receivables.

EQUITIES

Winner: R5.3bn IPO of Life Healthcare

Joint global coordinators, joint advisors, and joint bookrunners: Credit Suisse, Rand Merchant Bank, Morgan Stanley.

HIGHLY COMMENDED: Steinhoff’s €390m convertible bond due 2016.

The R5.3bn initial public offering (IPO) of Life Healthcare was not a straightforward listing on any count. For one thing, the deal, launched in volatile markets, was the first IPO in South Africa to have a simultaneous share buyback from existing shareholders and use the proceeds raised from the listing. For another, it required bookrunners to navigate complex and diverging shareholder objectives.

The thinking behind the deal was clear. Shareholders wanted to maximise their exit value, so a transaction was structured in which Life Healthcare bought back shares from existing shareholders. The structured share buyback created an efficient outcome for exiting shareholders, while giving new investors the comfort that the bulk of the equity they acquired consisted of new, unencumbered shares.

Rand Merchant Bank also had to secure a mandate from the company’s black economic empowerment (BEE) shareholders, who had a complex and cumbersome funding and shareholding structure. This required a number of restructurings within the group’s shareholding structure to maintain existing funding and security arrangements. The deal also utilised an asset-backed security (ABS) vehicle, the first of its kind to be listed on the Johannesburg Stock Exchange, which was created to unlock a portion of the discount at which exiting shareholders’ shares were trading in relation to their Life Healthcare ‘see-through’ value; the ABS vehicle also enabled institutions to retain exposure to the company ‘see-through’ benefits.

AMERICAS:

FIG CAPITAL RAISING

Winner: MGIC’s $1.5bn dual-tranche offering

Sole bookrunner: Goldman Sachs.

Recent growth figures out of the US offer a welcome signal that the country’s economy is showing signs of life. But its housing market – so crucial to the stability of the economy is still struggling, with house prices continuing to fall and many banks embroiled in foreclosure scandals. Against this challenging backdrop, mortgage insurer MGIC managed to place $805m worth of common shares and $345m in convertible senior notes all in one day.

The impressive accelerated 24-hour bookbuild exercise was made possible by the bookrunner’s ability to attract strong interest from both new and existing investors, which took up almost equal portions of the offer.

The convertible offering was multiple times oversubscribed and it secured a more favourable pricing for the issuer than the initial price range: common stock priced at a 25% premium to MGIC’s shareprice, at the top of the indicated range, while the convertible offered a coupon at 5%, outside the indicated range of 5.25% to 5.75%.

After-market performance was also strong. The greenshoe was exercised on the first day of trading on both the common shares and the convertible notes, providing MGIC with an additional $150m funding. This strong performance was supported by a frank disclosure to investors of likely future scenarios, both good and bad. A clear, realistic picture was outlined of potential stress scenario outcomes and which areas would potentially generate a loss, investors felt comfortable with the MGIC story and could focus on growth opportunities. Further, the dual offer allowed MGIC to raise capital while limiting share-count dilution. The offer aimed to create financial flexibility and to support the development of the business. Despite the still difficult conditions, in fact, investors saw potential in a market where competition and supply is limited.

M&A

Winner: NBC Universal and Comcastjoint venture

Advisors to General Electric: Citi, JPMorgan, Goldman Sachs.
Advisors to Comcast: Morgan Stanley, UBS, Bank of America Merrill Lynch.
Advisors to Vivendi: Barclays Capital, Société Générale.

HIGHLY COMMENDED: Sinopec’s $7.1bn acquisition of a 40% stake in Repsol Brasil; Banco de Bogotá’s $1.92bn acquisition of BAC Credomatic.

The breadth, complexity and significance of mergers and acquisition in Latin America last year was a clear sign of the region’s dynamism. Sinopec’s 40% stake in Repsol Brasil created one of the largest energy companies in private hands in Latin America and allowed Repsol to develop the pre-salt oil discoveries off the cost of Brazil without having to list the company’s shares on the stock exchange. Although much smaller in size, the region’s banking sector also saw an important deal. The acquisition of Central America’s BAC Credomatic by Banco de Bogotá creates the foundation for the development of a strong regional group and gives substantial growth opportunities to the Colombian bank outside of its home market.

But the deal that most impressed the judges was the joint venture between NBC Universal and Comcast. The unique, highly complex transaction structure created a joint venture that is 51% owned by Comcast and 49% owned by General Electric, and managed by Comcast. The vehicle consists of NBC Universal businesses and Comcast’s cable networks, regional sports networks and other assets and investments, creating a stronger and more competitive entity in the media and digital market.

The deal allowed Comcast to maintain a strong balance sheet while taking a controlling stake in NBCU’s content business. By immediately increasing the scale, capabilities and the value of its cable distribution, content and digital assets, it will reduce the investment needed to grow the business. The deal structure also gave significant tax benefits to Comcast and provides GE with an exit strategy from its NBCU investments to be concluded in seven years, which consists of either a transfer to a third party or an initial public offering.

BONDS: CORPORATE

Winner: McDonald’s Corporation’s Rmb200m 3% fixed-rate notes due 2013

Sole lead manager and arranger: Standard Chartered.

HIGHLY COMMENDED: Votorantim’s €750m 5.250% seven-year bond.

Breaking into new markets is always a challenge but when the proposition is good, even issuers that are little known on international markets are able to attract great interest. This is the case of our judges’ highly commended Brazilian issuer Votorantim’s inaugural Eurobond transaction, which performed exceptionally well even in the face of the most unpredictable obstacles – such as when the deal team had to cancel the planned roadshow because of volcanic ash from Iceland.

But the deal which really caught the judges’ eye was the renminbi offering from US fast-food company McDonald’s. As the first ever offshore renminbi bond issued in Hong Kong by a multinational company, this inaugural deal opened a brand new market to other subsequent renminbi issues. There were many attractions for McDonald’s, not least diversification of its investors base: the transaction raised McDonald’s profile as an issuer and enabled it to raise local currency funding in a crucial and fast-growing market. The ability to raise renminbi-denominated working capital for the company’s Chinese subsidiary is a funding solution that other international corporations will no doubt have an interest in replicating.

The deal was equally interesting from an investor’s point of view. The bond received high credit ratings (A3 by Moody’s and A by Standard &* Poor’s) and tapped into the growing appetite of institutional investors in Hong Kong who are looking for renminbi-denominated assets. As a result, the book closed within two hours and was more than five times oversubscribed.

The deal has broader resonance too. In opening a new renminbi market for international companies, the deal is a signal of the growth of China as the engine of the global economy and a challenger to the US dollar.

BONDS: SSA

Winner: The Republic of Chile $1.5bn dual-currency 10-year notes

Joint bookrunners and lead arrangers: HSBC, Citi, JPMorgan.

HIGHLY COMMENDED: United Mexican States $1bn 5.75% century bond.

Any issuance in the rare 100-year market would catch investors’ and commentators’ attention. When the deal has the record size of $1bn and an order book four times oversubscribed, as was the case with Mexico’s inaugural century bond, its success makes it a strong contestant for the award as best bond issuance by a sovereign entity. The prize, however, goes to Chile’s $1.5bn dual-currency 10-year notes, which represented the first US dollar-denominated bond offering from the Republic of Chile since 2004 and the first global europeso notes ever issued in the international capital markets.

One of the most anticipated deals of the year, the transaction comprises a $1bn 3.875% bond and a 272bn peso 5.5% bond. It funded fiscal spending and reconstruction costs following the catastrophic earthquake that struck the country in February last year. It also reopened the international bond markets for Chilean corporates by establishing a 10-year benchmark.

The order book amounted to a phenomenal $10bn – impressive demand even by Chile’s high credit quality standards – and attracted 360 investors from around the world. The US dollar tranche achieved the lowest ever 10-year coupon and yield by a Latin American issuer in the US dollar market, while the international peso-denominated offer was priced comfortably inside the country’s local nominal curve. More importantly, the local currency bond created a benchmark for future similar transactions and opened the market for Chilean issuers seeking to raise funds in pesos from international investors – an opportunity subsequently taken up by Banco Santander Chile.

INFRASTRUCTURE AND PROJECT FINANCE

Winner: $1.683bn Eagle P3 financing

Lead alternative finance and P3 advisor (lead sell-side advisor): Goldman Sachs. Co-advisor: JPMorgan. Purchaser’s advisor: Macquarie. Underwriters: Barclays Capital, Bank of America Merrill Lynch.

HIGHLY COMMENDED: Construction of McGill University Health Centre, Montreal.

A groundbreaking deal, the Eagle P3 financing project is the US’s first public-private partnership for passenger rail and the first rail PPP project to reach financial close. Denver Transit Partners was awarded the concession to design, build, finance, operate and maintain two rail corridors in the Denver area until the end of 2044. This is the first project under the Federal Transit Administration’s PPP pilot programme, which requires collaboration with the local Regional Transportation District (RTD).

The Eagle P3 deal had to overcome many challenges that had halted similar projects in the past. The project structure included innovative elements that overcame the lenders’ initial reluctance to accept appropriation risk, which is the risk that the government would not be obliged to make lease payments if any of the contractual obligations were not met by the contractor. By finding a structure that is acceptable to lenders, the deal has essentially created an initial blueprint for the financing and implementation of such PPP projects and for availability payment transactions in the US in general, where regular payments made by the public sector to the concessionaire are contingent to the contracted services being available.

Further, the project structure created the first private activity bonds (PABs) financing of an availability payment transaction in the US. PABs are tax-exempt bonds issued by local or state government with the exclusive purpose of providing financing for certain projects. Their inclusion in the deal reduced financing costs while also allowing the public sector to diversify the deal financing and raise funds on the capital markets. The project, therefore, accomplished the often challenging task of developing a concession agreement that is appealing to both the bank and bond markets.

LOANS

Winner: $7.625bn acquisition financing for the PPL Corporation’s takeover of E.ON US

Underwriters: Bank of America Merrill Lynch, Credit Suisse. Global coordinators: Wells Fargo, Bank of America Merrill Lynch. Equity offering: Bank of America Merrill Lynch.
Other bookrunners: Citi, Credit Suisse, Morgan Stanley, Wells Fargo.

The acquisition financing package put together for PPL Corporation’s takeover of E.ON US was both big and bold. It is not every day that almost 90% of such a large deal consideration is delivered in cash. It was, in fact, the largest cash transaction by a US utility and one of the largest corporate utility mergers and acquisitions transactions ever completed. While an impressive $6.5bn was being raised for the underwritten bridge financing, PPL also renewed its existing $5bn revolving credit facility; this was oversubscribed and resulted in a $1bn upsizing of the company’s existing revolving facility.

Given the size of its acquisition financing package, PPL was keen to maintain a strong capital position at the same time as building a longer-term debt profile and preserving its investment grade rating. A total of $2.9bn in long-term senior notes and first mortgage bonds were raised, along with a $2.48bn of common shares though an add-on offering and further $1.15bn mandatory convertible offering; this was by far the largest concurrent add-on common stock and mandatory convertible deal in the US.

Looking at the individual components of the concurrent deal, they were also the largest equity and convertible deals for a US utility.

All of this was executed in a challenging capital markets environment characterised by uncertainty over economic recovery and sovereign debt risk, which reduced the underwriting ability of a substantial part of the banking market. Despite such challenges and as a result of PPL’s advisors and structures’ work, market reception of all the components of the financing package was strong and fully met the company’s ambitious objectives.

STRUCTURED FINANCE

Winner: FDIC’s $4.07bn structured sale guaranteed notes series

Sole bookrunner and note structuring/restructuring agent: Barclays Capital.

HIGHLY COMMENDED: GMAC’s 1.3bn Mexican pesos auto securitisation

The Federal Deposit Insurance Corporation (FDIC) has been in the media spotlight over the past few years as a consequence of its crucial role in dealing with the US banks hit by the financial crisis. Its mandate to preserve and promote public confidence in the US financial system by insuring depositors within certain limits turned into a Herculean effort as the country’s banking system went into meltdown.

Last year, however, the FDIC benefited from some of the first encouraging signs from financial markets. For the first time in the current credit cycle, the FDIC was able to monetise assets that it had received as a result of taking control of failed depositary financial institutions. Its successful structured sale guaranteed notes (SSGN) raised more than $4bn and contributed substantial low-cost liquidity to the FDIC’s Deposit Insurance Fund, used to insure deposits of other failed depositary financial institutions.

The deal was the first ever SSGN with a FDIC guarantee, which is fully backed by the US government, and the first ever non-Ginnie Mae (the Government National Mortgage Association) mortgage offering executed with this structure.

FDIC’s SSGN notes opened markets for government-guaranteed non-agency residential and commercial mortgage backed bonds and became the model for large asset monetisation structures by both governments and the private sector internationally; it was followed into the market by the National Credit Union Administration’s $50bn securitisation of distressed legacy assets as well as further subsequent FDIC’s issuances.

The structure – under which all the securities were eligible for a zero risk-weight treatment – appealed broadly to both US and international investors; all tranches of the SSGN series were oversubscribed.

EQUITIES

Winner: Petrobras’s R$120bn/$70bn follow-on equity issue

Sole financial advisor: Rothschild. Global coordinators: Bank of America Merrill Lynch, Bradesco BBI, Citi, Itaú BBA, Morgan Stanley, Santander. Bookrunners: BB Investimentos, BTG Pactual, Crédit Agricole CIB, Credit Suisse, Itaú BBA, Goldman Sachs, HSBC, ICBC International, JPMorgan, Société Générale.

HIGHLY COMMENDED: $129m synthetic mandatory exchangeable note into GT Solar stock.

Size is not everything, but it does count, particularly when records are being broken. Brazil’s state-controlled oil company Petrobras issued the world’s largest ever equity offering last year, three times the size of the second biggest equity deal, the Agricultural Bank of China’s initial public offering, also brought to the market last year. This single deal represented a full 7% of all equity issuance in 2010 and was successfully placed despite market turbulence within the oil and gas industry following the catastrophic BP oil spill in the Gulf of Mexico. Investors’ concern over the fair valuation of Petrobras’s acquisition of pre-salt oil fields from the government had also to be overcome and the offer’s timing, close to presidential elections, represented a challenge, too.

The structure comprised four different types of securities, a priority offering with several subscription rounds - which included the possibility for shareholders to buy shares using Brazilian treasury securities and FGTS funds (the employees’ severance funds) as an alternative to using cash – and a specific offering for employees.

An issue this size presents the danger of ownership dilution but its structure maintained the Brazilian government’s control of the company thanks to a post-offering increase of its stake through subscription of leftovers from the priority offering and another order placed though a bookbuilding process. Shares were listed on the local stock exchange Bovespa and on the New York stock exchange as American depository receipts.

This year’s highly commended deal is the $129m synthetic mandatory exchangeable note into GT Solar stock transaction. It is the first such deal done on behalf of a financial sponsor, and monetised a large equity stake with limited impact on other stakeholders.

RESTRUCTURING

Winner: GGP’s $37bn REIT restructuring

Financial advisors: UBS, Miller Buckfire.

HIGHLY COMMENDED: Education Media and Publishing Group’s $4.1bn converted debt into equity and $650m equity issue.

The Banker’s winner in this category is the largest bankruptcy restructuring in the history of US real estate – with an enterprise value for GGP of $37bn – and one that paid all creditor claims in full. It was so successful that it allowed the company to re-list on the New York Stock Exchange while still in bankruptcy – the first time this was ever achieved.

The transaction consensually restructured $14.9bn of secured mortgage debt, recapitalised the company with $6.8bn in new equity from a group of investors lead by Brookfield Asset Management (which resulted in a change of control of the company but avoided a takeover by competitor Simon Properties) and reinstated $1.65bn of the company’s unmatured bonds.

The deal also included a $2.3bn equity offering launched upon emergence from Chapter 11 bankruptcy, which allowed the company to claw back part of the investors’ commitment thanks to equity raised at a higher share price. On the day GGP emerged from bankruptcy, its shares ended trading at $17.39 – an impressive recovery from the $0.60 at which they were valued almost a year and a half earlier,  the day the company filed for Chapter 11.

The Banker’s highly commended restructuring deal is Education Media and Publishing Group (EMPG), which put the company back in shape after a series of acquisitions left it loaded down with debt. The restructuring is also noteworthy for negotiating the largest ever out-of-court debt for equity exchange. EMPG defaulted on making first lien principal, interest and swap payments on its debt in 2009 and at the end of the same year it forecasted that it would have run out of liquidity by early February 2010. By early March 2010, EMPG’s debt restructuring was successfully closed with strong support from debt holders.

ASIA-PACIFIC

FIG: CAPITAL RAISING

Winner: Agricultural Bank of China’s $22.1bn IPO

Joint global coordinators and joint bookrunners: Goldman Sachs, CICC, Morgan Stanley, ABCI. Joint bookrunners: Macquarie, Deutsche Bank, JPMorgan.
Sole stabilisation agent, settlement agent and HKPO manager: Goldman Sachs.

HIGHLY COMMENDED: Great Eastern’s S$400m 15NC10 Tier 2 notes.

Looking at last year’s capital raising by financial institutions in Asia-Pacific, it is impossible to ignore Agricultural Bank of China’s blockbuster IPO. It was a landmark offering in almost every way, not least as the second largest ever initial public offering (IPO) globally with the largest ever cornerstone tranche – at $5.5bn – in a Hong Kong IPO.

The listing of ABC – the third largest bank in China in terms of total assets, with the largest branch network and largest retail business – completes the privatisation of China’s big five banks. While investor appetite for exposure to Asian, and particularly Chinese, growth helped to make this one of last year’s easiest sales, it was executed against a challenging market environment. For one thing, US markets had fallen 15% in the two months running up to the deal. More importantly for a deal that had a concurrent $10bn (post-shoe) A-share IPO on the Shanghai Stock Exchange, A-shares had posted the biggest weekly decline in 16 months, resulting in several IPOs being withdrawn or delayed.

The public listing of ABC, founded by former Chinese communist leader Mao Zedong in 1951, marks a milestone in Chinese banking. Only three or four years ago the bank was technically insolvent, with non-performing loans of about 24%; its turnaround was achieved by carving out its bad loans and a $30bn bailout. The success of its IPO is also the measure of Beijing’s success in whipping its banks into shape.

The judges’ highly commended deal, an S$400m ($318.3m) Tier 2 issue from Great Eastern, is the first ever public debt capital market transaction from an Asian (excluding Japan) insurance company, and the first ever non-equity capital raised by an insurer in the Asia, excluding Japan, region.

M&A

Winner: Guangzhou Auto/Denway delisting & relisting

Co-sponsors: JPMorgan, Morgan Stanley, CICC.

HIGHLY COMMENDED: Merger of AlBaraka Islamic Bank, Pakistan with Emirates Global Islamic Bank Pakistan.

Our winner this year is not a typical merger and acquisition transaction, but a complicated intra-group restructuring which involved a ‘listing by introduction’ combined with a public M&A transaction to delist the target.

The rationale behind the deal was to obtain listing status for the Guangzhou Auto (GAC) parent, rather than its subsidiary, in order to better access capital markets and enhance GAC’s financing ability and business profile. The deal would achieve parity between a joint ventures GAC had with Honda (Denway) and Toyota by delisting Denway, and it would streamline and optimise GAC’s business structure by trimming the organisational layers between GAC and Guangqi Honda.

On a single day, GAC announced a final proposal to delist Denway in exchange for GAC shares then, upon closing of the transaction, GAC shares (those not being offered as consideration for Denway) would immediately be listed.

The deal was structured to minimise the risk of value leakage during the restructuring – where each transaction could have been problematic if executed sequentially.

Moreover, simultaneous execution of the initial public offering (IPO) and the delisting helped to reduce the premium required to get a deal done, and to pitch the IPO as an opportunity to reposition the company’s strategy. Using the unlisted stock as consideration (meaning no cash was required), meant a valuation report was needed to indicate the value of the stock being offered in order to satisfy the SFC Takeovers Code requirement.

Successful investor dialogue pre-announcement and with the SFC in respect of approvals, enabled the deal’s managers to win additional time for key investors to complete due diligence and sign irrevocable undertakings; this was extended from the usual 24 hours to two weeks.

This year’s highly commended deal – the merger of AlBaraka Pakistan and Emirates Global Islamic Bank Pakistan – marks the first merger of Islamic banks in Asia.

BONDS: CORPORATE

Winner: PTT Public Company’s Bt4bn 100-year bond

Joint lead arrangers: Bangkok Bank, Kasikornbank, Siam Commercial Bank.

HIGHLY COMMENDED: Reliance Holding’s $1.5bn dual-tranche 10-year and 30-year unsecured notes.

Last year, Thai energy company PTT joined an elite group of issuers in the rare 100-year bond market. In this landmark deal – which helps to develop the debt capital market for issuers and investors interested in long tenors – Thailand’s first century bond also beat the Thai government to market at the long end of the curve; it has a 50-year bond planned for this year. The longest bond previously available from a Thai corporate or sovereign was 30-years.

The AAA rated bond was carefully structured to reassure investors unused to such long tenors. The debentures offer a put option that can be exercised at the end of the 50th and 75th years, or if the Thai government dilutes its holding in PTT to below 50% and, consequently, within six months, PTT’s credit rating is downgraded to below AA-. Theoretically, this could possibly take place only once during the bond’s life. It is not, however, a bond default, and this option is intended to give investors the flexibility to re-consider their investment and confidence in PTT should the government significantly change its ownership interest.

With outstanding debt of almost Bt170bn ($5.64bn), raising new debt was always going to present some challenges, let alone a new, and extremely long, tenor. However, the comfort of the structure put together by arrangers Bangkok Bank, Kasikornbank and Siam Commercial Bank proved extremely attractive to investors; the deal was more than two times oversubscribed, enabling the issuer to upsize the transaction from the planned Bt2bn to Bt4bn.

In a close competition, Reliance Holding’s dual-tranche $1.5bn bond – the largest ever public market offshore bond offering from Reliance and the largest ever corporate bond from India – was just beaten into the highly commended position.

BONDS: SSA

Winner: Republic of the Philippines 44.109bn pesos global local currency bond

Joint global coordinators: Citi, Deutsche Bank. Joint bookrunners: Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan.

This year’s winning supras, sub-sovereigns and agencies (SSA) bond is the first of a kind by an Asia-Pacific borrower – offering global investors the chance to gain exposure not only to the Philippines’ credit but also to its currency.

The fixed-rate notes are denominated in the Philippine peso, with interest and principal settled in dollars. Payments are indexed to the peso spot rate, providing investors with long-dated Philippine currency and interest rate exposure.

For the issuer, this landmark inaugural global peso note offers myriad benefits. In the first instance, it enables the Republic of the Philippines to reduce its foreign exchange exposure and broaden its investor base to include emerging market local currency investors while helping to create a more efficient domestic peso debt market. At the same time, it lengthens the average maturity on the country’s debt and reduces borrowing costs due to a lower coupon versus domestic peso treasuries.

Aside from the ability to benefit from future peso appreciation, the peso note attracted investor attention with no withholding tax, and international documentation, settlement and governance practices. As a result, the order book was oversubscribed by more than 13 times, at $13.5bn, and covered more than 280 investors globally. US and European investors each took about one-third of the orderbook, and Asian investors took the remaining 37%.

Demand also meant that the note was priced at the lowest ever coupon for a global offering by the Philippines (excluding Japanese yen), and priced through the country’s net cost of peso funding in the local markets.

INFRASTRUCTURE AND PROJECT FINANCE

Winner: S$1.115bn Singapore Sports Hub

Advisors: Deutsche Bank, HSBC. Lenders: BNP Paribas, Bank of Tokyo-Mitsubishi UFG, Crédit Agricole CIB, DBS, HSBC, NAB, Natixis, OCBC, SMBC, Standard Chartered, WestLB.

HIGHLY COMMENDED: $160m Manilla Cavite Toll Road finance.

Successfully closing a large project finance deal last year, with sponsors from Singapore, the UK, France, the US and Australia, and with markets still fragile, was an achievement. But closing the largest ever public-private partnership (PPP) in Singapore and Asia – for a project that cannot be described as essential infrastructure – is more impressive still.

The project, Singapore Sports Hub, is the largest integrated sports, leisure and retail infrastructure project undertaken on a PPP basis globally.

Seen as a benchmark in terms of PPP structures and pricing in Asia, the transaction involves the largest long-dated project interest rate swap ever executed in Singapore. Advisors came up with an imaginative swap strategy and execution prior to financial close to minimise market and execution risk. They structured the swap to accommodate a refinancing, and enabled the Singapore government to lock in attractive long-term fixed rates.

Risk allocation was customised to put in place a complex arrangement of long-term and shorter-term PPP contracts to achieve the Singapore government’s strategic, performance and revenue-sharing objectives. Where changes to risk allocation were needed, due to changes in the financial environment, these were structured to ensure the least amount of risk transfer to the government – ie, market refinancing risk, but not project performance risk – with adequate gain sharing by the government. To date, Sports Hub is one of the largest PPP projects with significant third party revenue risk elements.

The funding competition attracted two times the required funding amount required, and closed on a club basis with 11 banks.

This year’s highly commended deal, the Manila Cavite Toll Road finance, saw the first senior secured toll road project bond issued from the Philippines.

LOANS

Winner: Bharti Airtel’s $7.5bn acquisition-term loan facilities

Mandated lead arrangers and bookrunners: ANZ, Barclays Capital, BNP Paribas, Bank of America Merrill Lynch, Bank of Tokyo Mitsubishi, Crédit Agricole, DBS, HSBC, Standard Chartered, Sumitomo Mitsui Banking Corporation, State Bank of India

Bharti Airtel’s jumbo transaction – the biggest acquisition financing deal post-crisis in Asia – reopened the Asian market in 2010.

It scored a long list of memorable plaudits. It was the largest ever term-acquisition financing in Asia; the largest ever foreign currency denominated telecom financing in Asia; the largest ever financing for an Indian corporate; and the largest ever foreign currency financing for an Asian corporate.

Structured across various tenors and amounts to match cash flows, the facility allowed the company to dynamically manage its maturity profile. The transaction was structured into a Dutch tranche and a Singapore tranche to optimise the company’s tax position, while maintaining pari passu recourse for all the lenders.

The facility was competitively priced for the borrower – but still managed to generate a strong response from the market, with close to an additional $1bn of commitments received in syndication.

Just as importantly for Bharti, its landmark south-south acquisition of Zain Africa created a leading emerging markets telecom operator – and the fifth largest globally – across the fastest growing telecoms markets in the world, with 160 million subscribers and a population under coverage of more than 1.8 billion. Moreover, the deal provided Bharti with a strong foothold in Africa – Zain’s existing assets were spread across 15 countries.

STRUCTURED FINANCE

Winner: Macquarie Leasing’s Smart Series 2010-11 US Trust A$641.7m equivalent multi-currency securitisation

Originator and servicer: Macquarie Leasing (MLPL). Co-arrangers and joint lead managers: Macquarie Debt Markets, JPMorgan. Joint lead manager: RBS.

HIGHLY COMMENDED: ARA Bintang RM1.25bn medium-term note programme.

Last year’s Smart transaction from Macquarie Leasing was the first ever auto securitisation to be marketed to US based investors and the first Australian securitisation of any class to be issued into the US market since the onset of the global financial crisis in 2007.

Notwithstanding market volatility, because of the rarity of Australian asset-backed securities (ABS) on offer in the US, there was considerable appetite for the paper: the $500m of rule 144A senior notes were oversubscribed across 15 US institutional investors.

The issue further diversifies the investor base for the Smart programme, which has already tapped the Australian, European and Asian capital markets; with this latest transaction, it has issued A$6.6bn ($6.92bn) in total since 2007.

The structure comprised nine classes of fixed-rate and floating-rate notes plus a seller note. The Class B, Class C, Class D and Class E were not offered for sale. A novel feature incorporated to appeal to US investors was that each of the class A1, A2b, A3a, A3b and A4b note legal maturities were determined based on the scheduled amortisation of the receivable portfolio rather than the date of the latest maturing receivable in the pool (resulting in shorter legal maturities than in typical Australian ABS issues).

The deal involved considerable complexity for the arrangers and lead managers, including the coordination of a multi-currency transaction with cross-currency swap, as well as cross-border Australian and US documentation.

The regulatory and legal timelines, as well as costs involved in coming to market in the US, are such that an issuer needs sufficient volume to make it cost effective, and as yet, no other Australian issuers have followed Macquarie Leasing’s example.

EQUITIES

Joint Winner: Sino-Ocean Land $900m 8% perpetual subordinated convertible securities offering

Joint lead managers and bookrunners: Bank Of China International, JPMorgan, Macquarie

Joint Winner: China Unicom’s $1.8bn convertible bond

Joint bookrunners: CICC, Goldman Sachs, Nomura

Unusually, we have joint winners of our Asia-Pacific equities category this year. Moreover, both are, coincidentally, convertible securities from China. They each have much to recommend them.

Sino-Ocean Land broke new ground as the first Chinese corporate to issue perpetual subordinated convertible securities. More importantly, the equity-like structure had significant benefits for the issuer, first and foremost by not creating further leverage for the company. Additionally, the one-year conversion lock-up was seen as a way to create a loyal and solid base of investors.

The structure was designed to meet some of Sino-Ocean’s specific objectives. With its ability to raise funding in China constrained by the clampdown on the domestic property sector, the company wanted to raise a large chunk of capital – but not at a big discount; an equity-like instrument that would be given equity treatment on its balance sheet was seen as very attractive. The convertible bond met all of these objectives and gave investors an enticing offering: a stable yield of 8% and the chance to benefit from any gains in Sino Ocean’s share price.

China Unicom’s $1.84bn offering, meanwhile, is the largest ever international convertible bond offering in Asia, excluding Japan, and the largest ever international equity linked offering by a Chinese company.
The deal was welcomed by the analyst community. For one thing, compared with debt costs of 3% to 5%, the bond’s interest cost of 0.75% helped to relieve interest cost pressure on the company. And, because the bond is denominated in dollars, Unicom will potentially benefit from foreign exchange upside if the renminbi continues its slow appreciation against the dollar.

ISLAMIC FINANCE

Winner: Khazanah Nasional’s S$1.5bn sukuk

Joint bookrunners: CIMB, DBS, OCBC. Joint lead managers: CIMB, DBS, OCBC, CIMB Islamic Bank, Islamic Bank of Asia, OCBC Al-Amin Bank. Co-managers: ANZ, BNP Paribas, Maybank, UOB

HIGHLY COMMENDED: Sabana’s sharia-compliant RIET S$636m IPO.

Khazanah Nasional’s Singapore dollar sukuk was a landmark deal for Malaysia, for the sukuk asset class, and for the Singapore dollar market.

It was the first Singapore dollar issuance out of Malaysia’s International Islamic Finance Centre and the longest-tenored sukuk in the country’s currency. It was also the largest ever Singapore dollar bond from a foreign issuer and the largest Singapore dollar sukuk issue. Moreover, it was the first ever benchmark Singapore dollar-denominated sukuk Al-Wakalah.

These achievements did not escape the attention of the investment community. The sukuk attracted a huge orderbook covering 80 local and international investors. At S$4.3bn ($3.42bn), it was one of the largest ever books for a singdollar bond by a foreign issuer, and enabled Khazanah to upsize the transaction from the initially planned S$1bn to S$1.5bn.

The issue – via a Malaysian incorporated special purpose vehicle Danga Capital – comprised a S$600m five-year tranche and a S$900m 10-year tranche, and was structured to match Khazanah’s specific objectives. These were to test the Singapore dollar capital marketplace – it wanted to raise at least S$1bn through the transaction; to match the currency of Khazanah’s funding needs; to issue out of its existing multi-currency sukuk issuance programme; and to achieve greater diversification of its investor base by using a structure that employs a Middle Eastern sharia interpretation.

Our highly commended deal was the Sabana sharia-compliant industrial real-estate investment trust (REIT), the first such fully certified REIT in Singapore. It is also the largest sharia-certified REIT globally by total assets, and the first which has industrial assets. The transaction introduces a new investor base – sharia-compliant equity investors – to the Singapore equity and REIT space.

RESTRUCTURING

Winner: Asia-Pacific Telecom’s T$3.5bn syndicated loan and T$3.5bn bilateral bridge loan

Joint mandated lead arrangers and bookrunners: Chinatrust, Bank of Taiwan.

HIGHLY COMMENDED: RM820m restructuring of Konsortium Lebuhraya Utara Timur sukuk.

The refinancing of Asia-Pacific Telecom (ATP) is not a classic restructuring exercise. However, judges rewarded the complex series of negotiations and loans – which have rumbled on for years – in the rescue of a corporate in severe financial difficulties and caught up in an embezzlement scandal surrounding its former major shareholder, Rebar Group. The final solution, a syndicated loan, was completed in April 2010.

The rescue has a complicated history. In the early stages, one of the company’s lenders called for the immediate repayment of an existing loan. The resulting cross-border legal proceedings added further cost for APT, which had then only just returned to profitability.

Most challenging, however, was the need for APT’s advisors to come up with a refinancing deal in the context of the fallout from the earlier embezzlement and the huge damage that had been done to the company’s reputation. Many banks – potential lenders for the refinancing – had suffered from other losses caused by the Rebar Group and were extremely reluctant to extend additional credit to APT.

Chinatrust met the immediate settlement requirements with a bridge loan. This was later refinanced with a five-year syndicated loan, which transferred partial commitments to other participating banks. To encourage participation from other banks – and to secure their rights – Chinatrust put in place a rigorous cash-flow management mechanism to prevent cash leakage. A well-designed structure clarified the legal issues encountered by APT, and financial covenants were put in place to monitor APT’s business operation. Furthermore, restrictions were placed on the company so that additional debt could not exceed a set level and that it could not embark on non-core business expansion.

EUROPE:

BONDS: CORPORATES

Winner: Scottish and Southern Energy £1.2bn hybrid bond

Joint bookrunners: Barclays Capital, BNP Paribas, Credit Suisse, RBS.

HIGHLY COMMENDED: DTEK $500m notes; Merck €3.2bn multi-tranche notes.

The market for deeply subordinated perpetual bonds issued by companies rather than banks has sometimes been written off as a pre-crisis phenomenon. The combination of risk aversion and changes in international accounting standards and ratings agency methodology cast a cloud of uncertainty over any new issuance.

In this context, the dual-currency perpetual issue equivalent to £1.2bn ($1.96bn) for Scottish and Southern Energy launched in September 2010 broke a number of different barriers. It was the first sterling hybrid issue by a UK company or indeed by any European utility. It also tested the waters both for a new hybrid ratings methodology established by Moody’s in July 2010, and for new International Financial Reporting Standards (IFRS) rules.

Moody’s granted the bond, which is senior only to common equity, 50% equity equivalence, and it was also accounted for as equity under IFRS. This allowed the company to raise financing relatively cheaply without undermining its credit rating or financial profile.

Despite the lack of precedent for this structure, there was significant oversubscription for both tranches. The sterling tranche was finally set at £750m, on orders of £1.9bn, while the euro tranche was issued in minimum benchmark size of €500m after receiving €1.6bn in orders.

Two contrasting deals also caught the judges’ eye for a commendation. Bookrunners Bank of America Merrill Lynch, BNP Paribas and Commerzbank pulled in €26bn in orders for German pharmaceutical company Merck when it issued a three-tranche deal for €3.2bn to pre-finance an acquisition bid for Millipore. On a smaller scale but in a much tougher market, Ukrainian energy company DTEK shrugged off financial uncertainty in the country to issue the first corporate Eurobond there since 2007, a $500m benchmark with ING and RBS as bookrunners.

DEBT RESTRUCTURING

Winner: BorsodChem €1.2bn restructuring and €900m refinancing

Restructuring advisor to BorsodChem: Houlihan Lokey. Financial advisor to BorsodChem: Morgan Stanley. Financial advisor to senior lenders: DC Advisory Partners. Financial advisor to Wanhua:
Bank of America Merrill Lynch. Sole lead arranger for €900m refinancing for Wanhua: Bank of China.

HIGHLY COMMENDED: European Directories €2.1bn restructuring.

With a wall of pre-crisis financing deals on terms that are no longer obtainable approaching maturity, it is no surprise that the debt restructuring category saw a strong field of entries this year. One entry stood out for setting a whole range of precedents.

BorsodChem is a chemical manufacturer based in Hungary, bought out by two private equity firms in 2007. When the global downturn pushed the company into a breach of its €1.2bn loan maintenance covenants, BorsodChem’s advisors, Houlihan Lokey and Morgan Stanley, carried out the first ever pre-packaged enforcement sale for a company of this size in Hungary, navigating significant legal execution risks.

Not only that, advisors also had to contend with another unknown: a Chinese trade buyer, Wanhua, launching an aggressive loan-to-own strategy via mezzanine and senior debt. Few Chinese firms had made forays of this kind before, and Wanhua’s precise intentions were initially unclear.

Wanhua had the financial means to salvage BorsodChem and provide much-needed funds to complete a major expansion project that had been frozen. But senior lenders did not want their debt rolled into a company controlled by a Chinese entity, and the private equity sponsors were not willing to cede control of the company either.

In the end, mezzanine lenders totalling €260m were given 20% of the equity, much of it to Wanhua, which now holds a 38% stake in return for its mezzanine exposure and €140m in new money. Senior creditors will not take a haircut, and Wanhua has a call option to buy out existing shareholders.

EQUITIES

Winner: Q.Cells €127.6m rights offer and €128.7m convertible bond

Joint bookrunners: Citi, Goldman Sachs, UniCredit.

HIGHLY COMMENDED: Warsaw Stock Exchange 1.2bn zloty IPO; Pandora DKr11.4bn IPO.

An exceptional field of entrants highlighted the spread of equity market activity away from traditional centres, with eye-catching deals from markets such as Denmark, Poland and Russia as well as the usual heavyweights. This year’s winner is listed in a more traditional location – Frankfurt – but there is plenty of novelty value. Q.Cells is one of the world’s largest photovoltaic cell manufacturers.

The deal itself, completed in October 2010, is equally eye-catching. There were simultaneous offerings of €127.6m in equity, plus a convertible offering of €128.7m. All of this had to coincide with a Dutch auction tender for €492.5m in outstanding convertibles that were due to mature in 2012. It is the most comprehensive exchange offer of its kind in European equity markets to date.

Existing 46% shareholder Good Energies agreed to take up only two-thirds of its subscription rights, allowing an accelerated bookbuild for €36m for those rights not taken up and reducing the risk that other institutional investors would not receive their desired allocation. The overall investor response was highly positive: the offer was many times oversubscribed from about 140 different orders, and 45% of the interest came from new investors rather than those being exchanged from the existing convertible.

In the highly commended category, the Warsaw Stock Exchange initial public offering was an extremely symbolic deal for Poland, with a combined international institutional and local retail offering that attracted 323,000 subscribers. Meanwhile, joint global coordinators Goldman Sachs, JPMorgan, Morgan Stanley and Nordea Markets went the extra mile to persuade investors of the rather niche attractions of Danish branded jewellery bracelet manufacturer Pandora, from which owners and senior managers were all cashing out after just three years, with one banker apparently wearing the company’s products for the entire roadshow.

FIG CAPITAL RAISING

Joint Winner: Commerzbank $626m debt-for-equity swap

Joint bookrunners: Commerzbank, Credit Suisse. Advisors Citi, Credit Suisse, Goldman Sachs, UBS.

Joint Winner: Rabobank $2bn perpetual non-call hybrid Tier 1

Joint lead bookrunners and structurers: Bank of America Merrill Lynch, Credit Suisse, Rabobank.

In a year when the regulation of bank capital changed almost on a weekly basis, the field of entries in this category was consequently so exceptional that the judges could not split the two winners. Both deals provided templates for compliance with the barrage of new capital requirements coming from Basel, Brussels and elsewhere – one for a bank that was a victim of the financial crisis, another for one of the least-affected banks.

While Commerzbank’s restructuring is still ongoing, a debt-for-equity swap launched in January 2011 went a long way to bring the bank into alignment with Basel III, by substituting non-compliant hybrid capital for core Tier 1 equity. It was the first debt-for-equity exchange by a German financial institution, with a unique advanced book-build and stock-borrow structure to provide hybrid bondholders with a cash exit and to compensate for the dilution of existing shareholders.

Rabobank’s balance sheet is in a much healthier state, as one of the few AAA rated banks in the world. But its co-operative ownership structure makes it particularly dependent on hybrid capital that is now under such scrutiny. Its $2bn perpetual non-call hybrid Tier 1 offering, also in January 2011, marks the most comprehensive effort yet to tick all the boxes that regulators might possibly require.

The bond has a non-cumulative coupon cancellation feature in the event of regulatory prohibition, a permanent write-down of principal in the event of an 8% capital ratio breach, and a regulatory call feature in case some unexpected new twist in Basel III renders it non-compliant. And all this innovation was no obstacle to tight pricing and 3.25 times oversubscription, thanks to the largest ever European and Asian retail distribution for a Tier 1 transaction.

INFRASTRUCTURE AND PROJECT FINANCE

Winner: €750m Moscow-Minsk M-1 highway project

Financial advisors: Deutsche Bank, Gazprombank.

HIGHLY COMMENDED: €3.9bn Nord Stream pipeline project.

Project implementation risk and legal uncertainties are invariably more profound challenges outside the EU. And obtaining long-term financing is difficult for any project in this new era of constrained bank balance sheets, unless the sponsors can show a compelling case that the underlying asset can deliver reliable revenues. Indeed, most post-crisis road financings even within the EU have either been funds to expand existing roads with known traffic levels, or tend to be based on availability payments rather than traffic volume risk.

Given this context, the successful funding of the Federal Road M-1 Moscow-to-Minsk motorway project for €750m was an achievement for many reasons. The project carries full traffic risk on a newly constructed road. Its implementation will require unprecedented coordination between the authorities of the two countries involved, Russia and Belarus. With a long tenor of 18 years, it is also the debut issue in the Russian infrastructure bond format, using Russia’s recently adopted laws to facilitate public-private partnerships. Its success could help to kick-start much-needed investment in Russia’s ailing transport infrastructure.

Although the project enjoyed a strong anchor investor in the form of Leader Asset Management – the pension fund arm of state gas company Gazprom – it was also widely distributed with significant oversubscription. And the structure of the bond itself was highly sophisticated, seeking to match the underlying traffic risk by paying a coupon linked to a basket of Russian consumer price inflation and gross domestic product.

In the highly commended category is another vital international highway from Russia – this time a gas pipeline. The economic benefits of the Nord Stream pipeline to Germany are obvious to both countries and its shareholders include several of the largest EU energy companies. Even so, the €3.9bn package put together by Commerzbank and UniCredit required careful structuring, including pre-completion shareholder guarantees.

LOANS

Winner:  BHP Billiton $45bn acquisition facilities

Underwriters, mandated lead arrangers and active bookrunners: Banco Santander, Barclays Capital, BNP Paribas, JPMorgan, Royal Bank of Scotland. Financial advisor: Toronto Dominion.

HIGHLY COMMENDED: Wind Telecomuniczioni’s €3.9bn credit facilities.

These awards recognise performance in each category independently. So the winner in the loans category is a highly successful syndication of a very large acquisition facility – even though the acquisition itself ultimately never took place.

The Canadian government ultimately stalled BHP Billiton’s bid for Potash Corporation of Saskatchewan, but not before bookrunners had closed the largest syndication facility globally in two years. The $45bn financing, of which $42bn was underwritten by the five lead banks, would have backed the largest acquisition of 2010 had the deal closed.

There were four tranches in total, with maturities ranging from one to four years, and the one-year tranche also carried an option to extend by a further year. A concentrated syndicate structure with limited differential between the four tiers allowed a clearer focus on the process of taking out the loan in the capital markets, further encouraged by the pricing and fee structures of the deal. In addition, mandatory pre-payment reduced the commitment risk posed by participating banks.

A single round of syndication, mainly to Billiton’s relationship banks, for a uniform ticket size of $2.5bn pulled in 25 commitments (including underwriters), providing a significant oversubscription, so that the final allocation was scaled back to $1.8bn for each bank. The underwriting phase lasted just one week, with no amendments needed to sell down the commitment. The distribution was broad, with particularly good support among smaller Australian and Canadian banks.

The global coordinators Deutsche Bank and UBS had a much harder sell on their hands, albeit for a much smaller sum of money, for Wind Telecomuniczioni’s €3.9bn credit facility to refinance impending maturities. The company is high yield, and there was uncertainty surrounding a takeover bid for its parent, Weather, by Russia’s Vimpelcom.

M&A

Winner: £16.3bn merger of GDF Suez Energy International with International Power

Advisors for GDF Suez: Goldman Sachs, Rothschild, Ondra Partners, BNP Paribas. Fairness opinion: Blackstone, Banque Degroof, Société Générale. Advisors for International Power: Nomura, JPMorgan, Morgan Stanley.

HIGHLY COMMENDED: Merger of Orange UK and T-Mobile UK.

The merger of International Power (IPR) with GDF Suez Energy International combined size – the second largest merger announced globally in 2010 – with complexity and clear advantages for both parties. GDF Suez will contribute its international energy business, consisting of unlisted assets in the UK and Turkey, and strategic stakes in listed energy companies in the Middle East, Asia and Latin America.

The complex and sensitive structuring via a reverse takeover of IPR needed to take account of the French government’s 36% stake in GDF Suez and the national regulations governing both IPR’s UK listing, and the activities of utilities in all the countries where assets of the new entity are held. It leaves original IPR shareholders with a 30% stake in the combined entity, and GDF Suez shareholders with the remaining 70%. To help clinch the deal, advisors obtained an irrevocable undertaking to vote in favour from IPR’s largest investor, Invesco.

For IPR, it provides the opportunity to reduce its cost of debt to finance new projects, while retaining a large number of independent board members. For GDF Suez, it allows the listing of its international energy assets to provide a market-driven valuation, as well as increasing the profitability of the group and building potentially the world’s largest independent power producer.

In a crowded field, the highly commended deal was the merger of Orange UK and T-Mobile UK, the British mobile operations of France Telecom and Deutsche Telekom, respectively, with Perella Weinberg Partners, Bank of America Merrill Lynch and JPMorgan advising. The merged entity has a dominant 37% market share and is forecast to save the owners as much as £3.5bn in operating and capital expenditures.

BONDS SSA

Winner: Debut €5bn five-year bond for European Financial Stability Fund

Bookrunners: Citi, HSBC, Société Générale.

HIGHLY COMMENDED: Russian Federation $2bn five-year and $3.5bn 10-year Eurobond; Kingdom of Spain €6bn 4.85% 10-year bond.

In the sovereign and supranational sphere for Europe in 2010, there was really only one topic on the menu for dinner party conversation – the eurozone sovereign debt crisis. The creation of supranational fiscal resources to back up European Monetary Union was crucial to the survival of the euro itself. For this reason, failure was not an option for the European Financial Stability Fund’s (EFSF) debut five-year issue of €5bn to finance its support to Greece.

Just getting on the deal was a challenge in itself – 44 banks competed for the mandate, only three were chosen. On the one hand, a AAA rating with guarantees from all the eurozone sovereigns looked a straightforward sale. The order book reached a record €44.5bn within 15 minutes of opening. Almost half the buyers were central banks or sovereign wealth funds.

But on the other hand, this success did not come without plenty of investor education, to explain the EFSF’s unique structural characteristics. Not all the sovereigns backing it are rated AAA, but instead the guarantees are pooled and enhanced with a cash reserve and loan-specific cash buffer to ensure the top rating was assigned. A conference call the day before launch drew 400 participants and 36 separate questions from investors, even after an extensive roadshow.

There are still fears that Spain will become one of the EFSF’s clients, so raising a blockbuster €6bn for the Spanish government in October 2010 was an achievement in itself, and the deal was highly commended by the judges. So too was Russia’s sovereign return to the capital markets for the first time since its own sovereign debt crisis in 1998, a giant two-tranche deal that has established a proper benchmark curve for Russian corporate issuance.

STRUCTURED FINANCE

Winner: Kortis Capital $50m longevity trend insurance-linked securities

Bookrunner: Swiss Re Capital Markets.

The European structured finance market reopened in 2009, but remained very sluggish in 2010 relative to a more dynamic revival in the US. Most asset-backed securities deals have been very conservative structures and pools of assets, especially for commercial mortgage-backed securities.

So this year’s winner comes in the form of a genuinely innovative and potentially crucial insurance-linked security deal. Swiss Re has created and staged the first successful launch for a product that securitises longevity risk in a catastrophe bond format. The Kortis Capital issue has an eight-year maturity and is indexed to population data in the US and UK.

The trigger to write down principal is an event of large divergence in the mortality improvements experienced between male lives aged between 75 and 85 in England and Wales and male lives aged between 55 and 65 in the US. The only previous attempt at a similar bond, a so-called ‘survivor bond’ proposed in November 2004, failed to win over investors. By contrast, the Kortis deal received full subscription for its $50m in risk transfer, by offering mostly hedge fund investors a relatively short-dated and liquid way to access longevity risk.

As Western populations age, demand for longevity hedging is rising rapidly from pension funds and life insurers. This trend will be accelerated by the advent of Solvency 2 capital regulations for European insurers. But investment banks and reinsurance companies alike have struggled to provide capacity to take up this exotic and long-term risk.

A number of large longevity swap deals have taken place, but these are over-the-counter and often run for the maturity of the underlying pension or insurance liabilities, greatly limiting the potential pool of investors. The Kortis deal provides a way to diversify longevity hedging in a format that can be readily traded on the secondary market, which can only be good news for tomorrow’s pensioners.

ISLAMIC FINANCE

Joint Winner:  Kuveyt-Turk Katalim Bankasi $100m sukuk

Bookrunners: Liquidity Management House and Citi.

Joint Winner: Albaraka Türk Katilim Bankasi $240m dual-tranche syndicated murabaha facility

Bookrunners: ABC Islamic Bank, Standard Chartered Bank, Noor Islamic Bank.

HIGHLY COMMENDED: Stobart Group’s £19.1m murabaha financing.

With the largest pool of sharia-compliant assets outside the Gulf and Malaysia and deep local capital markets, Turkey has long shown good potential for Islamic finance, but 2010 was the breakthrough year when that began to translate into reality. Two key deals are joint winners for helping to kick-start Islamic capital markets in the country.

In both cases, Islamic banks – known as participation banks in Turkey – were able to diversify their funding bases and tap international markets at competitive pricing. Debut issuer status, high-yield ratings and difficult global market conditions could not impede their success.

Kuveyt-Turk participation bank launched the country’s first sukuk (Islamic notes), a three-year deal for $100m issued in August 2010. The structure was sophisticated, using a wakala (agency) sukuk in which the issuing bank acts as an investment agent, with the underlying assets consisting of ijara (leasing) and murabaha (forward sale) receivables. The deal blazed a trail by navigating potential Turkish legal and tax hurdles, and the notes were 1.5 times oversubscribed, with bids coming from Europe, the Middle East and Asia.

One month later, Albaraka Turk participation bank closed its debut syndicated murabaha financing deal in two currencies, for $98m and €108.5m. Thanks to heavy oversubscription, the facility was closed at twice its original size, with 22 banks from many countries participating in the syndicate.

There is every sign that these deals have opened the way for frequent Islamic issuance from Turkey. The country’s 2011 finance bill further smoothed the way, by ensuring tax neutrality for future ijara sukuk issues. Albaraka Turk is now mulling a $100m to $200m sukuk.

MIDDLE EAST

FIG CAPITAL RAISING

Winner: Qatar National Bank’s $1.5bn bond

Joint lead managers and bookrunners: BNP Paribas, Barclays Capital, JPMorgan, QNB Capital, Standard Chartered .

HIGHLY COMMENDED: Qatar Islamic Bank $750m five-year sukuk.

Qatar National Bank’s (QNB) debut $1.5bn Eurobond was the largest ever bond issue by a Middle Eastern bank; it also had one of the lowest coupons ever achieved by a Middle Eastern bank and the lowest ever for a Qatari bond issue.

The bond – priced at 20 basis points below initial price guidance – was a strategic foray into the international capital markets to establish a debut benchmark in the low fixed-rate environment. Despite the tight pricing, the book was nearly four times oversubscribed and attracted investors from across the board and a variety of geographies, demonstrating the investor appetite for this credit.

The judges were particularly impressed by the very tight execution timeline, which all in all took four weeks from mandate to pricing. QNB’s sound financial performance was key to the success of the transaction, as was the positioning of the bank – with its strong government support – as an integral part of the Qatari growth story. The proceeds will finance QNB’s balance sheet expansion and also enhance the bank’s asset-liability profile.

The highly commended deal, Qatar Islamic Bank’s (QIB) $750m sukuk, also impressed the judges. The transaction, capped at $750m, was the first non-sovereign, investment grade sukuk issue in 2010, and was met with overwhelming demand from the global investor base. QIB was able to price the sukuk at the lowest ever profit rate/coupon of any hard currency Middle East and north Africa financial institution to date.

This transaction was also noteworthy because it was executed in a volatile market that was exacerbated by the Irish bail-out and Spain’s ratings downgrade.

The issue achieved all of QIB’s management targets: it priced through 4%; achieved a truly global distribution; and raised the profile of the bank in the financial markets.

M&A

Winner: Merger of Barwa and Alaqaria

Advisors to Barwa: Goldman Sachs, First Investor. Advisor to Alaqaria: JPMorgan.
In the current climate, many companies or banks may have shrunk from a deal involving the Gulf real estate sector. However, for two government-backed entities, Qatari real estate companies Barwa and Alaquaria, it was an opportunity.

The rationale behind the deal was clear. Barwa, listed on the Doha Stock Exchange, was created by Qatari Diar in 2005 to focus on real-estate projects. It was initially geared toward investments in real-estate projects, but has expanded into facilities management, construction materials, banking and finance. Alaqaria, meanwhile, has traditionally invested in and developed industrial housing and related properties for the government, Qatar Petroleum and the energy sector. The company enters into turnkey build and transfer contracts for the construction and lease for a period of 10 to 20 years. Both companies grabbed the opportunity to create the largest diversified real-estate entity in Qatar.

This deal was a first for the Middle East in many respects. For one thing, it was the first merger to be conducted through an international style tender offer and the first to publish a merger document based on international precedents that was subject to local regulatory requirements. And, tipping its hat to the 21st century, it was the first such transaction in Qatar to create a website hosting all the relevant details of the merger.

It was a lengthy process but the deal was well executed. First, Alaqaria was delisted – this left no minorities in the final structure and therefore allowed for better integration of the two businesses and the chance to make cost savings.

The transaction was structured in a way that allowed change of control, ensuring continuity in Barwa and Alaquaria’s financing facilities.

BONDS: CORPORATE

Winner: Renaissance Services SAOG OR40m issue of subordinated loan notes

Structuring advisor, facility agent, security agent: BankMuscat.

HIGHLY COMMENDED: Qtel’s $2.75bn three-tranche bond.

In November 2010, Renaissance Services SAOG, the Oman-based multinational oil and gas services provider, completed its Rial Omani 40m issue of subordinated loan notes – the largest mezzanine financing offer by a non-banking company in the sultanate to date.

The aim of the Tier 2 capital issue was partly to provide long-term financing for the company, but also aimed to improve its capital structure and to lower the company’s cost of capital. The strategy and timing of the deal also impressed the judges: the decision by Renaissance to issue subordinated loan notes instead of raising equity when equity market prices in the region were weak was an astute and cost-effective move.

Structured by Oman’s Bank Muscat – and completed in only three months – the fixed-rate deal proved attractive to real money Omani investors, who took the entire offering. The positive reception by the investor community was quickly reflected in the company’s share price, which rose by 26.4% after the transaction.

The ability of local investors to absorb this size and type of subordinated transaction is a sign of the growing maturity of the Omani market. The fact that Renaissance – which listed on the Muscat stock market 15 years ago - was able to attract investors to a mezzanine issue also demonstrates the strength of the company’s story. It currently boasts a presence in 16 countries across the Middle East, Asia and Europe, and employs more than 11,000 people.

BONDS: SSA

Winner: Government of Dubai dual-tranche $1.25bn bond

Joint lead manager and joint bookrunner: Standard Chartered, Deutsche Bank, HSBC.

HIGHLY COMMENDED: Kingdom of Jordan $750m 4.125% five-year Eurobond; Egypt $1.5bn dual-tranche sovereign bond.

The government of Dubai’s dual-tranche $1.25bn bond marked the successful return of the government of Dubai to the international capital markets, and helped the issuer build out a 10-year yield curve.
The issue generated strong investor response with the orderbook four times oversubscribed to the tune of $5bn.

Dubai priced a $500m 6.7% five-year issue at par, for a spread of 542.7 basis points over US Treasuries, and a $750m 7.75% 10-year Reg S issue at par, corresponding to 527 basis points over, through lead managers and joint bookrunners Deutsche Bank, HSBC and Standard Chartered.

The emirate’s first bond since the Dubai World crisis came inside price guidance of 6.75% for the five-year and in the 7.8% area for the 10-year, which in turn was well inside price talk in the region of 6.8% and 8%.

Bond activity from Dubai was meagre last year, with just $4.2bn-worth of issues printed in 2010 versus $16.4bn in 2009. This perhaps helps to explain the appetite for Dubai paper but does not distract from the success of the deal, which was executed in relatively risk-averse markets.

Investors were also comforted by the conclusion of Dubai World’s restructuring. This clearly translated into renewed appetite, enabling Dubai to diversify its investor base and extend its maturity profile, thus setting a benchmark for future borrowers from the emirate.

The highly commended deals were the Kingdom of Jordan’s debut Eurobond and Egypt’s dual-tranche sovereign bond. Judges were impressed by the opportunistic timing of Jordan’s $750m sovereign deal, which has performed well in the secondary market. Egypt’s bond – launched in April 2010 – saw the first foray by the sovereign in the international debt capital markets since 2007, offering investors a rare opportunity to buy Egyptian risk in the international markets.

INFRASTRUCTURE AND PROJECT FINANCE

Winner: $600m financing for Suez Steel Company

Initial mandated lead arranger (IMLA) and facility agent: Arab African International Bank. IMLA and security agent: National Société Générale Bank.
IMLA and bookrunner: Banque du Caire. IMLA: Arab International Bank, Audi Egypt

HIGHLY COMMENDED: $1.4bn development of the Barka III and Sohar II independent power projects.

This $600m financing for the Suez Steel Company (SSC) comprised a $280m and E£1064m ($178.3m) eight-year medium-term loan (MTL) and a three-year renewable revolving-term facility (RTF) of E£628m and $17.86m. It had several standout features, including the complex structure of the syndicated import letter of credit for machinery and equipment that aimed to avoid foreign exchange risk by discounting (against security guarantees) a deferred payment to the invoicing agent (who benefited from a government-subsidised cost of funding) and simultaneously allowing access to the spot foreign exchange market for currency hedging.

This multiparty trade and project financing deal – which applied the Equator Principles – will do much to develop the Egyptian industrial sector by enhancing Egypt’s steel production and export capacity. The proceeds will partially finance the investment cost of the project for SSC in the Suez Governorate, including financing the upgrade of the existing melt shop, equipment and machinery for a 1.95 million tons per annum direct reduced iron plant, 1.25 million tons per annum new melt shop, two steel rolling mills with joint capacity of 938,000 tons per annum and ancillary installations, including a treatment plant.

The Barka III and Sohar II independent power projects was a close contender for this year’s award. It had several impressive features, not least the fact that it was executed without a government guarantee, the removal of the need for underwriting commitments and a mechanism for sharing of refinancing gains to make the deal attractive to developers and banks.

LOANS

Winner: $650m revolving credit facility for Qatar Aviation Lease Company

Joint initial mandated lead arranger and underwriter: Deutsche Bank, Standard Chartered Bank. Other participating banks: Arab Banking Corporation, DBS, HSBC Bank Middle East, International Bank of Qatar, Samba Financial Group, Sumitomo Mitsui Banking Corporation, BNP Paribas.

HIGHLY COMMENDED: $311m senior debt and subordinated debt financing for Octal Petrochemicals.

This year’s winning Middle East loan is the inaugural transaction for Qatar Aviation Lease Company, which was the first fully pre-funded syndicated financing transaction launched for a Gulf Co-operation Council credit for more than 12 months.

The loan – the first syndication to be launched after the announcement of the Dubai World restructuring in November 2009 – played a significant role in bolstering investor sentiment, laying the groundwork for a number of successful sovereign/quasi sovereign transactions done during the year.

The facility was structured as a revolving credit facility to enable the client to have flexibility in terms of draw-downs. And, as a newly formed company, the debut borrower clearly benefited from the credit enhancement that was provided by an unconditional and irrevocable first demand guarantee provided by the state of Qatar, acting through the ministry of finance.

Standard Chartered and Deutsche Bank adopted a two-pronged syndication strategy and approached 11 original lenders at the senior stage and the remaining 18 lenders during general syndication. The facility was well received and oversubscribed.

The judges were also impressed by the $311m senior debt and subordinated debt financing for Octal petrochemicals, our highly commended deal, led by Bank Muscat. This closed with the participation of six lenders (five local and one regional) in the senior debt tranche, three lenders in the subordinated tranche and eight local lenders in equity, apart from the promoters. The deal included a forward-looking debt service coverage ratio clause for payments to subordinated investors to establish a transparent mechanism for cash flow sharing among the senior lenders and subordinated investors.

STRUCTURED FINANCE

Winner: E£576m Al-Tawfeek securitisation

Financial advisor, back-up servicer and custodian: Commercial International Bank.

This year’s winning structured financing deal, from Al-Tawfeek on behalf of AT Leasing, is the first sharia-compliant securitisation executed in the Egyptian market. Issued on the back of a true sale transaction, the proceeds of the issued notes were used to finance the purchase of the securitised assets. The objective of AT Leasing, a leasing company incorporated in 2006, is to diversify its funding sources from equity and bank loans.

The static asset pool – which equates to about 50% of AT Leasing’s current outstanding balance sheet – is well diversified: 43% is plant and machinery; 28% is commercial vehicles; 22% is real estate; 5% is IT equipment; and 3% is passenger vehicles. Among the positive characteristics of the collateral pool is the relatively high-weighted average seasoning of the assets, given that 41% of the portfolio was orginated before 2008. The average amortisation of the pool at the closing date equates to 41.7% of the original value. The notes – rated by Egyptian ratings agency Middle East Rating & Investor Services – will pay a monthly fixed coupon of 9%, 10% and 11.25% per annum in order of seniority.

The transaction adopts a new credit enhancement technique represented by a 1% cash reserve account fully funded by the originator at the onset of the transaction. The reserve funds could also serve as the liquidity facility to the transaction, and full control of the reserve account is granted to the transaction custodian to ensure proper utilisation of the reserve fund. The three classes of notes also benefit from a letter of guarantee in the amount of 10% (E£57.6m, or $9.65m) of the total notes, as well as an over-collateralisation of 1.57% net of expenses available to the transaction at its outset.

EQUITIES

Winner: $50m IPO of Wataniya Palestine Mobile Telecommunications

Sole global coordinator and sole bookrunner: HSBC. Regional coordinator: Arab Bank.

HIGHLY COMMENDED: OR182m IPO of Omani Qatari Telecommunications.

Offerings from Palestine are rare indeed, so when mobile telephone operator Wataniya Palestine launched its initial public offering (IPO), it was oversubscribed 1.5 times, showing that despite the turmoil which characterises the region, demand from retail investors for interesting offerings is high. The company, part-owned by Qatar Telecommunications Co, offered 15% of its shares at $1.3 per share.

The listing was not without its trials. Israeli authorities, which control Palestinian mobile networks, had earlier refused to grant Wataniya an operating licensing, forcing the company to postpone the IPO on the Nablus Stock Exchange in Ramallah. The judges were particularly impressed by the resilience shown by Wataniya and its bank team to successfully execute the IPO in this challenging environment.

Wataniya’s listing is seen as a major coup for the Nablus exchange, as it adds much needed liquidity to the exchange. The company has a good story to tell, with revenue rising rapidly in the past year: from $4m in the first quarter of 2010, to $11.3m in the third quarter.

The company only began operations as the second mobile operator in Palestine a year ago, after entering the market as a competitor to Jawwal, owned by the Palestine Telecommunications Co (Paltel). Wataniya will join 40 companies listed on the Nablus bourse, which have a combined market capitalisation of about $2.5bn. Wataniya Palestine is 53% owned by Qatar Telecommunications and 47% by the Palestine Investment Fund (PIF), which is owned by the Palestinian Authority.

Another worthy candidate in this category was Omani Qatari Telecom’s IPO. This was the first bookbuilt IPO in Oman and represents a major milestone in Omani capital market history. The deal was oversubscribed in difficult market conditions and the judging panel was particularly impressed by the speedy execution, which took 10 days from launch to close.

ISLAMIC FINANCE

Winner: $450m sukuk for Dar Al-Arkan

Joint bookrunners: Goldman Sachs International, Deutsche Bank, Unicorn Investment.

In the first quarter of 2010, Dar Al-Arkan priced a $450m five-year maturity sukuk at a yield of 11%. It had a great deal to contend with. For one thing, markets had yet to recover from the Dubai World crisis in 2009. Then, in the week it came to market in February, conditions became even more volatile, especially for emerging market names, because of the unfolding crisis in Greece. That same week several other Middle East and north African transactions failed to close or were pulled from the market. Despite this unfavourable environment, Dar Al-Arkan’s joint bookrunners – Deutsche Bank, Goldman Sachs and Unicorn Investment – got the deal done without any change to pricing from initial guidance.

Moreover, the bonds have held up well in the aftermarket and have been one of the most stable issues recently in the Middle East. Dar Al-Arkan was last in the markets in May 2009 with a SR750m ($200m) domestic sukuk and in international markets in July 2007 with a $1bn sukuk.

The deal also broke a lot of new ground. It was the first international debt offering done out of one of the Gulf Co-operation Council countries in 2010, reopening the markets after the Dubai volatility at the end of 2009, and was the first ever sub-investment grade rated sukuk (Goldman was the sole ratings advisor). As the first ever 144A offering for a Saudi issuer, it was also the first Saudi issuer to roadshow in the US (the 12-day roadshow also took in Asia, Europe and the Middle East).

Dar Al-Arkan is a major real-estate developer in the Kingdom of Saudi Arabia, with total assets of SR20.1bn and a market capitalisation of SR18.5bn. Its operations are focused on the development of basic infrastructure on undeveloped land and the development and sale of residential and commercial projects.

RESTRUCTURING

Winner: $25bn restructuring of Dubai World debt facilities

Sole financial advisor to the holding company: Rothschild.

HIGHLY COMMENDED: Restructuring of Aref Investment Group debt via Kd290.6m murabaha.

In terms of restructuring in the Middle East in the past 18 months, there was only one deal that could win: the massive $25bn restructuring of Dubai World’s debt facilities. It was the most important transaction in the region last year and is the largest and most complex restructuring in the region’s history, involving 70 lenders from around the world. Its completion was crucial to restoring stability to the Middle East region’s financial markets – as such, the deal represents a milestone for the region and a blueprint for other potential restructuring transactions.

During Dubai’s boom years, the company (a holding company which includes companies key to the economy) grew rapidly via acquisitions, most of which were financed by debt – including significant debt that was taken on at the Dubai World holding company level. As the financial crisis unfolded, its operating cashflows were hit by deteriorating economic conditions – especially in the real-estate sector. This was exacerbated by the deteriorating market for assets realisations (for example, from Dubai World’s investment portfolio), which severely limited the cashflows being generated by operating subsidiaries that could be used to repay holding company debt.

The objective was to ensure the company had time to effect and orderly asset realisation programme and use the proceeds to improve the performance and value of key assets, as well as paying down the restructured debt. The agreement creates a stable financial platform for the company and provides significant flexibility, with limited financial or operational covenants.

Crucially, the restructuring agreement establishes a new corporate governance framework and ensures full repayment of lenders over time, compared to low estimated recoveries, while preserving full ownership and control by the government. The agreement also created a choice of economic terms to fit different lender preferences in the restructured facilities, and introduced the concept of a creditor monitoring panel, which gives a group of lenders monitoring and controls going forward.

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