The Banker reviews the Asia-Pacific region’s best deals of the past year.
Bonds: Corporate
Reliance Industries’ $4bn triple-tranche bond
Joint bookrunners: ANZ, Bank of America, Barclays, BNP Paribas, Citi, Crédit Agricole, DBS, HSBC, JPMorgan, Mizuho, MUFG, Standard Chartered Bank, State Bank of India, and Sumitomo Mitsui
Indian conglomerate Reliance Industries made a splash with a $4bn triple-tranche issuance in January 2022, comprised of 10-, 30- and 40-year tranches. It was the largest-ever deal by an Indian issuer in a single-day execution and the largest-ever private sector dollar transaction from south Asia. The deal also marked the first ever triple-tranche in dollars from India and the country’s first 40-year bond.
After engaging with more than 100 investors around the world, the leads began the book-building process, with indications of interest already covering the deal size. The peak orderbook ultimately reached $11.5bn.
The deal was launched for a total size of $4bn, with the spreads set at 120 basis points (bps), 160bps and 170bps over US Treasuries for the 10-, 30- and 40-year tranches, respectively. The 30-year tranche was priced with the lowest ever coupon for that maturity by an Indian issuer and the 10-year tranche came with the lowest ever reoffer spread by an Indian issuer in that maturity.
Bonds: Sovereign, supranational and agency
Pakistan’s $2.5bn triple tranche bond
Joint bookrunners: Credit Suisse, Deutsche Bank, Dubai Islamic Bank, and Standard Chartered
Pakistan achieved several landmarks as it returned to the international dollar bond market after its previous issuance in 2017.
The $2.5bn transaction was comprised of a $1bn five-year tranche, a $1bn 10-year tranche and a $500m 30-year tranche. The combined deal represented the largest ever Eurobond deal for Pakistan.
The deal was well-subscribed, enabling price tightening to take place. Coupon and yields were ultimately set at 6%, 7.375% and 8.875% for the five-, 10- and 30-year tranches as the orders reached $5.3bn. It was Pakistan’s first ever 30-year bond with the sovereign extending its maturity profile.
Asian investors took up 10–18% of the distribution of the three tranches, marking the first time Pakistan had achieved double-digit demand by Asian accounts in terms of the percentage of the deal.
Equities
Monde Nissin’s PHP55.9bn IPO
Joint global coordinators and bookrunners: Citi, JPMorgan and UBS
Local lead underwriters and bookrunners: BDO Capital, BPI Capital, and First Metro
Joint international bookrunner: Credit Suisse International
Co-bookrunners: Jefferies and Macquarie
Domestic co-lead underwriters: China Bank Capital, PNB Capital and SB Capital
On June 1, 2021, Philippine-based global food company Monde Nissin began trading on the Philippine Stock Exchange. The company sold 3.6 billion shares at a price of 13.5 pesos ($0.26), and a further 540 million shares were available via an overallotment option, granted by selling shareholders following the main offering. At a total value of 55.9bn pesos, it is the largest listing in Philippine history.
The shares were multiple-times oversubscribed in the institutional investor tranche, building on investment from 11 long-term, global cornerstone investors. There was also significant retail participation in the offering, with more than 125 eligible stock brokerages participating.
The capital raised will be invested into upgrading its production facilities and capabilities, as well as supporting the company in its plans for international expansion. The company began 40 years ago as a biscuits manufacturer, and then subsequently expanded into making instant noodles and other products.
In recent years, in response to changing consumer preferences, Monde Nissin has pivoted its long-term strategy to focus on healthier foods, including meat-free options. Most notably this included its 2015 acquisition of British meat-substitute brand, Quorn.
Monde Nissin has indicated it wants to increase its international sales, notably in the US market. Its CEO has hinted that a secondary listing in an international market, such as the UK or US, could be on the cards in the future.
Financial institution group financing
Axis Bank’s $600m sustainable perpetual issuance
Joint global coordinators, lead managers and bookrunners: Axis Bank, Bank of America, BNP Paribas, Citi, HSBC, JPMorgan, and Standard Chartered
Joint lead managers and bookrunners: Crédit Agricole, Emirates NBD Capital, Mashreq Bank, MUFG, and Société Générale
Sole sustainable structuring adviser: HSBC
Axis Bank is India’s third-largest private sector bank by total assets. On September 1, 2021, it priced $600m worth of perpetual, non-call five-year sustainable bonds. The issuance represented India’s first sustainable Basel III-compliant additional Tier 1 bonds. Axis Bank acted swiftly to take advantage of constructive market conditions following the US Federal Reserve’s annual Jackson Hole economic symposium at the end of August, announcing the mandate and then deal terms two days later.
The bonds were heavily oversubscribed, with the final orderbook standing at $1.8bn from 158 accounts, enabling the pricing to tighten significantly from initial price guidance, finalised at a fixed rate of 4.1% until March 2027 (five-year US Treasuries plus a 3.315% spread). The deal achieved a good geographic spread, with 58% of the book being allocated to Asian investors, 20% to European investors, 16% to the US and 6% to the Middle East.
Proceeds will be allocated to eligible green and social projects under the issuer’s sustainable financing framework, which has been reviewed by Sustainalytics, including renewable energy, green buildings and sustainable agriculture. Almost half of the bonds were allocated to sustainability-focused investors.
Infrastructure and Project Finance
Greater Changhua 1 Offshore Wind Project
Mandated lead arrangers, underwriters and bookrunners: BNP Paribas, Cathay United Bank, Crédit Agricole, CTBC Bank, DZ Bank, Export Development Canada, HSBC, Korea Development Bank, Siemens Bank, Société Générale, Standard Chartered, and Taipei Fubon Commercial Bank
Mandated lead arrangers: Deutsche Bank, E.SUN Commercial Bank, OCBC, and Sumitomo Mitsui
Financial advisers: CTBC and HSBC
In 2017, Taiwan’s government passed legislation to phase out nuclear power by 2025 and promote the development of renewable energy in its place. To help achieve this ambitious vision, Taiwan aims to generate a total of 5.5 gigawatts (GW) in offshore wind power within the coming years, which has in turn established the country as one of the world’s most dynamic and fast-developing markets for offshore wind investment.
Located approximately 35km offshore from Changhua County, the project consists of the development, construction and operation of a 605-megawatt wind farm, which will eventually form part of a larger 2.4GW complex. The Greater Changhua 1 project is expected to achieve completion in 2022 and by 2026 will help power 2.8 million Taiwanese households.
The $2.2bn transaction marks the first time a holding company (holdco) financing structure has been utilised in the Asian offshore wind market. Holdco financings, a specialist financing structure at holding company level, are commonplace in European offshore wind project deals. Ørsted, a Danish multinational power company, is the developer of the project and will retain a 50% stake in the offshore wind farm, with the rest going to Canadian institutional investor Caisse de dépôt et placement du Québec and local investor Cathay Private Equity.
The facilities were provided by a group of 18 international and Taiwanese commercial banks. The significant interest shown by the international financial consortium represents one of the most geographically diverse arrays of investors ever seen in the Asian offshore wind market.
Islamic Finance
Malaysia’s $1.3bn dual-tranche sustainability sukuk
Joint lead managers and joint bookrunners: CIMB, HSBC and JPMorgan
In April 2021, Malaysia became the first sovereign to issue a US dollar sukuk linked to sustainable activities. The dual-tranche offering comprised $800m of 10-year sustainability notes and $500m of 30-year notes (non-sustainability). The government announced the mandate on April 19, 2021, before two days of global investor calls with Asian, European and US accounts.
The deal garnered significant interest off the back of Malaysia’s newly-issued Sustainable Development Goals (SDG) sukuk framework, enabling the issuance to be upsized from a planned $1bn issuance and a significant price tightening. The final pricing landed at 2.07% US Treasuries plus 50 basis points (bps) and 3.075% US Treasuries plus 80bps for the 10-year and 30-year notes, respectively. This represented the lowest-ever yield and spread for a US-dollar sukuk issuance by Malaysia, according to its finance ministry. The deal was also more than six-times oversubscribed.
The allocation was well-spread globally, with 55% of the 10-year sukuk distributed to investors in Asia, 33% to Europe, the Middle East and Africa (EMEA) and 12% to the US. Some 46% of the 30-year sukuk was distributed to investors in Asia, 33% to EMEA and 21% to the US.
In addition to the sustainable use of proceeds, the underlying assets of the sukuk were also sustainable in nature, with vouchers representing travel entitlements on Malaysia’s Light Rail Transit, Mass Rapid Transit and KL Monorail networks.
This was the first sovereign issuance with such assets in a sukuk structure, setting a new benchmark. The issuance was a strategic offering for the country, which is an infrequent issuer on the international markets — it last sold US dollar-denominated debt in 2016. The proceeds will support it in achieving its SDG-focused policies as part of its 2030 ‘shared prosperity’ vision.
Leveraged Finance
Yingde Gases Group’s $1.8bn financing package
Bookrunners: Bank of East Asia, China CITIC Bank, China Merchants Bank, Crédit Agricole, JPMorgan, Morgan Stanley, and Ping An Securities
Mandated lead arrangers: ANZ, Bank of China, China Minsheng Bank, and Industrial Bank
Yingde Gases Group is China’s largest independent producer of industrial gases. The company was taken private by alternative investment firm PAG Asia Capital in 2017, and has since entered into several strategic initiatives to increase its market share, expand its offerings and develop its geographic footprint. PAG is now exploring the possibility of taking the company public via an initial public offering (IPO) in Hong Kong.
There have been reports of PAG exploring plans to merge its two Chinese industrial gases portfolio companies, Yingde Gases Group and Shanghai Baosteel Gases Group. In September 2021, Yingde Gases launched two loans into syndication totalling $1.8bn for repayments of existing bonds and loans.
The financing package comprised a $900m 18-month bridge loan and a $900m three-year term loan. This package optimised and simplified the company’s borrowings as it prepares for the potential IPO.
Loans
AirTrunk’s conversion of A$2.1bn loans into sustainability-linked loans
Joint sustainability structuring advisers: Crédit Agricole and Deutsche Bank
AirTrunk is a best-in-class hyperscale datacentre specialist platform for large cloud, content and enterprise customers across the Asia-Pacific region. The company develops and operates data centre campuses with industry-leading reliability, technology innovation and energy efficiency.
In September 2021, it sought to convert existing debt facilities into sustainability-linked loans (SLLs). The structuring marked the largest SLL for a datacentre globally to date, and the second-largest SLL completed in Australia for any sector. The key performance indicators (KPIs) for the loans relate to achieving an increase in the percentage of women employees at AirTrunk, achieving carbon neutrality for direct Scope 1 emissions from its operations and improving operating power usage effectiveness (energy efficiency) across its datacentres.
This represents the first time a datacentre loan in the Asia-Pacific region has utilised operating power usage effectiveness as a KPI to determine its loan margins.
AirTrunk has experienced substantial growth since establishing its existing corporate debt facilities in April 2020. By converting its financing structure to an SLL, the existing loan will be sustainability linked, as will future increment loans and investment made by AirTrunk. This will ensure a lasting positive impact on the environment and community, as the company embarks on further expansion of its hyperscale datacentre platform in the region.
M&A
Tokopedia and Gojek’s $18bn merger
Exclusive financial adviser to Tokopedia: Citi
Financial adviser to Gojek: Goldman Sachs
The May 2021 merger of Indonesian technology firms Tokopedia (an e-commerce specialist) and Gojek (a platform providing multiple on-demand services) was a breakthrough for the Asian technology and e-commerce sectors. The landmark transaction created ‘GoTo’, the first company globally to integrate e-commerce, on-demand services (including taxis, couriers and groceries) and financial services into a single platform.
It was the largest-ever merger between two Asia-based internet and media services companies, and the largest-ever business combination in Indonesia. Impressively, given the size of the deal and its complex structure, it was also announced and closed within a single day.
An impressive roster of investors backed the deal, indicating the desirability of the combined platform, including Alibaba Group, Facebook, SoftBank and Tencent. The combined company has operations in several countries across south-east Asia, but its strongest presence is in Indonesia, the region’s largest economy and the world’s fourth most populous country. This provides GoTo with a solid foundation for further growth, with it already starting from a high baseline. The platform has more than 100 million monthly active users and a total group gross transaction value of more than $22bn in 2020. As of the end of 2020, it had more than two million registered drivers in its fleet.
As well as focusing on e-commerce, GoTo also plans to further develop its payments and financial services offerings, including expanding to reach more underserved segments in Indonesia, where 140 million people have little or no access to the financial system.
The merged company listed on the Indonesia stock exchange in April 2022, raising $1.1bn via its initial public offering.
Restructuring
Eagle Hospitality Trust’s $509.9m restructuring
Financial adviser to Eagle Hospitality Trust: Moelis & Co
Singapore-based Eagle Hospitality Trust (EHT) was established in 2019 to lease out 18 hotels across the US under several American hotel brand names, with public equity trading on the Singapore Exchange. The trust’s capital structure consisted of a $341m term loan provided by a consortium of banks led by Bank of America, a $62m mortgage loan provided by Wells Fargo and a private $89m unsecured loan.
EHT’s troubles began in January 2020, when its 18 leases — which were owned by its founders and initial public offering sponsor Urban Commons — defaulted on their rent obligations. The situation worsened in March that year, when the Covid-19 pandemic forced 14 of the hotels to close. EHT terminated the leases in September and began exploring restructuring options to address its worsening liquidity situation.
When plans to replace the trustee-manager and raise a further $125m from EHT’s creditor banks failed, 27 of EHT’s entities were forced to file for Chapter 11, representing 15 of the 18 properties.
By the time of the Chapter 11 filing in January 2021, EHT’s cash reserves had dwindled to just $3.5m.
EHT’s financial adviser Moelis led a successful debtor-in-possession (DIP) financing process, allowing EHT to file for Chapter 11 with a committed $100m DIP facility. Since EHT is regulated by the Monetary Authority of Singapore and its properties, property managers and most of its creditors are in the US, the trust was forced to navigate a complex, cross-border bankruptcy filing. In addition, Urban Commons, a Los Angeles-based real estate investment and development firm, made numerous attempts to disrupt the proceedings.
Despite the multitude of challenges, the process went ahead with minimal delays. EHT’s assets were ultimately sold via an auction process in June 2021, under Section 363 of US bankruptcy code. Moelis designed an auction process that allowed for multiple bids on individual assets, which enabled EHT to secure a final aggregate purchase price of $482m for its assets and maximise consideration paid.
Securitisation
Lotte Card’s $450m social ABS transaction
Joint lead arrangers: BNP Paribas, DBS and Société Générale
In May 2021, Korean credit card company Lotte Card originated its largest-ever asset-backed securitisation (ABS) issuance. The $450m deal was also its first environmental, societal and governance-related transaction. The proceeds will be used to support customers in low-income brackets, in line with Lotte’s sustainability framework.
The structure combined an ABS and cross-currency swap along with other features, allowing Lotte Card to tap competitive cross-border US dollar funds.
Some of the key features that support risk-mitigation include credit enhancement through initial subordination for the senior notes (i.e. Lotte Card would take the first loss); overcollateralisation (i.e. the value of the pool of receivables is greater than the value of the rated notes); the diversified pool of receivables being legally assigned and ring-fenced for repayment under the notes and benefits from statutory protection under Korean ABS law; and the bankruptcy remoteness of the special purpose vehicle ensured any external claims that might arise with the originator would not jeopardise investors’ claims to the ‘ring-fenced’ receivables.
Sustainable Finance
NTT Group’s Y300bn multi tranche green bond
Bookrunners: Daiwa Securities, Nomura, Mitsubishi UFJ, Mizuho, Morgan Stanley, and Sumitomo Mitsui
Green bond structuring agent: Nomura
Nippon Telegraph and Telephone Corporation (NTT) is one of the world’s largest telecommunications companies. At 150 years old, the company has a long heritage supporting the infrastructure behind the telegraph and telephone communications in its name, and in more recent times has pivoted that expertise to cover digital infrastructure and services, such as cloud-based technologies and private 5G networks.
In October 2021, the group issued its second green bond under its revised green bond framework, inspired by its ‘NTT Green Innovation toward 2040’ vision, which sets out its aim to reduce the group’s greenhouse gas emissions by 80% by 2040.
The updated framework expands its list of eligible green projects from datacentres, green buildings and renewable energy to also include 5G-related investment, fibre-to-the-home-related investment, and research and development for the realisation of its ‘Innovative Optical and Wireless Network’ concept.
The triple-tranche Y300bn ($2.37bn) bond was evenly split between three-, five- and 10-year notes. Demand for the notes reached around Y900bn from more than 280 investors. NTT was also able to suppress the volume premium that normally accompanies a large issue size by emphasising the environmental, social and governance (ESG) credentials of the deal, and a strategic approach to marketing and investor engagement, achieving a strong pricing result.
The size of the deal is likely to have a significant impact on the development of ESG financing markets within Japan, where domestic ESG bonds have typically been limited to Y10bn. The bonds will also contribute to the development of improved communication technologies, which will be more energy efficient and have a lower impact on the environment.
