The Deals of the Year winners from Asia-Pacific.

Bonds: Corporates

Winner: Baidu $1.5bn SEC-registered dual tranche notes, China

Bookrunners and lead managers: Goldman Sachs, JPMorgan
Highly commended: Genting Singapore S$1.8bn perpetual subordinated notes; PTTEP $160m hybrid debentures
In the context of disputes over accounting standards between US and Chinese authorities, the launch of a corporate bond by a Chinese company that is registered with the US Securities and Exchange Commission (SEC) is significant. The SEC in recent months has demanded greater transparency and disclosures of Chinese firms, which has led to the retreat of many them from the US market. Baidu, however, was successful in gaining SEC approval and tapping US investors with this dollar-denominated bond.

The corporate bond by Chinese search engine Baidu was a landmark issue as it was the first SEC-registered bond to be offered out of China. There have also been very few offerings of SEC-registered corporate bonds in Asia, which makes this offering by Baidu all the more notable.

Through this dual-tranche senior unsecured notes offering, Baidu was able to tap into the wider US-based investor pool. The notes were registered under the US Securities Act of 1933 and at the time of issue were also expected to be listed on the Singapore Exchange.  

Goldman Sachs and JPMorgan were the joint bookrunners and joint lead managers on the deal and the $1.5bn offering comprised two tranches. There was one $750m five-year tranche, which was priced to yield at 2.25% and due in 2017. The company also issued a 10-year $750m tranche, which was priced to yield at 3.5% and due in 2022. Such yields are low for a Chinese company that is not state-owned, and at the time of the deal, it was the largest bond transaction by a Chinese company that was not state-owned.

The company, which went public in 2005, announced at the time of the issue that it expected to use a portion of the proceeds from the offering to retire existing debt, and the remainder would be used for general corporate purposes.
Bonds: SSA
Winner: Development Bank of Kazakhstan $500m intermediated exchange and $1bn  bond issue
Bookrunners: Halyk Finance, JPMorgan, VTB Capital
Highly commended: Thailand Bt30bn amortising bond; Philippines $500m onshore dollar bonds
Badly hit by a real estate and banking crash in 2008, Kazakhstan’s bond markets are not the ideal testing ground for innovative deals in the sovereign and state agency markets. Yet in December 2012, the Development Bank of Kazakhstan (DBK) achieved a first not just for the country, but for dollar bond markets as a whole.

The state-owned development agency wanted to replace $500m out of $777m outstanding on its bond maturing in 2015 with a longer-term issue. A tender offer and new issue is the most efficient method in terms of market operation, but bondholders may be reluctant to take part if it means taking a loss on the tendered bonds. DBK’s solution was to undertake an intermediated exchange offer that has the market efficiency of a tender without the negative impact on issuers’ balance sheets from buying bonds back above par, the first time this technique has been used on any bond issued to US investors under Reg S/144A rules.

The exchange was a great success, with 96% of eligible bondholders tendering their paper, setting a precedent for emerging market issuers to use this sophisticated technique. The replacement 10-year bond was also very well received, with an order book of $3.4bn allowing the deal to be upsized from $750m to $1bn, and still price inside the equivalent bonds of

Russian state development bank Vnesheconombank.
Two notable sovereign deals were highly commended. The Thai government in December 2012 issued its first bond on the local market to use an amortising structure rather than a bullet repayment, with a 25-year maturity that was also a challenging sell for the local market. And the Philippines found an innovative way to diversify its funding, issuing a $500m bond purely into the domestic market, to take advantage of high local dollar liquidity.
Equities
Winner: Hopewell Highway Infrastructure renminbi follow-on offering, Hong Kong
Sole bookrunner: Bank of China International Hong Kong
Highly commended: AIA Group $6bn, $2bn and $6.4bn block trades; NZ$525m Fonterra shareholders’ fund listing
Hong Kong’s reputation as an offshore renminbi centre was boosted by the new shares placement by Hopewell Highway Infrastructure (HHI), a toll-road infrastructure company. The deal had Bank of China International Hong Kong as the sole bookrunner and was a welcome option for investors in a year when Hong Kong’s initial public offering market had been quiet. This deal was the first renminbi-denominated follow-on equity offering in Hong Kong, and it was the first company in Hong Kong to adopt dual-counter dual-currency trading. This was also the first new shares placement permitted by the Hong Kong stock exchange to be settled on a T+2 basis.

The offering of a new product to renminbi investors demonstrates how the internationalisation of the renminbi is gathering pace as products are being created to suit different investor appetites. It is expected that as the renminbi continues on its path to being an international currency, the market will see more offerings of dual-currency products such as this.

The shares were denominated in both Hong Kong dollars and renminbi, and traded on two different counters with different stock codes. The Hong Kong dollar and renminbi shares are fully fungible and provide investors with certain protections.

Should there be any adverse changes in regulation, for example, investors would be able to convert the renminbi-denominated shares to Hong Kong dollar shares.

After the placement of the shares the stock prices of both the Hong Kong dollar and renminbi counters rallied and showed high trading volume and liquidity. Although the renminbi counter’s free float is about one-fifth the size of the Hong Kong dollar counter, the trading of the renminbi shares has been active.
HHI has been involved in other landmark renminbi transactions and was one of the first companies to issue renminbi corporate bonds in Hong Kong.
FIG capital raising
Winner: Commonwealth Bank of Australia £750m covered bond into UK market
Joint bookrunners: RBS, Commonwealth Bank of Australia, Royal bank of Canada
Highly commended: Mitsui Sumitomo Insurance $1.2bn hybrid notes, Japan
Covered bonds are still at an early stage of development in Australia when compared to the level of maturity in markets such as Europe. Legislation in Australia to allow covered bonds – in the form of the Banking Amendment (Covered Bonds) Act 2011 – was only passed by the country’s parliament in October 2011. And it only took a month for the first covered bond to come out of Australia, in November 2011.

Since then the major Australian banks have been racing to issue their inaugural covered bonds. Approximately one-third of the issues to date have been domestic in Australian dollars, with the remainder being in a range of currencies. In August 2012, Commonwealth Bank of Australia (CBA) issued a £750m ($1.15bn) 14-year covered bond, which was arranged by CBA as well as Royal Bank of Canada and RBS. This deal was significant as it was the first long-dated sterling covered bond by a non-UK bank. With this transaction, CBA led the way and opened the long-dated sterling covered bond market for other non-UK issuers.

This 3% covered bond was also the largest sterling transaction by an Australian bank. In addition to this, it was also the longest sterling benchmark trade issued by a major Australian bank.

CBA was able to target the long-dated sterling covered bond investor base through this transaction and was able to achieve diversification in the range of investors. More than 50 investors participated in the issue, with 11 investors placing orders that were greater than £50m. The majority of the investors was UK-based and included some of the largest fixed income investors in the UK. Fund managers accounted for nearly three-quarters of the demand on this deal, with the next largest share being taken by insurance companies.
Infrastructure and project finance
Winner: $8.5bn Australia Pacific LNG Processing project, Australia
Mandated lead arrangers: ANZ, BBVA, Société Générale Corporate & Investment Bank, Bank of China, Lloyds, Commonwealth Bank of Australia, DBS Bank, DNB Bank, HSBC, Mizuho, National Australia Bank, Sumitomo Mitsui Banking Corporation, Bank of Tokyo-Mitsubishi UFJ, Westpac Banking Corporation
Financial advisor: RBS
Highly commended: $2.54bn Uz-Kor Chemical Surgil project; Gulf JP Bt17.6bn and $568m project finance
Financing the downstream part of the Australia Pacific LNG Processing (APLNG) project was a sizable deal that involved three export credit agencies and 14 commercial banks. APLNG is a coal seam gas-to-liquefied natural gas (LNG) project located in Queensland, Australia, and is a joint venture between Australia’s Origin Energy, US-based ConocoPhillips and China’s Sinopec.

The deal was the world’s first coal seam gas-to-LNG project financing and the first gas to come from the project is expected by mid-2015. The project involves the development, construction, maintenance and ownership of the liquefaction plant. The facility is expected to be built at a total capital cost of $20bn. The LNG liquefaction project has two trains, which are projected to have a combined output of 9 million tonnes a year.

The project uses proprietary technology from ConocoPhillips in the liquefaction process and it is expected that the majority of the LNG output will be sold to Sinopec, to help meet China’s growing demand for cleaner sources of energy.

The project is one of Australia’s largest project financing deals and a flagship project for the LNG industry in Australia. It is also expected that the financing of this project will pave the way for similar projects in the region.

A total of $8.5bn was raised in three tranches, $2.76bn of which came from the Export-Import Bank of the United States (US Exim), $2.87bn from the Export-Import Bank of China, and a syndicate of Australian and international commercial banks raised $2.875bn. At the time of the deal it was the single largest direct loan in US Exim’s history.

Islamic finance
Winner: Development Bank of Kazakhstan RM240m Sukuk al-murabahah
Lead arrangers: HSBC, RBS
Lead managers: AmInvestment Bank, Halyk Finance, Kuwait Finance House
Highly commended: Axiata Rmb1bn sukuk, Malaysia; $170m Brunei Gas Carriers murabaha
The Development Bank of Kazakhstan (DBK) is increasingly playing a policy role, not just through the financing it supplies to the Kazakhstan economy, but also through the way it arranges its own finances. Islamic finance has long been on the agenda for the Kazakh government, and in July 2012 DBK issued the first sukuk (sharia-compliant notes) not just for the central Asian state, but for any member of the Commonwealth of Independent States (CIS).

Moreover, the deal, denominated in Malaysian ringgit, establishes a market for Kazakh issuers in the home of the world’s largest and most developed sukuk investor base of sharia-compliant funds. This was also the first issue, Islamic or conventional, from a CIS credit into the Malaysian market. The sukuk uses a murabahah commodity sale and repurchase structure, has a five-year maturity, and received RM320m ($105.9m) of orders, with RM240m issued. The structuring required particular skill, because DBK does not, as yet, have underlying business designed to be sharia-compliant, which ruled out structures such as sukuk al-ijara (lease-backed notes) that rely on sharia-compliant rental streams.

The sukuk is intended as the debut for a programme of RM1.5bn that should make DBK a familiar name in the sukuk industry. It has also served as a tool to educate Kazakh investors about the sharia-compliant asset class, with the notes listed on the Kazakhstan Stock Exchange rather than in Malaysia, and 39% of investors in the offering drawn from DBK’s home market. Having prepared the ground in terms of regulatory norms and investor demand in both Kazakhstan and

Malaysia, the scene should now be set for other debut Kazakh sukuk issues, most notably the sovereign.
Highly commended deals included the largest sukuk to date denominated in Chinese renminbi – and also the first to carry a credit rating – issued by Malaysian telecom company Axiata and backed by airtime voucher revenues.

Loans
Winner: $3bn Alibaba syndicated loans, China

Mandated lead arrangers and underwriters: Credit Suisse, DBS, ANZ, HSBC, Citi, Deutsche Bank, Mizuho
Mandated lead arrangers: Bank of East Asia, Barclays, Cathay United, CDIB, Chinatrust, Fubon, ING, Intesa Sanpaolo, Megabank, Morgan Stanley, Natixis, Taishin
Financial advisor: Rothschild
Highly commended: CP Pokphand $410m term loan
The loan to the Chinese e-commerce firm Alibaba was the largest syndicated loan to be completed by a Chinese privately owned company in 2012, and was one of the largest take-private transactions in the world for a website. The deal also had one of the largest order books for a loan transaction in recent years in Asia, outside Japan.

Alibaba Group Holdings includes online commerce sites alibaba.com, taobao.com and tmail.com, which are business-to-business, consumer-to-consumer, and business-to-consumer e-commerce websites, respectively.

The transaction is even more notable because it occurred in a year when many Chinese firms had been the subject of accusations over their governance and accounting standards and had been targeted by short sellers. The complex structure of Alibaba Group Holdings meant that significant due diligence was carried out to ensure that the regulatory risks with such a large and complex transaction were covered.

The $3bn facility, which was extended to the Chinese company by a number of banks in February 2012, helped the company privatise its business-to-business segment. The $3bn facility was divided into a three-year $1bn term loan facility and a 12-month $2bn bridge loan. The deal was structured in two phases, the first of which involved a small group of relationship banks and large investors, a number of whom were Taiwanese, and then the second phase of a general syndication that targeted a wider group.

As well as taking alibaba.com private, the company was also pursuing its goal of a share buy-back from internet corporation Yahoo!. And a few months later in September 2012, Alibaba Group purchased half of Yahoo! Inc’s 40% ownership in Alibaba Group for $7.6bn.

M&A
Winner: TCCA/Kindest Place acquisition of Fraser and Neave and spin-out of Asia Pacific Breweries to Heineken, Singapore
Financial advisors to TCCA/Kindest Place: DBS, HSBC, Maybank, Morgan Stanley, United Overseas Bank
Financial advisors to Fraser and Neave: Goldman Sachs, JPMorgan
Financial advisors to Asia Pacific Breweries: Goldman Sachs, UBS
Financial advisors to Heineken: Citi, Credit Suisse
Highly commended: San Miguel $500m investment into Philippine Airlines and Air Philippines Corporation; Alibaba $7.6bn repurchase from Yahoo!
Singapore-listed drinks and printing company Fraser and Neave (F&N) found itself at the centre of a three-way takeover battle in mid-2012. TCCA and Kindest Place, investment vehicles for the family that owns Thailand’s largest brewers ThaiBev, were arrayed against Japanese brewer Kirin plus an Indonesian property magnate, and industry giant Heineken, which was bidding for F&N subsidiary Asia Pacific Breweries (APB).

The ThaiBev consortium moved fastest, building a 29% stake in F&N by July 2012 via the purchase of shares from Singaporean banking group OCBC and the open market. This was more than double Kirin’s stake at the time. ThaiBev’s offer of S$8.88 ($7.19) per F&N share implied a premium on the valuation of F&N’s 39.7% stake in APB above the offer made by Heineken. But Heineken could still have scuppered the deal, either by wading in as a third bidder for the whole of F&N, or by dropping its bid for APB altogether.

In September, the large group of advising bankers hammered out a deal in which Heineken agreed not to bid for F&N in return for a ThaiBev undertaking to approve the sale of APB to Heineken. This allowed Heineken to win shareholder approval for its acquisition of APB for S$5.6bn in September 2012. The battle for the rump of F&N took longer, but by February 2013 Kirin agreed to sell its stake to ThaiBev, which could then close out the rival bid by Indonesia’s Riady family.

Real Estate Finance
Winner: Global Logistic Properties Japanese real estate investment trust $1.3bn IPO
Joint global coordinators: Nomura, Citi, Goldman Sachs

Joint bookrunners: Nomura, JPMorgan, SMBC Nikko
Highly commended: HK$983m Angelo, Gordon office development finance
This initial public offering (IPO) for a Japanese real estate investment trust (J-REIT) was the largest REIT IPO offering by size in 2012 and was also the largest ever Japanese REIT IPO in dollar terms. It was a landmark deal from one of the largest logistics property companies in the world.

The investment trust was set up by warehouse operator Global Logistic Properties (GLP). The Singapore-based company is a global company with a reach in markets such as China and Brazil, and this trust was focused on owning and operating logistics properties in Japan. The GLP J-REIT portfolio has 33 logistics properties, a business that has been growing alongside the growth in e-commerce markets. GLP contributed the properties for an initial consideration of $2.6bn, retains a 15% interest in the J-REIT and continues to manage the assets as the J-REIT’s property and asset manager. The net cash proceeds from the sale were estimated to be approximately $1bn, which GLP intended to use for investment in China, Japan and other countries.

The GLP J-REIT was listed on the Tokyo Stock Exchange and started trading in December 2012. The IPO was priced at the top end of the range at Y60,500 ($609.33) each. By January 2013, the unit price hit Y81,700.

The IPO offering was for 1,834,500 units, which included 87,400 units of over-allotment. Of these units in the real estate trust, a 57.5% share was a domestic offering and there was an international placement for the remaining 42.5% share of 779,662 units.

The investment trust had robust aftermarket performance and active trading. It closed up 5.12% from its IPO price on the first day of trading, which was the best J-REIT first-day performance since 2007. The trading value of Y26.4bn was the largest ever for any Japanese real estate trust.

Restructuring
Winner: Arpeni Pratama Ocean Lines $700m restructuring, Indonesia
Financial advisor: Rothschild
Highly commended: A$3.4bn Nine Media restructuring; $11.2bn BTA Bank restructuring
The debt restructuring of Arpeni Pratama Ocean Line (APOL) was a complex transaction that was challenging because of APOL’s corporate structure, as well as international regulations that had to be navigated in restructuring the company’s dollar-denominated bonds. The deal involved a landmark Chapter 15 bankruptcy filing in New York, which was a first for an Indonesian company. The restructuring also involved a large number of creditors, who had separate interests and some of whom had threatened legal action against the Indonesian company.

APOL is a shipping company that owns and operates the largest fleet of Indonesian dry bulk vessels. The company started to experience difficulties from 2009 in meeting its debt obligations.

The obligations that needed restructuring included secured and unsecured facilities with domestic and international banks, dollar and Indonesian rupiah-denominated bonds, a sharia-compliant medium-term note facility, working capital lines and unwound derivative lines. There were also obligations to international secured vessel financing creditors and trade creditors.

The deal involved restructuring more than $700m of obligations. The negotiations for the restructuring involved numerous parties such as the bank creditors, trade creditors and shareholders, as well as seeking out new investors for a capital injection, which was completed with a $75m private placement.

The company’s dollar and rupiah loans were renegotiated, $130m of international secured facilities were restructured, and the company’s poor derivative positions were unwound.

Sharia-compliant medium-term notes equivalent to $82m also had to be restructured. For $141m of 8.75% guaranteed senior secured notes that were due in 2013, an exchange tender offer was made, which involved the landmark US bankruptcy filing. The exchange/tender offer also involved the issue of warrants to noteholders. Also, the restructuring deal involved the buy-back of approximately $90m of creditor facilities from various classes of creditors.

Structured finance
Winner: Rmb3bn corporate loan securitisation for Bank of Communications, China
Sole financial advisor: HSBC
Joint lead managers: Haitong Securities, Guotai Junan Securities and Citic Securities

Highly commended:Macquarie Leasing Smart 2012-14 $750m Reg S asset backed securities
This Rmb3bn ($485m) deal to securitise the corporate loans of Bank of Communications opened up the securitisation market in China and has paved the way for other institutions to follow suit.

This deal will ideally serve as a template for the sector in China, which is expected to develop alongside the China Banking Regulatory Commission’s intention of developing securitisation. The Chinese regulator has laid down rules that mean any bank involved in securitisation of its loans must retain an equity tranche that equals 5% of the transaction.

This securitisation was the first by a commercial bank in China in four years, and opened up the securitisation market, with Bank of China following suit days later.

The deal comprised of Rmb850m A1 notes, Rmb1.61bn of A2 notes and Rmb310m of B notes. They were priced at 4.2%, 4.4% and 6% respectively. The A1 tranche, which accounted for 28% of the total securitised assets, was targeted a funds and insurance companies.

The securitisation of the loans also sets up Bank of Communications to do further issuances in the future, especially considering the positive response to this transaction. Also, through this deal, domestic investors’ awareness of securitisation has been increased and is likely to increase interest in this new asset class in China in the future.

The transaction, which provided an alternative source of funding for the bank, helped it manage its asset growth and open itself up to a broad and diverse range of investors. The transaction was a first for Bank of Communications and many observers commented that the deal demonstrated that securitisation can successfully be used by the banking sector in China as an alternative to bond issues or capital raising. Securitisation is an attractive option to Chinese banks as it frees up the balance sheet to enable them to lend more.

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