Deals of year logo 2021

The Banker reviews the Asia-Pacific region’s best deals of the past year.

Corporate bonds

Winner: Alibaba’s four-tranche issuance

Bookrunners: Citi, Credit Suisse, Morgan Stanley, JPMorgan and China International Capital Corporation

Co-managers: ANZ, Bank of China, BNP Paribas, DBS Bank, HSBC, ING, Mizuho and Wells Fargo

In February, Chinese megabrand Alibaba, a major, force in the country’s huge e-commerce sector, grabbed attention with a $5bn bond offering. The four-tranche deal, split across 10-, 20-, 30- and 40-year maturities, was Asia’s largest bond offering in eight months. The 20-year tranche, comprised of $1bn of sustainability bonds, was also the group’s debut issuance under its newly published sustainable finance framework. It was all the more noteworthy as it came just months after Chinese regulators pulled the plug on the planned initial public offering of Ant Group, an affiliate company of Alibaba Group, in November 2020. The regulator then launched an antitrust investigation into Alibaba in December 2020.

Alibaba’s offering received strong demand, and was more than six times oversubscribed, suggesting investors remain confident in the brand’s longer-term outlook.

The company raised $1.5bn in 10-year bonds, $1bn in the 20-year tranche, $1.5bn in 30-year paper and $1bn in 40-year notes, at 2.125%, 2.700%, 3.150% and 3.250%, respectively. Due to the high level of demand, it was able to tighten pricing by 30-40 basis points for all four tranches.

Excluding the sustainability notes, the group will use the proceeds for general corporate purposes such as working capital and repayment of offshore debts. The sustainability tranche will be used to finance eligible projects within its framework, such as increasing energy efficiency, responding to the Covid-19 pandemic or contributing to the circular economy.

Sovereign, supranational and agencies financing

Winner: Indonesia’s $4.3bn triple-tranche issuance

Joint bookrunners: Citi, Deutsche Bank, Goldman Sachs, HSBC and Standard Chartered

Amid market conditions that may have given many issuers pause for thought, in early April 2020 Indonesia issued a mega $4.3bn triple-tranche offering. The deal comprised $1.65bn 10.5-year, $1.65bn 30.5-year, and $1bn 50-year senior unsecured fixed rate notes.

It was the first emerging market, Asian Sovereign offering since the Covid-19 outbreak, re-opening this market at a moment of high uncertainty.

Despite ongoing market volatility, the transaction was very well received, with orders peaking at an aggregate size of more than $11bn, with investor interest spread across Asia, Europe and the US. The high demand enabled substantive price tightening of all three tranches, with final coupons of 3.9%, 4.25% and 4.5% across the 10.5-, 30.5- and 50-year tranches, respectively. A highly impressive result given the market circumstances.

The deal was also notable as it was the first time Indonesia had ever issued a 50-year bond, its longest ever tenor. It was also the first sovereign in the region to issue an offering with this time to maturity.

Indonesia used the proceeds from the bonds for general budgetary needs, as well as contributing towards Covid-19 relief and recovery programmes.

Equities

Winner: JD.com’s $4bn secondary listing

Joint sponsors: Bank of America, CLSA, UBS

Joint global coordinators: Bank of America, BOCI, CCBI, China Renaissance, CLSA, ICBCI, Jefferies and UBS

JD.com, a major Chinese e-commerce firm and rival to Alibaba, has joined a growing number of Chinese firms with a primary listing in the US to add a secondary listing in Hong Kong.

In June 2020, it offered 133 million shares for sale via the Hong Kong Stock Exchange, at HK$226 ($29) per share, worth approximately $3.87bn. There was strong demand from both retail and institutional investors for the shares, with the retail investor tranche around 180 times oversubscribed. The institutional tranche was also heavily oversubscribed, allowing the company to prioritise orders from high quality accounts.

The market responded positively to the listing, with share prices increasing during initial trading and then gradually over the following weeks. Due to the offering’s positive reception, the company also subsequently opted to exercise almost the full 19.95m shares over-allotment option, boosting the final offering size to approximately $4.46bn.

The transaction’s success was all the more impressive given its timing during ongoing geopolitical tension between the US and China, as well as uncertainty around Covid-19.

The listing was not only the largest Chinese equity capital markets transaction in 2020, it was also the largest listing globally for that year too.

The company said it plans to use the capital raised to “invest in key supply chain based technology initiatives to further enhance customer experience while improving operating efficiency”.

Financial institutions group financing

Winner: OCBC’S $1bn T2 notes

Joint lead managers and joint bookrunners: Bank of America, Citi, JPMorgan, OCBC

OCBC is one of Singapore’s longest-established banks, formed in 1932 in a merger of three local banks, the oldest of which had existed since 1912. It is also the second largest financial services group in southeast Asia by assets.

In September 2020, this large regional player issued $1bn 10-year, non-call five, fixed rate subordinated notes under its $30bn global medium-term note programme, with the bonds counting towards its Tier 2 regulatory capital. The deal represented the first Tier 2 subordinated bond deal from Singapore in more than a year.

Demand for the notes was strong, even without high profile marketing, particularly from Asian investors, with orderbooks peaking at more than $6bn. Even at final pricing of 1.832% fixed until September 2025 (the call date), representing a 42 basis points (bps) tightening from initial price guidance, the issuance remained 5.8 times oversubscribed. The final results represented a negative new issue concession of 5 to 7bps and, according to Dealogic, the lowest ever coupon for a Tier 2 transaction in Asia-Pacific. The bank will use the proceeds from the bonds for general corporate purposes.

Infrastructure and project finance

Winner: Star Energy Geothermal’s $1.1bn dual tranche green project bonds

Joint global coordinators: Credit Suisse, DBS Bank, Deutsche Bank

Joint bookrunner: Barclays

Co-manager: BPI Capital

In October 2020, Star Energy Geothermal Group priced the largest green bond issuance by any southeast Asian corporate to date. It was a $1.1bn senior secured project bond split across two tranches: a $320m tranche due in April 2029 priced at 3.25%, and a $790m tranche priced at 4.25%, with a longer term of 18 years.

There was huge demand for the offering. By September, the order book stood over-subscribed at $2.8bn, while strong momentum from institutional investors allowed pricing to be tightened by 27.4 basis points.

In terms of geographical distribution, 42% of the notes went to US accounts, 39% to Asia and 19% to Europe, the Middle East and Africa. Asset managers secured the largest share with 82% of the total notes, while 8% went to insurers and pension funds, 8% to hedge funds and 2% to private banks.

The bonds are rated Baa3 stable by Moody’s and BBB- by Fitch. The green bond frameworks the bonds were issued under are aligned with the International Capital Market Association’s Green Bond Principles and the Asean Green Bond Standards initiative.

Star Energy will use the bonds’ proceeds for the repayment of its existing loans, as well as to invest in technologies to help reduce carbon emissions, increase sustainable energy and promote circular economies in Indonesia. Star Energy is the country’s largest geothermal producer, with a total installed capacity of 875 megawatts.

The $1.1bn issuance is the energy group’s second green framework offering. In April 2018, Star Energy issued $580m of senior secured green bonds with a term of 15 years.

Islamic finance

Winner: Islamic Finance Indonesia’s $2.5bn triple-tranche sukuk

Joint lead managers and joint bookrunners: BNP Paribas, Dubai Islamic Bank, HSBC, Maybank and Standard Chartered

Joint green structuring advisers: BNP Paribas and HSBC

Indonesia’s debt management office had a busy 2020, beginning with a $4.3bn multi-tranche bond issuance in April, at a time when Covid-19 uncertainty was at a high and later on, in July, issuing a ¥100bn ($943m) Samurai bond.

Between these two notable transactions was another significant deal, a $2.5bn triple-tranche sukuk issuance, including a $750m green tranche. This was the country’s first sukuk issuance since February 2019 and consisted of a five-year, $750m green sukuk, a 10-year $1bn sukuk and a 30-year $750m sukuk.

Following the April issuance, the sovereign was waiting for the most opportune window to launch the sukuk. In June, finding highly favourable market conditions following news from the US Federal Reserve about its plans for corporate bond purchases, it acted and was able to price the deal intraday. It was not alone in capitalising on the favourable market conditions, yet despite seven other deals in Asia ex-Japan G3 primary markets on the same day, demand across the three tranches peaked at more than eight times its total size.

The strong demand enabled Indonesia to tighten pricing by 70 basis points compared to initial guidance, with yields of 2.30%, 2.80%, and 3.80%, respectively, for the five-, 10- and 30-year tranches. Even with the aggressive tightening the offering maintained much of its demand, including from quality investors.

The deal achieved a number of firsts for both the issuer and the wider region. This includes it having the lowest-ever US$ five-year and 10-year coupon/profit rate achieved by Indonesia across both the conventional bond and sukuk format. It was also the first US$ 30-year sukuk issued by Indonesia and the largest US$ 30-year sukuk ever issued out of Asia.

Leveraged Finance

Winner: SJM Holdings’ $1bn dual-tranche issuance

Bookrunners: Banco Nacional Ultramarino, Bank of East Asia, Bank of China, Bank of Communications, BNP Paribas, CCB International, China International Capital Corporation, ICBC, OCBC, Tai Fung Bank, Yue Xiu Securities

SJM Holdings, the largest operator of casinos and resorts in Macau, made an impressive bond market debut in January 2021, with a $1bn dual-tranche offering across $500m five-year non-call three notes and $500 seven-year non-call four notes. Despite being in an industry hard hit by Covid-19, the brand’s strong heritage, along with concerted investor engagement, made for a highly effective transaction.

A comprehensive marketing process was undertaken throughout December 2020 and January 2021. This included initial sessions with more than 50 Asia and Europe-based investors during December. A so-called wall-crossing exercise, where there is in-depth engagement with selected investors before a public launch, was also undertaken, attracting $1.5bn in orders.

Further engagement with more than 100 investors was also undertaken after the public announcement of the bond on January 18. These efforts really paid off with the offering more than two times covered two hours after launch on January 20, and peaking at more than $10bn at close. The book even continued to grow after prices were tightened by 50 basis points or more across both tranches. Final pricing of 4.5% and 4.85%, respectively, was achieved.

It was a blockbuster deal in several respects including being the largest-ever debut bond offering for a high yield issuer in Asia and the lowest yields ever achieved on five-year and seven-year bonds for a debut issue in Asia.

The transaction helped the company diversify its funding sources, expand its investor base and extend its debt maturity profile.

Loans

Winner: CP Group’s $7.2bn bridge financing for acquisition of Tesco’s Thailand and Malaysia operations

Joint underwriters: JPMorgan, Siam Commercial Bank and UBS

In early March 2020, Charoen Pokphand Group (CP) announced that it had entered into a definitive agreement to acquire Tesco’s Thailand and Malaysia retail and mall operations for $10.6bn, in what was to be the largest-ever merger and acquisition (M&A) transaction on record within southeast Asia. The acquisition was completed at the end of 2020, and to enable the deal to go ahead a $7.2bn bridge financing package was put together for CP.

Syndication of the package was complicated by the spread of the Covid-19 pandemic, which was causing major market and operational disruption internationally by late March 2020. At this stage, there were significant questions about whether it would be possible to attract the necessary financing.

With a highly challenging market backdrop, and operational obstacles, getting the deal over the line required a significant effort by the banks involved, with, for instance, market volatility having a severe impact on credit spreads.

Nonetheless, by June the senior syndication (where commitments of $1bn were sought) had been completed with 12 banks signed up (including the three underwriters). General syndication, launched in June 2020 and completed in September 2020, attracted a further 24 lenders.

Despite the challenges the deal was successfully executed attracting 36 lenders based across southeast Asia, east Asia, Europe and the Americas; a resounding success, even without the testing circumstances.

The financing was the first M&A loan from Thailand’s retail sector since March 2016, the largest Asia-Pacific, ex-Japan and Australia, acquisition loan during 2020 and the second largest Asia-Pacific, ex-Japan and Australia, loan for any purpose in 2020.

M&A

Winner: Asahi’s $16bn acquisition of Carlton & United Breweries

Lead adviser to Asahi: Rothschild & Co

Adviser to Asahi: Nomura

Adviser to AB InBev (Carlton & United Breweries): Lazard

Carlton & United Breweries (CUB) is one of Australia’s longest-established brewing companies, with a heritage stretching back to 1832. It has existed in various incarnations throughout its history, including as Fosters Group between 1990 and 2004. In 2016, CUB was acquired by AB InBev, the world’s largest brewing company, which took over the brand as part of its purchase of SABMiller (CUB’s then owner).

However, since its acquisition of SABMiller, AB InBev has struggled with its level of leveraging and has made a number of strategic divestments. In July 2019, it announced that it had agreed to sell CUB to Japanese brewing company, Asahi, for A$16bn ($12.3bn). Shortly after, it put plans for an initial public offering of Budweiser APAC (which would have included CUB) on ice.

For AB InBev the attraction of the deal was being able to further deleverage its balance sheet and strengthen its position for future growth opportunities. For Asahi, which is now the third largest brewer in the world, after AB InBev and Heineken, and continues to build its global presence, the transaction represented a rare opportunity to quickly establish scale and broaden its markets. It also follows Asahi’s acquisition of a number of former SABMiller European businesses in 2016 and 2017.

The deal had to overcome a number of regulatory hurdles, namely satisfying conditions from the Australian Competition and Consumer Commission and passing a review by Australia’s Foreign Investment Review Board, but was successfully completed in June 2020.

Restructuring

Winner: Pacific International Lines’ $3.3bn debt restructuring

Financial adviser: Evercore

Headquartered in Singapore and operating across 500 global locations in more than 90 countries, Pacific International Lines (PIL) is the largest container shipping group in southeast Asia and the 12th largest globally.

In early 2020, the Covid-19 pandemic sent shockwaves through global supply chains which led to a contraction in cargo volumes. PIL had posted a net loss of $795m in 2019, following a loss of $254m in 2018, and therefore, was in a particularly vulnerable position.

In an effort to buoy the company’s struggling finances, PIL had unsuccessfully engaged with various financial institutions throughout 2018 and 2019 to raise both debt and equity. By June 2020, PIL’s liabilities stood at more than $3bn, which included bank loans of $1.12bn due to mature within a year. Facing the pressure of an over-leveraged capital structure, the company’s liquidation seemed inevitable.

In December 2019, PIL turned to Evercore to evaluate its strategic options and take steps to salvage the company. Evercore identified Heliconia Capital Management, a subsidiary of the Singapore government’s investment company Temasek, as a potential investor. A $112m emergency credit facility from Heliconia was secured in July 2020.

The emergency credit facility provided a much-needed liquidity boost for PIL, allowing it to continue critical operations, while the terms of a broader comprehensive financing package and debt restructuring scheme were being finalised with PIL’s stakeholders.

The debt restructuring scheme involved complex negotiations with more than 125 competing creditors to reprofile PIL’s repayment of its liabilities. Between 74% and 100% of PIL’s creditors from each class voted in favour of the scheme, allowing Heliconia to make a subsequent investment of $600m into PIL, a mix of debt and equity, and acquire a significant majority interest in the company.

The transaction concluded as Singapore’s largest comprehensive debt restructuring exercise to date, positioning PIL for future growth and protecting more than 9000 jobs throughout the company and its subsidiaries.

Securitisation

Winner: Exsim’s sharia-compliant securitisation programme

Financial adviser and deal structurer: New Paradigm Capital Markets

Lead arranger: United Overseas Bank

In February 2020, Exsim, a Malaysian property development company particularly well-known for commercial and industrial developments, broke new ground in the Islamic finance and securitisation markets with a sharia-compliant securitisation linked to the progress billings of a commercial development project. Progress billings are invoices submitted for work completed on long-term projects.

This transaction marked the first time that a sharia-compliant structured transaction involving progress billings for a commercial project has been undertaken, globally. The overall securitisation programme combines two different structured programmes: an Islamic medium-term notes programme based on securitised progress billings from development projects for issuance of up to RM2bn ($486m); and an Islamic commercial paper programme established to cover cost overruns and bridge any timing mismatches between progress billing receipts and ongoing constructions costs for issuance of up to RM1bn.

Under these sukuk programmes, Exsim Development or any of its developer subsidiaries will, as required, sell their beneficial rights related to specific property development projects to the Issuer, Exsim Ventures Berhad (the special purpose vehicle established for the sukuk programmes), with the objective that future receipts under these agreements will be used to fund construction costs relating to the relevant development. In essence, the arrangement enables Exsim to monetise future income from the sale of yet-to-be-completed developments and allows it to more efficiently manage project development cash flows.

As this was the first structured transaction in Malaysia to monetise progress billings involving a commercial project, it posed additionally complexity to be skilfully managed in terms of creating appropriate risk management structures in the absence of prior examples and regulatory oversight.

Sustainable finance

Winner: Goodman Interlink’s HK$590m green interest rate swaps

Sole arranger: Crédit Agricole

Compared to its cousins in the bonds markets, the sustainability-linked derivatives markets is at a relatively early stage in its development. However, it is also an area that has the potential to make a big impact as companies seek to transition to more sustainable financing and ways of operating. Compared to traditional derivatives, sustainability-linked derivatives incorporate a so-called ‘sustainability premium’ into their pricing, where the borrower must hit certain pre-agreed key performance indicators related to sustainability, or face higher costs.

In October 2020, Goodman Interlink, a joint venture between Goodman Group (a global logistics property group) and Goodman Hong Kong Logistics Partnership, engaged in a landmark deal in the development of this market in Asia-Pacific.

The company agreed a HK$590m ($76m) green interest rate swaps deal, the first deal of its kind in the region. It had previously agreed green loan facilities with Crédit Agricole, secured against a prime logistics building in Hong Kong. The green interest rate swaps were agreed as its interest rate hedge against this facility, and is linked to the green credentials of the logistics building.

Goodman Interlink will incur a penalty on the fixed rate it pays on its side of the swap if it fails to meet the so-called ‘green condition’, specifically the building must continue to have a silver certificate from US LEED (Leadership in Energy and Environmental Design) and a gold certificate from Hong Kong BEAM (Building Environmental Assessment Method).

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