Deals of the year 2012

AFRICA

BONDS: CORPORATE

WINNER: FIRST TECHNOLOGY’S R450M DEAL

Sole arranger: Rand Merchant Bank 

HIGHLY COMMENDED: Edcon’s R1.01bn bond

South Africa lays claim to having the deepest capital markets in Africa. Despite this, corporate bond issuance in the country has chiefly been the preserve of blue-chip companies and those owned by big private equity houses.

Bankers have long talked of medium-sized firms becoming more established in the capital markets. Little has happened as yet, but the R450m ($59m) senior secured bond from First Technology, a provider of IT software and hardware, could herald a change.

FirstTech tapped the market in September last year, becoming one of the few South African companies of its size to diversify its debt issuance beyond bank loans. The deal was particularly attractive to the borrower given that it got a more flexible covenant package than it would have done from a loan.

The transaction was complicated by the need for FirstTech to negotiate with its bank lenders to make sure they were comfortable with the terms. After getting their agreement, the deal proved popular with investors, thanks in part to FirstTech’s investment grade rating. Bankers say it provides a template for other mid-cap firms in South Africa that want to issue bonds.

Judges were also impressed with South African retailer Edcon’s R1.01bn five-year secured bond in April 2011. Goldman Sachs and Rand Merchant Bank led the deal, which marked Edcon’s debut in the South African bond market and came shortly after it had raised euro and dollar paper. 

BONDS: SSA

WINNER: NAMIBIA’S $500M DEAL

Bookrunners: Barclays Capital and Standard Bank

HIGHLY COMMENDED: Delta State Government of Nigeria’s N50bn bond

Namibia became the latest of a growing list of African sovereigns to issue an international bond when it sold $500m of paper in late October 2011.

The 10-year transaction followed a debut Eurobond from Nigeria and Senegal’s first benchmark-sized deal, both of which took place in the first half of 2011.

Namibia, rated Baa3 by Moody’s and BBB- by Fitch, managed to price its bond with a coupon of just 5.5%, or 336 basis points above US Treasuries, the standard benchmark for any dollar issuer. Thus, despite being launched at a precarious period in the eurozone crisis, the deal was substantially tighter than those of Nigeria and Senegal, who paid respective coupons of 6.75% and 8.75% for their 10-year debt. In fact, Namibia’s paper yielded the least relative to Treasuries of any sub-Saharan African issuer bar South Africa.

Although no African sovereigns, except South Africa, tapped the Eurobond market in the first quarter of 2012, Namibia’s deal has gone a long way to making the world’s emerging market investors more comfortable with taking on exposure to the continent.

Another contender was Delta State of Nigeria’s N50bn ($317m) 14% seven-year bond in September 2011. Access Bank led the transaction, which was the first tranche of a N100bn bond programme, the biggest launched by a Nigerian state. It will be used to help the borrower build infrastructure and ensure it generates the majority of its revenues internally, rather than having to rely on the federal government.

EQUITIES

WINNER: ZAMBEEF’S $55M LISTING IN LONDON AND RIGHTS ISSUE IN ZAMBIA

Bookrunner: Renaissance Capital

HIGHLY COMMENDED: Holdsport’s R930m initial public offering

Zambian meat and dairy producer Zambeef’s $33m initial public offering (IPO) on London’s Alternative Investments Market (AIM) market last June, while small, was significant in many ways. It marked the first time a company from the southern African country had listed internationally and was one of the few overseas African IPOs from outside the natural resources sector.

In essence, the deal testified to emerging market investors’ growing appetite to get exposure to Africa’s rising and ever-wealthier middle-class consumers. It got the attention of some of London’s biggest investors, with UK fund manager M&G buying 10% of the stock to become Zambeef’s largest single shareholder.

Zambeef has used the funds for expansion at home and in west Africa. It opted for an AIM listing as it would have struggled to raise as much money locally.

Nonetheless, the IPO was part of a two-pronged capital raising, with Zambeef completing a $22m rights issue on the Lusaka Stock Exchange shortly beforehand.

The deal, led by Renaissance Capital, has caught the eye of other Zambian companies, many of which are also considering listings abroad to access deeper pools of capital than what is available at home.

Also in the running was South African sports retailer Holdsport’s R930m ($136m) IPO in July 2011. The transaction was the first primary listing in the country from the retail sector in seven years. It has performed well. The shares were trading at R40.65 in late March this year, having been listed at R31.

FIG CAPITAL RAISING

WINNER: FIRSTRAND’S €267.5M BUYBACK OF ITS JUNE 2012 NOTES

Dealer managers: FirstRand and Royal Bank of Scotland

HIGHLY COMMENDED: Capitec Bank’s $99m primary placing

South Africa’s FirstRand launched a buyback of its €500m June 2012 bond in June last year as part of a liability management exercise. It chose a volatile period to conduct its buyback, given the troubles in the eurozone. This worked to its advantage, with more investors – many of whom were ‘risk-off’ with regards to emerging markets – taking up the offer than might have been the case in a less unstable environment.

FirstRand opted to buy back up to 60% of the notes. It chose a fixed-price cash tender to go about this, which proved popular given that the short maturity on the bonds meant investors were more interested in dealing with a price than a spread, which is the typical method of conducting bond buybacks.

The banks that led the buyback, FirstRand and Royal Bank of Scotland, identified as many as three-quarters of the bondholders. Ultimately, the take-up level for the tender was 53.5%, or €267.5m.

Particularly pleasing for FirstRand was it managing to purchase the bonds at 99.5%, thus enabling it to redeem them below par (investors were happy to accept this price given that many had bought the bonds in the secondary market at less than 99.5 cents on the dollar).

The judges also noted South African mass-market lender Capitec Bank’s $99m primary placing in late October last year, led by Bank of America-Merrill Lynch. The deal helped Capitec diversify its shareholder base, with 40% of the take-up coming from non-shareholders.

INFRASTRUCTURE AND PROJECT FINANCE

WINNER: ADDAX BIOENERGY’S €269M RENEWABLE ENERGY PROJECT IN SIERRA LEONE

Financial advisor: BNP Paribas

HIGHLY COMMENDED: East Delta Electricity Production Company’s E£4.6bn syndicated loan

Addax Bioenergy’s project in central Sierra Leone, which reached financial close in November 2011, involves developing a greenfield site for agricultural and energy schemes, chiefly producing bioethanol and electricity from sugarcane and bagasse. It will consist of a sugarcane plantation, an ethanol distillery and a power plant. It will produce just over 100,000 megawatt hours of renewable power annually, which will be fed into Sierra Leone’s national grid.

The first project finance transaction in Sierra Leone, funding consisted of €127m of equity and €142m of 12.5-year debt provided by European and African development finance institutions. The latter was split between a €121m tranche and a dollar one, guaranteed by South Africa’s Export Credit Insurance Corporation, of $28.9m.

The groundbreaking project is the biggest investment in Sierra Leone’s agricultural sector and is key to the west African country’s attempts to diversify its economy and bolster its power supply.

Highly commended was East Delta Electricity Production Company of Egypt’s E£4.6bn ($775m) 10-year syndicated loan signed in May last year. Coordinated by National Bank of Egypt, it will be used to add 1500 megawatts of power to Egypt’s national grid.

The deal stood out for being carried out in the midst of Egypt’s revolution that saw the overthrow of president Hosni Mubarak’s regime and forced the country’s banking system to shut down temporarily. Despite this, it was oversubscribed by 25%, with 14 Egyptian banks committing.

ISLAMIC FINANCE

WINNER: GAMBIA GROUNDNUT CORPORATION’S $14M MURABAHA FINANCING

Lead arranger: International Islamic Trade Finance Corporation

Few international Islamic trade financing deals have come out of Africa. But last year’s $14m murabaha facility for Gambia Groundnut Corp (GGC), a government-owned agency in the small west African state, demonstrates the potential for them.

GGC’s deal was led by International Trade Finance Corp (ITFC), which is part of the Islamic Development Bank. Agriculture employs as much as 70% of Gambia’s population, the vast majority of whom are Muslim, and groundnuts are a major export crop. ITFC arranged two murabahas of $7m, each repayable over six to nine months and syndicated to about 10 banks.

The deals gave farmers more assurance that they would be paid in cash upon delivering their crop to GGC, which is responsible for the marketing of Gambia’s groundnuts. As such, GGC said the financing resulted in an increase to Gambia’s marketable crop of about 15%, significantly boosting foreign exchange earnings and helping to reduce rural poverty.

An additional feature of the transaction was that it was structured with a local facility manager to monitor stock levels at all of GGC’s regional depots, thus providing additional comfort to participants.

Africa’s agricultural sector is expected to develop quickly over the coming two decades. Financing will be key to that process. Deals such as GGC’s demonstrate that farmers and agricultural marketing bodies have the potential to tap a wide source of international funds as they go about their expansion.

LOANS

WINNER: HELIOS TOWERS TANZANIA’S $85M-EQUIVALENT DEAL

Sole bookrunner and Lead arranger: Standard Bank

Mandated Lead Arrangers: Emerging Africa Infrastructure Fund, Investec Bank, National Micofinance Bank, Bank of Africa Tanzania, International Commercial Bank

Helios Towers, owned by various investors including Soros Fund Management and the World Bank’s International Finance Corp, is one of Africa’s biggest independent operators of telecoms towers, with a presence in the Democratic Republic of Congo, Ghana, Nigeria and Tanzania.

It approached Standard Bank last year to arrange a dollar and Tanzanian shilling syndicated loan to fund the expansion and upgrade of its towers in Tanzania. That was no easy task amid an environment of rapidly rising inflation and a weakening local currency, something that was affecting most of east Africa at the time. Tanzanian treasury bill yields shot up from less than 7% to more than 17% during the year, making conditions particularly tough for borrowers and banks in the country.

But Helios managed to put together a syndicate of seven lenders, including Standard Bank, to raise $85m-equivalent.

The deal is part of a growing trend of sub-Saharan African companies tapping the international syndicated loan market. Bankers say that Tanzania, whose economy is expected to expand hugely in the next decade following the recent discovery of natural gas reserves off its coast, is likely to become a more prominent feature of that market. Deals such as Helios’s help pave the way for other borrowers. 

M&A

JOINT WINNER: ACCESS BANK’S TAKEOVER OF INTERCONTINENTAL BANK

Financial advisors to Access Bank: Access Bank, Citi

JOINT WINNER: ECOBANK’S ACQUISITION OF OCEANIC BANK

Financial advisors to Ecobank: Ecobank, Renaissance Capital

The takeovers of Intercontinental Bank by Access Bank and Oceanic Bank by Ecobank last year were products of Nigeria’s 2009 banking crisis. Intercontinental and Oceanic, two of the country’s biggest lenders, were among the 10 to fail stress-tests carried out by Nigeria’s central bank in the latter half of the year. They, like the other eight, were forced to accept capital from the government and were given two years to recapitalise further to the extent that they could stand on their own feet.

Many banks lined up to buy Intercontinental and Oceanic, hoping to get their hands on the two lenders’ large branch networks and asset bases and establish themselves among the biggest players in Nigeria. Access, already a large lender in Nigeria, and Togo-based Ecobank, whose Nigerian subsidiary was small, emerged victorious.

The two takeovers will substantially change the face of Nigeria’s banking sector. Both Access and Ecobank and have now entered the top tier, which previously comprised First Bank, Zenith, Guaranty Trust Bank (GTB) and United Bank for Africa (UBA). The big four has now become the big six: Access has risen to become the third largest Nigerian bank by assets, overtaking UBA and GTB, while Ecobank sits in fifth place, one ahead of GTB.

Both mergers will increase competition in the already fierce retail market in Nigeria and could well drive down costs for consumers.

The big four claim not to be intimidated by the emergence of two new rivals. They state that not only will they be able to maintain their market share, but also generate higher profits than them. Time will tell if they are right. Access and Ecobank will be trying their utmost to ensure they are not.

STRUCTURED FINANCE

WINNER: SA EXPRESS’S R900M AIRCRAFT LEASING DEAL

Bookrunner: Rand Merchant Bank

Rand Merchant Bank (RMB) used an innovative deal structure to help SA Express, the largest operator of domestic flights in South Africa, lease seven Bombardier Q400 turbo-prop aircraft last year. RMB bought the planes from Flybe in the UK after setting up a specially incorporated company for the transaction. It then entered into a 10-year rental agreement with SA Express.

RMB split the debt financing, closed in October, into a R700m ($92m) senior tranche and a R200m junior tranche. Futuregrowth Asset Management and Sanlam Capital Markets, two local investors, provided the funds alongside RMB.

RMB and one of the others also invested in a portion of the deal’s equity. In addition, RMB decided to offer some of its private bank’s high-net-worth clients a portion of the equity. This was the first time it had done this for such a deal and it demonstrated the appetite among South African high-net-worth individuals to invest in alternative asset classes.

RMB believes the deal has paved the way for similar ones in the future that also use private bank clients to invest in the equity tranches.

TRADE FINANCE

WINNER: MOHAMMED ENTERPRIZE TANZANIA LTD’S $60M SOFT COMMODITY DEAL

Mandated lead arranger: Rand Merchant Bank

Africa-focused banks are increasingly trying to make revenues from the continent’s growing trade flows with the rest of the world and within itself.

A $60m trade finance loan for Mohammed Enterprize Tanzania Ltd (METL), a commodities trading firm, exemplifies one of the ways this can be achieved. The family-owned company is one of the biggest in Tanzania, with assets and revenues each totalling about $400m. Considered one of the east African country’s blue-chip borrowers, it approached Rand Merchant Bank (RMB) last year to arrange a soft commodities loan to support its buying and selling of agricultural products and grow its operations, which it is looking to expand as east African economies become more integrated, making it easier for businesses to operate regionally rather than just within their own borders.

METL’s deal was structured to accommodate trading in a diverse range of commodities – including wheat, maize, rice, sugar, edible oil and pigeon peas – and fund both imports and exports. The latter helped reduce local currency risk, which was important to lenders given the Tanzanian shilling’s volatility over the past year.

Aside from RMB, which was mandated lead arranger on the deal, China Construction Bank and FIM Bank, a Maltese entity specialising in trade finance, participated.

Bankers say that such deals are likely to become more common as Africa’s trade with places such as India – where many of METL’s exports are shipped – rises in the coming decade. As they do, competition among banks to lead them will become stiffer.

AMERICAS

BONDS: CORPORATE

WINNER: CHRYSLER’S $3.2BN SENIOR SECURED HIGH-YIELD NOTES

Lead bookrunners: Bank of America-Merrill Lynch, Goldman Sachs

Other bookrunners: Morgan Stanley, Citi

HIGHLY COMMENDED: OGX’s $2.56bn high-yield corporate bond and Caterpillar’s Cnh2.3bn corporate bond

The alliance between US automotive group Chrysler and Italian car manufacturer Fiat has won over many sceptical analysts who feared the combined group would fail to turn Chrysler’s ailing businesses around. The new Chrysler Group was formed after the US company emerged from its government-sponsored bankruptcy in 2009.

The ability to repay loans to the US and Canadian governments, which totalled $7.6bn, was a crucial aspect to the successful integration of the two businesses. It required a substantial recapitalisation of the group, which involved a $1.3bn equity investment from Fiat, a $4.3bn first lien facility and $3.2bn senior secured notes. This gave Fiat 51% of the group’s capital, from the 30% it had pre-transaction, and lowered the long-term cost of capital and interest expenses by more than $350m annually.

The Banker’s judges were impressed by the entire recapitalisation package put together for the client, but the $3.2bn bond facility alone deserves recognition as corporate bond of the year in the Americas for its timing and execution. The debt deal consisted of $1.5bn in secured senior notes with a duration of eight years and an 8% coupon, and $1.7bn-worth of secured senior notes with a 10-year duration and an 8.25% coupon. The transaction closed at the end of May last year and took advantage of the relative strength of the high-yield market over that period by re-tranching the facilities.

The notes were the third largest high-yield offering since 2008 and, combined with the term loan issuance, were part of the debt deal that raised the largest total new funds in the Americas since the credit crisis.

BONDS: SSA

WINNER: MEXICO’S $1BN 5.75% CENTURY BOND REOPENING

Joint bookrunners: Goldman Sachs, Credit Suisse

HIGHLY COMMENDED: Uruguay’s $1bn local currency inflation-linked bond

When Mexico issued a century bond in 2010, it grabbed the headlines because of the rarity of this instrument. When the country tapped the same market last year, taking advantage of international volatility, and reopened its century bond, it not only attracted another $1bn, it also secured a much-improved yield. The notes priced at 96.5% with a yield of 5.96%, 14 basis points below the original October 2010 issue’s yield of 6.1%, which meant a 94.27% price at the time.

The deal due in 2110 has a 5.75% coupon. The transaction was announced and completed within four hours, allowing the government to minimise its exposure to intra-day market volatility. It should also be noted that Mexico’s century bond reopening came to market on the same day as the University of Southern California’s inaugural 100-year notes. Despite this, the Mexican bond attracted interest comfortably in excess of its offering.

There was little margin for error on the timing of the deal. It was priced a few days after the US government debt’s downgrade to AA+ by rating agency Standard & Poor’s and also reflected the market’s concerns over the European sovereign debt crisis, the decision of the US Federal Reserve’s Federal Open Market Committee to keep interest rates at record lows until the middle of 2013, and a significant drop in the Dow Jones Industrial Average index just two days before the century bond was priced.

Not surprisingly, most of the demand for the bond came from North American investors, who bought almost 88% of the notes – 10% was sold to European accounts, 2% to Latin Americans and 0.3% to Asians.

EQUITIES

WINNER: MOSAIC’S $7.5BN FOLLOW-ON EQUITY OFFERING

Left lead bookrunner: Credit Suisse

Bookrunners: UBS, JPMorgan

Co-managers: Bank of America-Merrill Lynch, Barclays, Morgan Stanley, Citi, Deutsche Bank, Wells Fargo, BMO Capital Markets, BNP Paribas, HSBC, Royal Bank of Scotland, Santander

HIGHLY COMMENDED: Gerdau’s $3.2bn American depository receipt and Kinder Morgan’s $3.3bn initial public offering

The $7.5bn follow-on equity offering for Mosaic is impressive for its size – the largest ever follow-on for a non-financial firm in the US. But it is its complex and smart structure that impressed The Banker’s judges the most.

US conglomerate Cargill had decided to spin off Mosaic, its fertiliser business, by significantly reducing the 64% stake it had in the company, which had become a leading global provider of crop nutrients and feed ingredients. The problem was how to carry out a divestment worth $24bn by a group which is 85% family-owned. The matter concerned Cargill’s owners to the extent that the option to list their shares on the stock exchange was considered.

Instead, Cargill’s investment banks provided a solution that allowed the group to painlessly reduce its stake in Mosaic while remaining in private hands. The structure involved the recapitalisation of Mosaic’s shares into three different groups and the distribution of the stake in Mosaic to Cargill’s shareholders and debt holders. It also provided the all-important added bonus of being tax-free for the companies and their shareholders. Such shares were to be subsequently redistributed over a period of time.

The $7.5bn offer marks the exit of Cargill as the majority shareholder in Mosaic, reducing its stake to 24% immediately after the spin off – to be further reduced to zero in subsequent stages of the deal. The deal improved the US conglomerate’s credit profile by reducing its debt and it also provided the liquidity sought by Cargill’s largest shareholders – the foundations and trusts holding the late Margaret A Cargill’s shares.

Conversely, Mosaic’s shares became more liquid and satisfied certain criteria for inclusion in the S&P 500 index.

FIG CAPITAL RAISING

WINNER: BANCO DO BRASIL’S $1BN TIER 1 9.25% JUNIOR SUBORDINATED PERPETUAL NC11 NOTES

Bookrunners: HSBC, Standard Chartered, BNP Paribas, Citi, Banco Bradesco, BB Securities

Co-lead managers: Banco Safra, Banco Votorantim

HIGHLY COMMENDED: Capital One’s $2bn forward equity sale and Metlife’s $9.7bn equity and convertibles offer

With the adoption of Basel III’s stricter capital rules in Europe, it stood to reason that financial institutions elsewhere would look ahead and ready themselves to incorporate those rules into their balance sheets.

Banco do Brasil’s $1bn Tier 1 perpetual notes were designed to comply with Brazil’s current regulatory criteria for Tier 1 instruments while allowing the bank to amend the terms to meet Basel III requirements in the future. The inclusion of a ‘floating indenture’ will modify the loss absorption criteria and the restrictions on interest payments, to comply with new capital requirements when they are introduced in Brazil. The notes are the first Basel III-compliant offering from an emerging markets’ issuer and the third Basel III-compliant offering globally.

The deal was very well received by investors and the book was more than eight times oversubscribed, in spite of the unsecured and subordinated structure with no step-up and the fact that interest and loss-absorption triggers were different from the issuers’ existing perpetual bonds. Investor enthusiasm allowed Banco do Brasil to tighten its preliminary guidance by 25 basis points to between 9.25% and 9.5% and double the target size from the original $500m.

Further, the deal allowed Banco do Brasil to diversify its investor base as it attracted strong demand from private banks, which represented almost half of the orders, and with a wide geographical take up. European investors represented the majority of the 350-plus accounts, about 38% of the total, followed by Asian investors with 28%, and North Americans with 25%. Latin American accounts represented 9% of the total. It is safe to say that Banco do Brasil’s Basel III-compliant Tier 1 perpetual notes will pave the way for other issuers in Latin America and other emerging markets.

INFRASTRUCTURE AND PROJECT FINANCE

WINNER: $2.3BN DESERT SUNLIGHT PROJECT

Sole underwriter, joint bookrunner and lead placement agent: Citi

Joint bookrunner and joint lead arranger: Goldman Sachs

Joint lead arrangers: Bank of Tokyo-Mitsubishi UFJ, Lloyds Banking Corp, BayernLB, UniCredit, Sumitomo Mitsui Banking Corporation, Banco Santander/Sovereign Bank

HIGHLY COMMENDED: $1.44bn Puerto Rico toll roads and 1.7bn reais Brazil ethanol pipeline

The Desert Sunlight project deal is the largest renewable energy debt financing to date and represents a landmark in terms of innovation, scale and multiple market execution in the sector. It finances the pioneering California-based Desert Sunlight Project, a $2.3bn greenfield photovoltaic energy project, which uses relatively new thin-film technology.

The deal is the first broadly distributed solar energy financing to tap both the bank and bond markets. It comprised of $744m fixed-rate notes with an average duration of 17.7 years, which had been executed as a US private placement, and $993m of syndicated bank debt and letters of credit. The US Department of Energy guaranteed $1.46bn of the total $1.74bn debt package, but a partial guarantee could have been deemed too risky for some investors and too safe for others. The bonds and the bank tranches were, therefore, dissected and regrouped into special purpose vehicles which divided the financing parts into guaranteed and non-guaranteed components.

This made the financing products more palatable for both the bond and bank markets and resulted in an AAA rating for the former and a BBB- for the latter, according to rating agency Fitch.

Further, the totality of the Desert Sunlight Project’s output is sold under long-term contracts to Southern California Edison and Pacific Gas & Electric, which meant creating an innovative dual borrower structure, where two different borrowing entities were created in relation to the two off-take contracts. 

LOANS

WINNER: $13.3BN LOAN FOR KINDER MORGAN’S ACQUISITION OF EL PASO

Sole underwriter: Barclays

Lenders: Barclays, Bank of America, Bank of Tokyo-Mitsubishi UFJ, Citi, Credit Suisse, Deutsche Bank, JPMorgan, Royal Bank of Canada, Royal Bank of Scotland, UBS, Wells Fargo

HIGHLY COMMENDED: Tenedora Nemak’s $1.145bn loan and Alere $2.1bn senior secured loans

The sheer size and underwriting commitment of the loan for Kinder Morgan’s acquisition of pipeline operator El Paso is overwhelming, especially considering the non-investment grade status of the borrower – it is indeed the largest ever solely underwritten debt financing for a client of this rating, and the second largest ever sole underwritten loan for any type of client.

The $13.3bn acquisition financing was pivotal in US pipeline operator Kinder Morgan’s $21.2bn acquisition of rival El Paso, the largest takeover the sector had ever seen. Barclays shouldered the full amount of the loan at a time of high market volatility and rising cost of funds. Such an arrangement helped the client to speed up the acquisition process, as well as providing financing covering more than half of the acquisition consideration.

Barclays created a three-part loan package which it initially provided full commitment to and only sold on to 10 other banks at a later stage. Relationship banks that would have valued gaining visibility with the client were involved in the syndication and the facilities were priced to take into consideration different banks’ cost of funding and the different loan components.

Because Kinder Morgan intended to sell El Paso’s upstream assets as soon as the takeover was announced, with proceeds paying down the acquisition debt, Barclays provided a 364-day, $6.8bn bridge financing. The three-year, $5bn term loan, also part of the loan package, gave flexibility to the client on the timing for other planned assets sales post acquisition, while the year-and-a-half, $1.5bn back-stop revolver ensured that Kinder Morgan’s existing $1bn in revolver liquidity would be maintained pre-acquisition and increased after the purchase of El Paso was completed.

M&A

WINNER: SANOFI AVENTIS’S $20.1BN ACQUISITION OF GENZYME

Advisors to Genzyme: Credit Suisse, Goldman Sachs

Advisors to Sanofi Aventis: Evercore; JPMorgan

HIGHLY COMMENDED: 8.32bn reais Portugal Telecom acquisition of Oi-Telemar Brazil

Sanofi Aventis’s courtship of Genzyme has been protracted and intense, but the tenacity of the French pharmaceutical giant and the size of its acquisition financing package eventually won over the US biotech group, giving life to the largest life sciences deal in nearly two years and the second largest biotech deal ever, after Roche’s $46.8bn purchase of Genentech in 2009.

The initial hostile approach developed into a friendly negotiated transaction that gave the sought after valuation to the target’s shareholders. It gave them an upfront cash payment of $74 per share – a 48% premium on the July 1, 2010 price, around the time Sanofi Aventis first approached Genzyme, when the offer was firmly rejected – and a tradable contingent value right (CVR) entitling shareholders to receive additional cash payments up to $14 per CVR if certain milestones are achieved.

The CVR total amount is $3.8bn, which brings the premium paid on Genzyme’s shares to a maximum of 76%. The triggers are a combination of a production target and a series of sales targets in connection to Genzyme’s experimental multiple sclerosis drug Lemtrada and production of two other medicines. The CVR agreement will terminate at the earlier of either the last target being achieved or the end of December 2020.

CVRs will essentially trade as options and since their successful use in such a large acquisition, other big pharmaceutical firms may consider them in future deals, helping to mitigate risk as they seek new revenue streams.

The acquisition expands Sanofi Aventis’s footprint in biotechnology, improving its growth ability, while it gives Genzyme the crucial role of becoming the group’s key research centre in rare diseases. It also creates more value for the US firm’s other products as it will now be part of a larger company with global reach and resources.

RESTRUCTURING

WINNER: CAPMARK’S $21BN RESTRUCTURING/RECAPITALISATION

Advisor to unsecured creditors: Houlihan Lokey

Advisor to Capmark: Lazard

As was the case with many real estate finance firms in the US, the financial crisis left 

Capmark Financial Group in a worrying position. Its business was heavily dependent on the generation of cash flow from the volume and performance of new loans; the ability to securitise, sell or finance such loans; the value of real estate-related assets under management; the value of loans on its balances sheet; and the spreads generated on interest earning assets. The fact that pre-crisis this was the largest company in the real estate finance sector meant that trying to put Capmark back into a reasonable shape was a Herculean task.

However, this was a task that Houlihan Lokey and Lazard successfully completed for their clients. The reorganisation plan put together after Capmark filed for bankruptcy helped to significantly reduce the total debt the company had on its balance sheet – which went down from $8.92bn to $1.25bn – and gave unsecured investors a sensible deal. It also improved the appreciation of Capmark’s unsecured bond trading prices between its Chapter 11 filing and its emergence from bankruptcy.

The deal involved tireless negotiations among all interested parties and it comprised a long list of crucial actions. It restructured about $21bn of liabilities, including $1.5bn of secured bank debt and $7bn of unsecured bank and bond debt. It also involved the sale of Capmark’s mortgage services business to Berkadia for $874m. Capmark Bank, part of the group, was recapitalised with about $1.55bn, thanks to an equity contribution from the parent while negotiating a settlement with the secured lenders. It also sold $1bn of Asian assets and limited the claims by its Japanese lender.

The deal eliminated or resolved nearly $1.8bn of contingent claims, while selling $400m of non-core business lines, including the Mexican non-performing loans platform, a military housing unit and a broker dealer business.

STRUCTURED FINANCE

WINNER: NATIONAL CREDIT UNION ADMINISTRATION’S $28BN SECURITISATION

Exclusive financial advisor and sole bookrunner: Barclays

Co-managers: JPMorgan, Wells Fargo

HIGHLY COMMENDED: ENA Surtrust Panama’s $395m toll road securitisation

The financial crisis left the credit union sector in a dire state. In 2010, two years after the peak of the crisis, the US government had to intervene to stabilise the part of the sector that was the worst affected afflicted by losses on subprime mortgages through the $50bn National Credit Union Administration (NCUA) resolution plan.

This involved a government guarantee on bond issuances backed by the mortgage-related assets and it was intended to provide temporary stability to the system, resolve insolvency and liquidity issues for the corporate credit unions, and reform their regulatory structure.

Five corporates, including the sector’s two largest, had been put under NCUA conservatorship and held about 72% of total corporate credit union assets and more than 90% of the corporate system’s distressed assets. The task was challenging, but the programme led by Barclays and co-managed by JPMorgan and Wells Fargo delivered exceptional results.

Pivotal in the success of the resolution plan put together by the banks was a $28bn securitisation programme which involved the issuance of a total of 13 transactions in less than nine months through a number of securitisation structures, including owner trusts, a real estate mortgage investment conduit trust and a revolving master trust to issue both fixed and floating notes with amortising and bullet principal repayment profiles. A broad range of distressed debt was involved, from private-label residential mortgage-backed securities, to commercial mortgage-backed securities, consumer asset-backed securities, collateralised debt obligations and agencies and corporate bonds.

The banks also devised the $10bn sale of liquid securities and 600 derivative contracts involving more than 14 counterparties for a nominal value of $25bn, which were unwound in a controlled process.

TRADE FINANCE

WINNER: SPX CORPORATION’S $1.8BN SENIOR SECURED CREDIT FACILITIES

Foreign trade facility agent: Deutsche Bank

Joint lead arrangers and book managers: Deutsche Bank, Bank of America-Merrill Lynch

Joint book managers for the revolving and foreign trade commitments: JPMorgan

Joint book manager for the foreign credit commitment: Commerzbank

HIGHLY COMMENDED: Montes del Plata’s $1.3bn import financing

The $1.8bn senior secured credit facility has provided engineering company SPX Corporation with the increased financial capacity to support continued organic growth and the flexibility to execute future acquisition plans.

The deal’s largest component is a five-year foreign credit instrument facility worth up to $1.2bn, to be used for letters of credit and guarantees in various currencies, split between fronting and multi-issuer tranches of $1bn and $200m respectively. This is a key element of the facility, which replaces SPX’s senior secured credit arrangements, as it allows the company to take advantage of the flexibility of the multi-issuer structure while retaining the higher protection given by a fronting agreement.

The structure also comprises a five-year global revolving credit facility, available for loans in a number of currencies, for a total amount of up to $300m, and a five-year domestic revolving facility for up to $300m, to be used for loans and letters of credit. The deal allows SPX to seek additional commitments to add to the financing structure for a total amount of up to $1bn.

The multi-currency element of the deal is also worth noting. SPX is a producer of highly specialised engineered products for the infrastructure, process equipment and diagnostic tools sectors. These range from thermal heat transfer equipment for power plants to equipment for the food industry. Given the rise in the consumption of electricity, processed foods and beverages and vehicles by the emerging markets, having the ability to quickly finance trade in a number of currencies is increasingly important for the company.

ASIA-PACIFIC

BONDS: CORPORATE

WINNER: EACCESS’S $700M HIGH-YIELD BOND

Joint bookrunners: Crédit Agricole, ING, UBS

HIGHLY COMMENDED: Vedanta Resources $1.65bn high-yield bond offering and Pertamina’s $1.5bn fixed-rate notes

Japan’s eAccess high-yield bond was notable not just for the complexity of the transaction, but because of its triumph in the face of adversity. Given the challenging market conditions at the time of the issuance, it was surprising that the deal went ahead at all.

The company, a mobile broadband provider and the largest wholesale provider of digital subscription services in Japan, launched its bond at a time when major events were occurring in Europe, Africa and Asia. Two days after eAccess launched its roadshow on March 8, 2011, market sentiment was affected by Spain’s downgrade by ratings agency Moody’s and intensified fighting in Libya. And much closer to home, on March 11, Japan was hit by an earthquake, tsunami and subsequent nuclear crisis.

However, eAccess decided to continue with the roadshow and bond issuance, confident that the market would still view the company favourably and realise that the catastrophe would have a limited impact on the company.

When the bond issuance went ahead, it was well received by investors in the US, Europe and Asia. The deal was three times oversubscribed and was upsized from the initial offering size of $500m to the equivalent of $700m. Given the interest of investors in Europe, the company decided to issue a euro tranche of €200m senior notes at 8.375%, in addition to the $420m of 8.25% senior notes due in 2018.

US and UK investors accounted for the majority of the demand, issuing several large orders worth $10m and €10m and above. For the US dollar tranche, 40% of the investors were from the US, 44% from Europe and 16% from Asia. For the euro tranche, 15% were from the US, 81% from Europe and 4% from Asia.

BONDS: SSA

WINNER: 323.4BN PESOS DOMESTIC DEBT CONSOLIDATION PROGRAMME OF THE REPUBLIC OF PHILIPPINES

Joint deal managers: First Metro, BPI Capital Corporation, Citicorp Capital Philippines, SB Capital and Investment Corporation

Deal coordinators: Development Bank of the Philippines, Land Bank of the Philippines

HIGHLY COMMENDED: Thailand’s debut inflation-linked bond

The development of the Philippines’ capital markets has been progressing in recent years, and was noticeable in the high number of deals from the country entered into our awards. The local banks have come to the fore and it was only domestic banks that worked on the country’s debt consolidation programme, the winner of this category.

The Philippines’ 2011 debt consolidation programme was the sixth in the country, and the largest domestic debt exchange by the Republic of the Philippines. In the transaction, 292.5bn pesos ($6.84bn)-worth of eligible bonds were swapped for new benchmark issues, which are due in 2022 and 2031. The total issue size was 323.4bn pesos, which was divided into a 10-year 67.6bn pesos bond and 20-year 255.8bn pesos bond, with coupon rates of 6.375% for the 10-year and 8% for the 20-year bond.

The exchange programme smoothed the debt maturity profile of the Philippines by reducing the maturity hurdles from bonds that were due to mature in the next few years. Of the bonds that were swapped, 75% had maturities that were due between 2011 and 2017, and the programme successfully reduced the near-term maturity hurdles. The programme also lengthened the average maturity of the portfolio of eligible bonds by 37.9% from 5.48 years to 7.56 years.

The cash-flow relief resulting from the maturity extension has enabled the Philippines to defer originally allocated short- and medium-term debt service payments to fund priority social and infrastructure programmes.

At the time of the transaction, in July 2011, the Philippines’ finance minister Cesar Purisima said: “The success of this bond exchange will further strengthen the fiscal position of the republic as short- and medium-term debt will be swapped for longer-dated securities.”

EQUITIES

WINNER: BUMI ARMADA’S $888M INITIAL PUBLIC OFFERING

Joint global coordinators: Credit Suisse, CIMB, Maybank

Joint bookrunners: Crédit Agricole, CLSA, RHB, UBS

HIGHLY COMMENDED: Sun Art’s $1.2bn initial public offering and Origin Energy’s A$2.3bn Patreo rights issue

The initial public offering (IPO) of Bumi Armada, the Malaysia-based international offshore oil field services company, was the largest IPO in Malaysia and the second largest in south-east Asia in 2011. It was also south-east Asia’s largest ever oil field services equity offering.

Bumi Armada is an international company serving clients in more than 10 countries across Asia, Africa and Latin America. Some of the key sales points for the company ahead of the transaction were that the company has an expanding reach, a large and modern fleet of offshore support vessels, an experienced management team and it has established partnerships with key players throughout the oil and gas value chain.

The IPO was priced at RM3.03 ($0.98), slightly above the midpoint of the indicative range of RM2.80 to RM3.15. It could have been priced higher, but Bumi Armada decided to leave something on the table for institutional investors to ensure that it had a strong trading debut. The retail offering was also priced at RM3.03, the first IPO in Malaysia with a retail price at zero discount to the institutional price. The institutional tranche was nearly 50 times oversubscribed and the retail offering was oversubscribed by 9.5 times.

Bumi Armada’s management team met more than 210 investors in Malaysia, Singapore, Hong Kong and London before the offering. And when the RM2.7bn IPO went ahead in July 2011, it attracted strong and balanced demand from both domestic and international investors. Bumi Armada had a strong performance on its debut and had the highest first day trading performance among south-east Asia jumbo IPOs since 2010. On the first day of trading – July 21, 2011 – the stock closed at RM4.14, up 36.6% from the IPO price. It has also continued to trade well above its IPO price and performed well relative to the region’s other IPO issuances in the same year.

FIG CAPITAL RAISING

WINNER: INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA)’S RMB1.5BN BASEL III-COMPLIANT TIER 2 NOTE

Joint bookrunners: Bank of China, Credit Suisse, DBS, HSBC, ICBC, Goldman Sachs

HIGHLY COMMENDED: Maybank S$1bn Tier 2 note and Commonwealth Bank of Australia’s €1.5bn covered bond

Industrial and Commercial Bank of China (Asia)’s Basel III-compliant offering was a landmark event as it was the first ever Basel III-compliant capital instrument offering in Asia, and paves the way for similar issuances in the region.

The Basel III-compliant Tier 2 notes opened up a new investor base for banks seeking to raise subordinated debt as it was the first ever subordinated debt offering by a bank in the offshore renminbi market.

With a 10-year maturity, due in 2021, it was also one of the longest dim sum bonds to be issued.

The offering was made by ICBC (Asia), a wholly owned subsidiary of ICBC. The proceeds from the offshore offering were repatriated into China and injected into the issuer’s mainland subsidiary.

Under the requirements of Basel III, all Tier 1 and Tier 2 capital instruments must feature a non-viability loss absorption (NVLA) as an eligibility criteria, which can result in a writedown of the principal and coupon if the NVLA is triggered. There is currently no precedent for what kind of event would trigger the non-viability, but under the terms of the NVLA with this transaction, the trigger can only be determined by the relevant authorities in Hong Kong.

Despite this feature, however, the ratings were favourable. Fitch rated the notes in line with ICBC (Asia)’s existing subordinated notes and just one notch below its senior ratings.

The offering was oversubscribed with an orderbook in excess of Rmb5bn ($792.5m) from more than 80 accounts. There was participation across a broad range of investor types. Private banks purchased 54% of the transaction, insurance companies bought 20%, fund managers 11%, hedge funds 7% and other investors accounted for 8% of the distribution.

INFRASTRUCTURE AND PROJECT FINANCE

WINNER: FFC ENERGY’S RS11BN WIND ENERGY PROJECT

Lead arrangers: MCB Bank, National Bank of Pakistan, Habib Bank, Allied Bank, Faysal Bank, Askari Bank

Participants: Alfalah Bank, Bank of Punjab, Pakistan China Investment Company, NIB Bank

HIGHLY COMMENDED: Thailand’s Bt8.9bn korat wind farm project financing; Philippines’ 11.5bn pesos Tplex road project syndicated term loan facility

The financing of Pakistan’s first wind energy project is a landmark achievement not only because it establishes a benchmark for future projects, but because such a project offers a potential lifeline to a country that has been afflicted by energy crises.

FFC Energy is a special purpose vehicle designed to build, own and operate a wind power generation facility, the first wind project in Pakistan. Funding such projects has been challenging in Pakistan, and it is expected that more ventures will follow the success of this transaction.

There were a number of challenges in financing this renewable energy project. There was no precedent for such a transaction in Pakistan and there had not been any pilot project in the public sector. Also, the power purchaser had been facing liquidity problems and there was a perceived default risk. Additionally, because many of the participants were unfamiliar with financing wind power generation, it led to a longer turnaround time for arranging the funds. This pressure was combined with the demands of needing to close the transaction on time.

To familiarise themselves with the details of a wind energy project, the lenders hired technical consultants who helped them carry out a technical assessment of the project and identified the lenders’ risk in the project. Contingency costs of approximately 25% were built into the funding plan to ensure that the project was fully funded and completed on time.

The Rs11bn ($129m) non-recourse syndicated project finance facility and $64.5m letters of credit facility for FFC Energy was arranged privately, without any public funding or subsidies. The project needed funding in the local currency from local financial institutions to avoid exposure to foreign currency risk.

ISLAMIC FINANCE

WINNER: PT AXIS TELEKOM’S $1.2BN LOAN AND INDONESIAN RUPIAH CURRENCY SWAP

Mandated lead arrangers: Deutsche Bank, HSBC

Swap counterparty: Deutsche Bank

Underwriters: SABB, China Development Bank

Swap provider: SABB

International lenders: Deutsche Bank, HSBC, SABB, China Development Bank, Svensk Exportkredit, EKN

HIGHLY COMMENDED: Khazanah’s Cny500m sukuk trust certificate and Bangladesh’s $420m syndicated murabaha trade finance deal 

The $1.2bn financing and hedging transaction for PT Axis Indonesia Telekom is an example of a deal where the complexity was driven by the needs of the client.

This transaction was the largest Islamic loan facility for an Indonesian borrower and was also the largest ever long-term foreign exchange hedge into Indonesian rupiah.

PT Axis Indonesia Telekom – formerly known as Natrindo Telepon Seluler – is the Indonesian mobile telecom subsidiary of Saudi Telecom Company (STC). The deal addressed the financing and hedging package for the company as well as the requirement from STC for the deal to be fully sharia-compliant.

The facilities were extended by six international lenders, mainly to finance capital imports from Sweden and China. The complexity of the deal was not just in terms of the product sophistication but also in the navigating of the varying interpretations of what is actually ‘sharia’ across countries and between organisations. For this transaction, Deutsche Bank structured a solution that was then approved by the sharia committees of STC and Deutsche Bank.

As well as achieving new milestones in both Islamic financing and hedging, the transaction also had to have all the features of a conventional complex structured finance solution.

There were a number of challenges in structuring the deal. The large financing requirement for the Indonesian company required access to the US dollar financing in the global capital markets, and the lenders imposed hedging requirements to handle the US dollar financing and Indonesian rupiah revenue mismatch.

LOANS

WINNER: ADITYA BIRLA’S $900M ACQUISITION FINANCE

Mandated lead arrangers: ANZ, Bank of America-Merrill Lynch, HSBC, Royal bank of scotland, Standard Chartered

HIGHLY COMMENDED: $5bn Sinopec loan

In January 2011, Aditya Birla Group agreed to acquire Atlanta-based Columbian Chemicals Company from One Equity Partners, a division of JPMorgan Chase.

The Aditya Birla Group is one of the largest business groups in India with revenues of approximately $30bn and 131,000 employees across 33 countries. The acquisition of Columbian Chemicals by Birla Carbon - a subsidiary company of the Aditya Birla Group - was a key acquisition as it catapulted the company to become one of the world’s largest players in the carbon black industry.

The acquisition accorded the group access to 11 plants across nine countries (the US, Canada, Brazil, Germany, Spain, Italy, Hungary, China and South Korea), complementing the group’s existing facilities in Egypt, Thailand, China and India and providing the Aditya Birla Group with instant access to the large European and North American markets, thus enabling it to utilise its Asian expertise and draw synergies from these markets. 

The financing for the deal was arranged by ANZ, Bank of America-Merrill Lynch, Royal Bank of Scotland and Standard Chartered, and by June 2011 the $900m transaction had closed. The acquisition financing had market participation from all major investors across the Asia-Pacific region, the Middle East, Europe and the US.

The deal was a landmark cross-border transaction with borrowers in four different jurisdictions and a collateral and guarantor group in more than eight countries. The acquisition facilities were extended across Asia, Africa and North America. By financing the acquisition through multiple facilities, there were a number of benefits, such as flexibility with regard to the different regulatory environments and the ability to achieve financing at a favourable price in volatile market conditions. The global market conditions at the time were challenging, but despite this, the offering was still able to attract strong investor interest.

M&A

WINNER: SABMILLER’S A$11.5BN FOSTER’S ACQUISITION

Advisors to bidder: Moelis, Morgan Stanley, JPMorgan, RBS.

Advisors to target: Gresham Advisory Partners, Goldman Sachs

HIGHLY COMMENDED: A$14.6bn Axa/Amp Aph acquisition; Atlas’s $368m acquisition of Carmen Copper Philippines

SABMiller’s acquisition of lager brand Foster’s was the largest merger and acquisition transaction in Australia in 2011, and was notable because it moved from a hostile takeover bid to a scheme of arrangement. It was SABMiller’s largest acquisition and the first to involve a hostile strategy.

SABMiller, the world’s second largest brewer, first made an approach to Foster’s – Australia’s largest brewer – the month after the Australian company had demerged its wine business in May 2011. In June 2011, SABMiller announced that it had made a friendly acquisition proposal for Foster’s at A$4.90 ($5.04) a share. This initial proposal was pitched at a credible level but not at full value because the company believed that Foster’s would reject the offer regardless of the price. In August, SABMiller announced its intention to make a takeover bid at the same price.

SABMiller acquired a 2.1% stake in Foster’s before it made its bid and acquired another 2% later when the market fell in August. One of the challenges for SABMiller was to overcome the Foster’s board’s preference to remain as an independent company, and so it had to take a hostile stance, which meant that SABMiller moved from a friendly proposal to an announcement of a hostile bid, and then it negotiated an agreed transaction.

The whole transaction took place within six months of the initial proposal. It also set a new precedent as SABMiller had to seek relief from the Australian Securities and Investments Commission from the requirement to launch a takeover bid within two months of announcing its intention to make a bid, a first in Australia.

By September the two companies had agreed at transaction at A$5.10 a share and for Foster’s to make a capital return of A$0.30 a share before completion. In November 2011 the Australian Taxation Office ruled against the capital return and the scheme consideration was increased to A$5.40 a share.

RESTRUCTURING

WINNER: CENTRO REAL ESTATE RESTRUCTURING

Sole advisor to Centro Retail Group: UBS

Advisors to Centro Properties Group: Moelis, Lazard, JPMorgan

Advisor to creditors: Flagstaff Partners, Houlihan Lokey, McGrathNicol

HIGHLY COMMENDED: PAAB restructuring of Rm20bn water bonds

In what has been dubbed as the most complex corporate restructuring in Australian history, the Centro Retail Group was revitalised after a near-death experience and being on ‘life support’ for nearly four years.

In late 2007, Centro Group struggled to refinance its short-term debt, and the following year lenders gave the Centro Group a number of short-term extensions. A debt stabilisation agreement was reached in 2009, which gave the company some breathing room to begin its restructuring, which was eventually completed in 2011.

The Centro Retail Group comprised numerous entities and its massive corporate structure posed serious challenges to the restructuring process.

The restructuring involved the sale of the company’s US shopping centre interests and management platform to Blackstone Real Estate Partners VI for $9.4bn. This sale was completed in March 2011 and was a major achievement in the restructuring process. In the same month, an agreement was announced to reconstruct the group’s Australian interests to create a new listed Australian real estate investment trust (A-REIT) known as Centro Retail Australia and listed as CRF. The new CRF is Australia’s second largest manager of retail shopping centres based on gross lettable area and a top 10 A-REIT based on pro forma equity value. It has an internalised structure and owns or manages A$7bn ($7.21bn) of retail shopping centres diversified across Australia, including a A$4.4bn wholly owned portfolio and a further A$2.6bn of external assets under management via the ownership of one of the largest unlisted property syndicate platforms in Australia.

The structuring meant that the Centro Retail Group avoided a break up, fire sale or potential bankruptcy.

STRUCTURED FINANCE

WINNER: SILVER OAK’S $645M CROSS-BORDER COMMERCIAL MORTGAGE BACKED SECURITIES

Joint lead arrangers: DBS, HSBC, Standard Chartered

HIGHLY COMMENDED: Philippine Airlines’ $150m ticket securitisation 

The Silver Oak commercial mortgage backed securities (CMBS) transaction was the first ever tender offer for a Singapore CMBS.

It was also the first benchmark Singapore CMBS since 2006, which effectively re-opened the Singapore CMBS market after the financial crisis. It was also the largest ever AAA rated CMBS from Asia and one of the largest AAA rated securitised note issuances from Singapore.

The deal also carried an early redemption feature in the new CMBS notes, which eliminated the requirement for note-holders’ consent. This accommodated investors who were ineligible to participate in the tender offer.

Through the tender offer and consent solicitation, the issuer was able to early redeem maturing CMBSs and close the new CMBS in June 2011, rather than at the original maturity date in September 2011. The deal captured the favourable market environment by the early redemption in June and isolated the issuer from volatility in global financial markets in the months that followed.

The task of achieving early redemption of outstanding CMBSs was challenging because the maturing CMBSs consisted of multiple classes of notes across two currencies; there was a requirement for at least 75% threshold to be reached on each and every class of notes; and certain investors were not able to participate in the tender offer.

It was the first combined rated CMBS bond, term loan, revolving credit and liquidity facility structure in Asia, where all the funding instruments were publicly rated.

The CMBS transaction had a strong reception from Asian and international investors and the book building and the pricing of the CMBS notes completed in eight hours. Investors in Europe accounted for 50% of the transaction, investors in Asia (excluding Japan) for 46% and Japanese investors accounted for 4% of the transaction.

TRADE FINANCE

WINNER: DEFTECH’S RM3.86BN GUARANTEE SYNDICATION

Lead arranger, issuing bank: Maybank

Lending banks: AmBank, RHB

HIGHLY COMMENDED: Hapag-Lloyd/Hyundai $925m shipping finance and Dairy Food Group’s supply chain finance

DRB-Hicom Defence Technologies (Deftech), a Malaysian defence company, was the subject of this deal after it won a project for the development and manufacturing of armoured vehicles. To support this, Maybank was the lead bank in offering a RM3.86bn ($1.2bn) facility in a bank guarantee syndication deal that totalled RM7.5bn. The tenor of the bank guarantee syndication deal was for seven years until 2018. Other lenders involved in the deal were RHB, which accounted for 26.5%, and AmBank, which accounted for 13.5%.

The solution needed to work across Deftech’s supply chain and Maybank functioned as a one-stop shop for Deftech’s financing needs, working with the suppliers and the buyers and handling the guarantees and counter-guarantees, while working with the other banks in various countries.

Maybank was the lead arranger and only issuing bank in this club deal. This involved arranging the reissuance of performance guarantees and advance payment guarantees to Deftech backed by counter-guarantees from a total of 16 suppliers in Turkey, Norway, France, Germany, Malaysia and South Africa. Letters of credit had to be issued to Deftech’s suppliers, and foreign exchange contracts had to be arranged so that Deftech could hedge its foreign exchange exposure. Also, guarantees had to be issued to Deftech’s buyer, which involved the additional participation of RHB and AmBank.

Deftech was also linked into Maybank’s internet banking platform TradeConnex, a web-based trade finance solution which enables customers to submit trade finance documents for processing via the bank’s internet portal. The customer is able to apply for letters of credit, submit payment instructions and track the transaction status at any time through the online programme. All the transactions were processed by Maybank’s trade operation centre in Kuala Lumpur, which meant that the transactions were being handled efficiently and promptly.

EUROPE

BONDS: CORPORATE

WINNER: CABLEEUROPA ONO’S €2BN REFINANCING

Global coordinator: Deutsche Bank

Lead managers: JPMorgan, BNP Paribas

Bookrunners: Bank of America-Merrill Lynch, BBVA, Crédit Agricole, Goldman Sachs, ING, Morgan Stanley, Natixis, Santander, Société Générale CIB

HIGHLY COMMENDED: Vimpelcom’s $2.2bn Eurobond and Fiat Industrial’s debut $2.2bn Eurobond

The winning corporate bond issue tackled many of the crucial issues of 2011, including the disintermediation of constrained bank balance sheets and the crisis in the peripheral eurozone. Unlisted Spanish cable television company CableEuropa is a high-yield credit, having only recently entered profit in 2010 after constructing its network.

When its lending banks made clear that they would not be able to refinance all of the €3.5bn that the company had maturing in 2013 to 2014, a turn to the bond markets was essential.

However, Spanish credits were out of favour with investors as the sovereign struggled under its debt burden, and no Spanish high-yield issuer had raised such a sum of money. The solution, crafted by Deutsche Bank, was a sequence of four bond issues, carrying eight-year maturities and subordinated or secured on the company’s shares.

This culminated in a giant €1bn issue in January 2012, which took the total sum raised to €2bn over 18 months in some of the worst bond market conditions since 2008. The secured bonds used a special purpose vehicle so that bond creditors would rank pari passu with bank lenders and enjoy the same security in the event of a default. In a sign of how far investors became comfortable with the credit as its refinancing programme unrolled, the final €1bn issue was upsized from just €400m as orders poured in from Europe and the US.

Two other ambitious €2.2bn issues are highly commended in this category. Vimpelcom issued the largest ever bond from a privately owned Russian company to finance its acquisition of Wind Telecom, while the newly spun-off truck division of Fiat launched a successful debut that priced inside its better-known parent company.

BONDS: SSA

WINNER: THE EU’S €4BN 15-YEAR BOND

Bookrunners: Barclays, Crédit Agricole, DZ Bank, Goldman Sachs, JPMorgan

HIGHLY COMMENDED: Republic of Hungary’s $3.75bn dual-tranche Eurobond

The eurozone sovereign crisis was undoubtedly the topic of 2011 for European capital markets, and a supranational solution was of central importance. The EU’s debt issuance to fund the European Financial Stability Mechanism (EFSM) was therefore an essential element.

Although the vehicle had substantial guarantees on it, fears over restructuring in the countries that were receiving bail-out loans from the EFSM – Portugal and Ireland – were still acute. And there was downward ratings pressure on the dwindling number of AAA rated sovereigns left in the eurozone.

Despite those challenges, the EFSM managed to issue its longest transaction to date in September 2011, just as investor fears were peaking. This €4bn deal was the only 15-year AAA syndication of 2011, and the only sovereign or supranational to price any deal longer than 10 years in the second half of the year. With an order book that exceeded E5bn within an hour, the bond priced just 1.69 basis points wide to the benchmark French obligations assimilables du trésor (OAT) bond, even after upsizing from an original minimum of €2.1bn.

There were about 100 individual investors, with real money accounting for around 80% of the demand, including 28% from pension funds and insurers, 38% from asset managers, 20% from banks and 13% from central banks. Most of the investors were European, but around 7% of the issue was sold into Asia.

Sovereign woes were not confined to the eurozone. While Hungary is now locked in difficult negotiations with the EU over possible financial support, its position would have been considerably worse without this year’s highly commended deal. Priced in March 2011, before markets began to shut down later in the year, the bond was upsized from $2bn to $3.75bn. That made it the largest ever dollar issue from central and eastern Europe, and it included a 30-year tranche.

EQUITIES

WINNER: PRADA’S HK$16.7BN INITIAL PUBLIC OFFERING

Joint global coordinators: Crédit Agricole, Goldman Sachs, Intesa Sanpaolo, UniCredit

HIGHLY COMMENDED: Salvatore Ferragamo’s €379m initial public offering

In an ugly year for equity capital markets in Europe and worldwide, there was an Italian fashion industry double. Initial public offerings (IPOs) for Prada and Salvatore Ferragamo are the winning and highly commended deals, respectively.

What distinguished them both from the overwhelming majority of IPOs was that they made money for investors after flotation, rather than (sometimes disastrous) losses. To buck the trend of falling share prices requires a good story, and a steady hand from arranging banks.

Prada was also a ground-breaking deal, as the first IPO of an Italian company to take place in the Hong Kong market. A stock exchange that has been known to place plenty of hurdles in the path of foreign issuers allowed listing just seven weeks after the initial filing, as the global coordinators deployed dedicated teams in Hong Kong to complement their Italian coverage teams.

By February 2012, the stock was up almost 10% from its June 2011 IPO, but this was not achieved simply by heavily discounting the original offering. On the contrary, its price to earnings ratio at listing was 22.8 times, representing a premium to comparable luxury goods manufacturers such as Tiffany, Burberry or Richemont.

The coordinators also had to react quickly after realising that unfavourable tax treatment was deterring local retail investors from buying into the offering. The international allocation was increased by five percentage points at short notice, but the offer was still three times covered, with 60% allocated to long-only funds. Asian investors ultimately took 14% of the offering, with 57% going to the US and 29% to Europe.

Luxury shoe-maker Ferragamo followed Prada through the door a few days later, just before markets slammed shut. Despite deteriorating conditions, 70% of the allocation was to long-only funds, and the deal priced only just below the middle of the target range.

FIG CAPITAL MARKETS

WINNER: CREDIT SUISSE’S $8BN CONTINGENT CAPITAL PACKAGE

Lead manager: Credit Suisse 

Co-lead managers: HSBC, Barclays Capital, ING, Intesa Sanpaolo, Santander, UniCredit, ABN Amro, BBVA, Commerzbank, Crédit Agricole, Danske Bank, Rabobank, Nordea, Natixis, Standard Chartered

HIGHLY COMMENDED: Zurich Insurance’s $500m perpetual hybrid capital

Bank capital issuers were caught between fears over peripheral eurozone exposure and a rising tide of new regulation during 2011. Not the most auspicious conditions to establish a new asset class, but Credit Suisse’s buffer capital notes (BCNs) did just that.

Swiss regulators created a ‘Swiss finish’ to Basel III, calling on the country’s largest two banks to hike their Tier 1 capital ratio to 10%, plus another 3% in the form of contingent capital with a high trigger for conversion into equity (any fall in the common equity Tier 1 ratio below 7%). UBS appears to have taken the view that this asset class is not viable, opting for a 13% straight equity ratio.

By contrast, Credit Suisse raised the equivalent of $6bn through an exchange of existing Tier 1 hybrid capital that is no longer eligible under regulatory requirements. This was replaced in February 2011 with Tier 1 BCNs, including a SFr2.5bn (€2.07bn) tranche and a $3.45bn dollar tranche.

The bank issued a further $2bn in Tier 2 BCNs, which received orders of a staggering $22bn, split 66% to 34% between institutional funds and private banks. The demand allowed Credit Suisse to price the notes below its original guidance of an 8% coupon. The total package secured 70% of the buffer capital that Credit Suisse was eligible to issue at the time, and clearly demonstrated that the market for such paper exists at an economically viable price.

A further innovation was the use of a conversion floor price of $20 a share – half the share price at the time of issue. This helped to tackle concerns of a share price ‘death spiral’ if the BCNs were ever converted.

INFRASTRUCTURE AND PROJECT FINANCE

WINNER: $11BN LGV SUD EUROPE ATLANTIQUE HIGH-SPEED LINE

Lead arrangers: BBVA, BNP Paribas, Crédit Agricole, Dexia, Mediobanca, Sumitomo Mitsui Banking Corp, Santander, Société Générale, UniCredit

Financial advisors: Crédit Agricole, Natixis, Société Générale

Costing €7.845bn in total, and including debt funding of €4.29bn, the 302-kilometre Tours to Bordeaux high-speed rail line is one of the largest infrastructure projects anywhere in the world over the past decade. It is certainly the largest private funding package for any French rail sector project to date. The line will link to the existing Bordeaux to Paris high-speed connection, and may ultimately be extended on from Tours to the Spanish border.

The project itself is remarkable, requiring 40 kilometres of connecting lines, 40 underpasses and 390 bridges, and is expected to take more than six years to complete. Equally notable are the terms of the financing package successfully closed in June 2011 amid difficult market conditions for such a large sum. The equity sponsor receives a 50-year concession, and will receive revenues directly derived from the number of train paths used by operators.

That leaves lenders fully exposed to traffic risk if usage falls below expectations – a risk that many creditors have baulked at on European deals in recent years. The deal was further complicated by a complex intercreditor structure, with the French state, state-owned bank Caisse des Depots et Consignations (CDC), the European Investment Bank (EIB) and French rail infrastructure manager RFF all acting as guarantors on different parts of the financing.

The CDC’s €757m contribution is the largest single loan of this kind that it has made, while the EIB’s €1.2bn is the largest single loan that the supranational has granted to a French borrower. The French state’s guarantee is the first issued under 2009 legislation designed to facilitate public-private partnerships, so the project should establish an important precedent for the development of key infrastructure initiatives.

ISLAMIC FINANCE

WINNER: KUVEYT TURK’S $350M SUKUK

Joint bookrunners and sharia advisors: HSBC, Liquidity Management House, Standard Chartered

Having launched Turkey’s first sukuk (Islamic notes) in 2010, Kuveyt Turk participation bank – as sharia-compliant banks are known in Turkey – cemented its status in the sukuk market in 2011. The $350m sukuk, maturing in 2016, was both much larger and of a longer maturity than the bank’s $100m debut a year earlier.

The timing in October 2011 was tough, given ongoing volatility, so the arranging banks sought to maximise the potential investor base with a structure that would meet the sharia-compliance requirements of even the strictest jurisdictions. As sukuk must raise finance against real underlying assets, the bookrunners used a range of structures to allow Kuveyt Turk the largest possible pool of eligible assets. These were a mix of ijara real estate leases, murabaha receivables due to the bank, and other miscellaneous assets in a wakala structure, where the issuer acts as portfolio manager (wakeel) for the selected assets. 

The issuer took its roadshow to key sharia-compliant markets in Dubai, Abu Dhabi and Kuala Lumpur, as well as Singapore, Switzerland and London. The deal pulled in 69% of its investors from the Middle East, where the approval of sharia advisory boards tends to be more difficult to obtain. A further 19% was sold into Asia, with the remainder sold to European investors. Pricing tightened by 12.5 basis points from initial guidance, with orders from more than 50 accounts, and the sukuk ultimately priced well inside conventional Eurobonds issued by much larger Turkish banks.

The deal also set important precedents for the Turkish market, as the first issued since the government passed special sukuk enabling legislation in 2011. The whole structure, including its special-purpose vehicle, received approval from the Turkish Capital Markets Board, confirming the ability of sukuk issues to meet high local regulatory standards.

LOANS

WINNER: LACTALIS’S €7.5BN SYNDICATED LOAN

Bookrunners and underwriters: Crédit Agricole, HSBC, Natixis, Société Générale

Mandated lead arrangers: BBVA, BNP Paribas, Commerzbank, Credit Mutuel, Mediobanca, Mitsubishi UFG, Rabobank

Arrangers: ING, Mizuho, Scotia Capital, Sumitomo Mitsui, WestLB

HIGHLY COMMENDED: RAC’s £620m senior credit facility

The €7.5bn syndicated loan for French dairy products firm Lactalis’s takeover of Italian peer Parmalat was the largest acquisition financing in Europe in 2011. It was undertaken to a tight timetable to meet the requirements of Italian financial regulator Consob for certain funds to be provided, even though the outcome of the bid was far from certain amid government hostility over the idea of Parmalat’s acquisition by a foreign buyer.

The combined company will be the world’s largest dairy producer, but this did not make the loan a straightforward sell. Lactalis was privately owned and unrated, which obliged the bookrunners to assist other participating banks with their credit analysis.

The deal was also ambitious because the option of a bridge to capital markets was not available. So the bookrunners structured a term loan with maturities ranging from 18 months to five years, which refinanced existing Lactalis debt as well as the acquisition. Despite these challenges, the facility was oversubscribed at the initial syndication phase, avoiding the need for further general syndication.

With 66% placed outside Lactalis’s home country, the syndicate ultimately included participants from the UK, Canada and Japan as well as other eurozone countries. The company’s lending relationships were also significantly expanded, with one new lender as a mandated lead arranger, and a further three among the arrangers.

The highly commended deal was on a much smaller scale, a £620m (€752.6m) syndicated loan for Carlyle’s 5.5 times leveraged acquisition of UK vehicle breakdown service provider RAC. But it was still a significant deal, the largest all-sterling funding for a leveraged buy-out since the financial crisis, with an all-senior secured structure and bullet maturity to minimise funding costs.

M&A

WINNER: CHEUNG KONG’S £2.4BN TAKEOVER OF NORTHUMBRIAN WATER

Financial advisors to Cheung Kong: RBC Capital Markets, HSBC

Financial advisor to Northumbrian Water: Deutsche Bank

HIGHLY COMMENDED: Lactalis’s €4.6bn acquisition of Parmalat and the merger of Micex and RTS

The Cheung Kong consortium’s purchase of 100% of Northumbrian Water was the first major takeover in the UK water sector since the financial crisis. It also confirmed the Hong Kong-Chinese investment group’s status as a major investor in the UK regulated utilities, alongside earlier investments in gas and electricity.

Both of Cheung Kong’s financial advisors played vital roles in facilitating the deal for the company, which was listed on the London Stock Exchange. Major Canadian institutional investor Ontario Teachers’ Pension Plan held a 27% stake in Northumbrian, which could have potentially blocked a 100% takeover given the 75% acceptance threshold required under a scheme of arrangement.

There were rumours that Ontario Teachers had contemplated buying the company itself in 2010, so its response to the Cheung Kong approach was uncertain. But Canada’s RBC Capital Markets was able to provide important insight on the fund’s likely reaction.

In addition, competition rules required Cheung Kong to sell its stake in Cambridge Water to complete the Northumbrian purchase. HSBC stepped in to buy the Cambridge stake from Cheung Kong. All this had to be prepared with an accelerated timetable, after rumours of a possible approach to Northumbrian became public at the end of July 2011.

The takeover bid ultimately represented a 38.4% premium to the preceding six-month average share price of Northumbrian. It received unanimous approval from the Northumbrian board.

Two market-changing deals were highly commended. The Lactalis takeover of Parmalat created the world’s largest dairy producer in the teeth of Italian scepticism about the sale of a ‘crown jewel’ company to a French buyer. And Russia’s two stock exchanges, Micex and RTS, finally merged after years of disappointment, in a move that could open the door to a more coherent, active and liquid Russian equity market.

RESTRUCTURING

WINNER: DANAOS SHIPPING’S $4BN RESTRUCTURING

Financial advisor to Danaos: Evercore

Financial advisor to creditor HSH Nordbank: Jefferies

Chair of creditor committee: Royal Bank of Scotland

HIGHLY COMMENDED: Metrovacesa’s $5.98bn restructuring

If a chief financial officer set out to imagine a worst-case scenario, then Danaos Shipping might tick many of the boxes. It is based in Greece, the country at the eye of the eurozone storm, and running a container shipping fleet business directly affected by the decline in global trade.

Moreover, the company was overleveraged and entirely dependent on bank lending at a time when banks’ appetite for lending collapsed owing to their own balance sheet constraints. And just to provide an extra complication, one of its largest creditors – specialist German shipping finance bank HSH Nordbank – decided to negotiate separately from the creditor coordination committee.

Boutique investment bank Evercore needed every bit of its shipping finance advisory expertise. The Danaos loans had limited amortisation, leaving a large refinancing hurdle, and were secured with 80% loan-to-value ratios on containerships whose valuations had slumped by more than 20% in many cases, leaving loans under-collateralised. The estimated financing shortfall was $1.5bn.

The company also had a large unfinanced orderbook of new vessels, and many of its customers had seen cash flow slump, so that they were unable to honour their contracted charter rates for Danaos ships. And the whole network of customers, suppliers and assets was by its nature spread across the world.

In a deal finally clinched in March 2011, about $3bn of debt was treated, lending banks supplied a further $346m of equity investment, and unsecured swap counterparties put in another $80m. Danaos owners invested a fresh $120m, while further new money came from China’s Exim Bank and export credit insurer Sinosure, one of the company’s four shipyards, and a private equity investor.

Shipyards accepted rescheduling of orders, and one provided $190m in seller financing. Danaos avoided Chapter 11 bankruptcy or court proceedings, and perhaps most remarkably, avoided losing a single customer.

STRUCTURED FINANCE

WINNER: FCT COMPARTIMENT’S 2011-1 €956M AUTO ASSET-BACKED SECURITIES

Joint lead managers: BNP Paribas, Société Générale

The European asset-backed securities (ABS) public market has not recovered to anything like its pre-crisis health, with most deals retained by the issuing bank for the purpose of refinancing with the European Central Bank. Banque PSA Finance (BPF), the auto loans division of French car manufacturer Peugeot Citroën, had good reason to want to revive the public securitisation market, which used to finance 20% to 25% of its activities before the financial crisis.

The PSA’s FCT Compartiment ABS, backed by €1.05bn in auto loans, launched even as the eurozone crisis was intensifying in July 2011. But lead managers still set a number of post-crisis precedents, offering hope that auto securitisations can once again provide a source of medium-term funding at a spread that is competitive with other forms of financing.

At €956m, the issue was the largest publicly sold auto ABS in Europe since 2008, and the weight average loan maturity of 2.47 years was the longest in Europe since the crisis. The deal also gave BPF unusual levels of flexibility, with a dynamic rather than a static pool, and a 16-month revolving period before interest payments begin. The initial pool consisted of more than 130,000 prime quality loans averaging €4600 each.

Despite the challenging size and conditions of the issue, FCT Compartiment was 1.3-times oversubscribed within five hours, with 20 offers drawn from across Europe following a roadshow that took in France, Germany, the UK and the Netherlands. This enabled the managers to price the ABS at the tight end of the guidance range, 90 basis points over the European Interbank Offered Rate. The buying accounts were high quality, with more than half consisting of banks, and more than one-third long-only fund managers.

TRADE FINANCE

WINNER: TUPRAS’S $2.1BN MULTISOURCE BUYER’S CREDIT FACILITY

Mandated lead arrangers: Bank of Tokyo-Mitsubishi, BBVA, BNP Paribas, Crédit Agricole, Deutsche Bank, HSBC, Santander, Société Générale, Sumitomo Mitsui Banking Corp, WestLB

A large current account deficit, driven partly by high dependence on imported energy and hydrocarbons, has long been a key weakness of the otherwise vibrant Turkish economy. As one of the country’s largest oil refiners, Tupras has an economic responsibility to try to curb its use of imports, as well as a financial imperative given sky-high oil prices.

Hence a core part of its strategy is a $3bn project to build a residuum upgrading complex at its Izmit refinery. This will turn low-value heavy by-products from diesel refining into higher value so-called ‘white products’ and petro-coke, reducing the amount of diesel needed to meet customer demand.

To finance the imports needed for an engineering, procurement and construction contract with Spain’s Tecnicas Reunidas Group, Tupras needed a substantial and long-duration loan. This ultimately required a sizable lending group of 10 banks from four European countries as well as Japan. There was also backing from the Italian and Spanish export credit agencies, SACE and CESCE, respectively.

The final package includes three tranches, an unguaranteed 7.5-year commercial loan for $359m and two 12.5-year tranches, one for $624m guaranteed by SACE and one of $1.1bn guaranteed by CESCE. The last of these tranches represented the largest ever private sector risk that the Spanish export credit agency had guaranteed. The whole deal, signed in difficult conditions in October 2011, signalled a real commitment to Turkey as an increasingly important trading partner for both Europe and Asia.

MIDDLE EAST

BONDS: CORPORATE

WINNER: TAQA’S $1.5BN BOND ISSUE AND BUYBACK TENDER

Joint bookrunners on bond issue: Royal bank of scotland, Bank of America-Merrill Lynch, Mitsubishi UFJ, Standard Chartered

Dealer managers on tender offer: Royal Bank of scotland, Citi

HIGHLY COMMENDED: IPIC’S $3.75bn triple-tranche sukuk offering and Majid Al-Futtaim’s $400m five-year sukuk

On December 5, 2011, Abu Dhabi’s national energy company, TAQA, priced a $1.5bn dual-tranche bond issue, garnering an order book in excess of $7.5bn – more than five times oversubscribed. The issue successfully attracted interest across both the long five-year and 10-year tranches.

The long five-year tranche achieved a coupon of 4.125% – the lowest coupon paid by TAQA to date. The transaction was a brave move as it forms an integral part of the pre-funding of TAQA’s $1.5bn 2012 bond maturity.

While the initial price guidance offered to investors on TAQA’s $1.5bn offering included an approximately 50 basis points (bps) new issue premium, it was strong momentum, an appreciation of the credit story and a disciplined funding approach at TAQA that enabled the company to finally launch the transaction with a relatively minimal new issue premium (NIP) of about 25bps for both tranches.

This is tight by comparison to premiums paid by recent emerging markets and Gulf Co-operation Council (GCC) issuers. For example, in our highly commended deal, Abu Dhabi’s International Petroleum Investment Company (IPIC) paid an NIP of approximately 40bps to 50bps on its $3.75bn triple-tranche offering in October 2011.

However, the IPIC deal remains impressive and represents a series of firsts. Comprising tranches of $1.5bn five-year, $1.5bn 10-year and a $750m 30-year, it is the largest US dollar corporate bond offering from the central and eastern Europe, Middle East and Africa region and was the first 30-year tranche issued by a regional corporate since 2007.

Meanwhile, Majid Al-Futtaim’s five-year $400m sukuk in January 2012 marked the first issuance by a United Arab Emirates-based privately held company in more than four years.

BONDS: SSA

WINNER: DUBAI DEPARTMENT OF FINANCE’S $500M 10-YEAR PUT FIVE-YEAR BOND ISSUE

Joint bookrunners: Royal Bank of Scotland, HSBC, UBS, Emirates NBD

HIGHLY COMMENDED: Lebanon’s $1.98bn voluntary debt exchange offer

In June 2011, the Dubai Department of Finance, on behalf of the government of Dubai, priced a $500m benchmark bond transaction from its $5bn euro medium-term note (EMTN) programme. The bond will yield 5.59% and will provide Dubai with additional liquidity for general budgetary purposes.

The issue was 3.5 times oversubscribed and raised more than $1.8bn. The impressive global demand is illustrated by the fact that more than 90 accounts placed orders, with 35% into eurozone accounts, 24% into UK accounts, 21% into Swiss accounts and 11% into Asian accounts. Investor split by type was also well spread, with 45% being fund managers, 37% banks, 10% private banks, 3% insurance companies and 5% others.

Structured as a 10-year bond, it offers investors the flexibility to investors to sell the bonds at a put date in five years, while offering the government longer duration at shorter-term funding levels. This structure is a first for the Middle Eastern markets.

Indeed, the bond was a true achievement for the Dubai Department of Finance in terms of innovative structure and execution dynamics amid a challenging market environment given prevailing concerns over the European sovereign debt crisis and the Arab Spring uprisings. 

Meanwhile, the judges were impressed by Lebanon’s voluntary debt exchange for Eurobonds maturing in 2012, totalling $1.98bn. Conducted in November 2011, this liability management exercise successfully increased the country’s financial flexibility and extended its debt maturity profile.

Among the issue’s most notable achievements was that the new cash portion of the transaction ($238.3m) was almost three times oversubscribed, as well as the fact that its strong total participation rate of 64.3% of the voluntary exchange offer measured favourably compared to a similar Republic of Lebanon debt exchange programme in 2008 involving three Eurobonds that saw a 58.53% participation rate.

EQUITIES

WINNER: AABAR INVESTMENTS’ $1.64BN SENIOR EXCHANGEABLE BOND

Joint bookrunners: Bank of America-Merrill Lynch, Deutsche Bank, Morgan Stanley

Call spread counterparty: Deutsche Bank

HIGHLY COMMENDED: $106m initial public offering of eXtra (United Electronics Company)

On May 24, 2011, Abu Dhabi-based Aabar Investments, a subsidiary of the state-owned International Petroleum Investment Company (IPIC), successfully executed a five-year $1.64bn senior exchangeable bond. The bonds are exchangeable into German vehicle manufacturer Daimler in which Aabar holds a 9.1% stake.

It was a landmark transaction for the region and broke a series of records as the largest exchangeable bond offering with a derivative overlay ever priced in the Europe, Middle East and Africa region, the largest ever exchangeable bond offering for an unrated issuer and the largest equity-linked offering from the Middle East since November 2006.

Aabar made derivative transactions on a number of Daimler shares with a counterparty that would buy the company’s shares at the same time as the bond launch to hedge its exposure. However, the deal was easily absorbed. Indeed, the combination of the Abu Dhabi sovereign vehicle and liquid underlying saw considerable demand which led the transaction to be upsized by $653m during book-building – a 67% increase.

The geographical breakdown also highlights the global pull of this transaction – the book featured 3.4% of demand from Asia and 1.5% from Middle Eastern investors.

The sheer size of the deal made it noteworthy and success was crucial as, while the company had completed a $2bn loan last year, this was its first foray into the capital markets in its current form.

The transaction also highlighted the banks’ rapid execution capacity in the equity-linked market, with books fully covered within one hour from launch.

Another candidate worthy of praise in this category was Saudi Arabian eXtra’s $106m initial public offering (IPO) – the largest offering from the country in 2011. The consumer electronics company’s IPO was the first in the country to offer a 30% pricing range – SR42 ($11.20) to SR55 per share.

FIG CAPTIAL RAISING

WINNER: BANK AL-JAZIRA’S SR1BN SUKUK

Joint lead managers and bookrunners: HSBC, JPMorgan

Saudi Arabia’s Bank Al Jazira launched 2011’s first local currency debt capital market deal from the country on March 26 with its inaugural SR1bn ($266.6m) sukuk.

Despite a challenging market backdrop in the region amid the Arab Spring uprisings, total orders reached SR4bn – one of the highest oversubscriptions in the Saudi market. In doing so, it broke the record for the largest Tier 2 capital sukuk and the first issuance for a sharia-compliant bank in Saudi Arabia.

The 10-year sukuk priced at 170 basis points (bps) over six-month Sibor – bang in the middle of the plus-165bps to 175bps guidance. High demand helped to keep the pricing tight, with bankers away from the deal commenting that the 170bps mark was a good level for lower Tier 2 debt from a bank of its size.

Indeed, the transaction has been lauded across the region for its sophistication and highly successful placement despite Bank Al Jazira being one of the smaller banks in the region.

Based on the mudaraba and murabaha structures, the issue attracted a highly diversified investor base with government agencies, insurance companies, pension funds, corporates, financial institutions and investment banks all proving willing buyers.

The complex structure of the sukuk also deserves particular mention. The Islamic bond was structured innovatively so as to reflect the bank’s risk and to incorporate subordination obligations without exposure to underlying assets. 

The deal was an impressive score for both HSBC and JPMorgan as it represents the first of its kind in restructuring capital in a sharia-compliant way to manage regulatory changes arising from the implementation of Basel III.

In addition to acting as joint lead manager and bookrunner, HSBC was the sole sharia structuring bank. This deal has cemented its dominance in the Saudi sukuk market. 

The success of the Al Jazira sukuk transaction has generated renewed interest from other potential issuers in pursuing similar transactions.

INFRASTRUCTURE AND PROJECT FINANCE

WINNER: SATORP’S SR3.75BN PROJECT SUKUK

Joint lead managers and bookrunners: Deutsche Bank, Saudi Fransi Capital, Samba Capital

HIGHLY COMMENDED: The $600m Shams 1 solar project and Bahrain’s $320m Muharraq wastewater public-private partnership project

Launched in October 2011, Saudi Aramco Total Refining and Petrochemical Company’s (Satorp’s) debut SR3.75bn ($1bn) project sukuk was a standout deal in this category. Satorp is 62.5% owned by Saudi Aramco and 37.5% owned by French energy company Total.

As the Middle East’s first public project sukuk, the deal captured the judges’ attention for utilising an emerging asset class.

To date, issuances for development and infrastructure projects have been a limited feature of the sukuk landscape and this deal certainly pushed into new territory in a bold way. Due in December 2025, the sukuk has a tenor of approximately 14 years.

The significant demand from a wide range of investors led to an oversubscription of roughly 3.5 times and enabled the sukuk to be priced at the lower end of the 95 basis points (bps) to 105bps price range.

The proceeds of the sukuk will be used to finance the planned 400,000-barrels-per-day crude oil refinery in Jubail. The total cost of the project is estimated to be more than $13bn.

The issuance is important – both symbolically and from a sukuk structure point of view. There are now signs that several other Saudi issuers are preparing to go to the market, preferring to raise funds in this way, which could trigger a trend in project sukuk, especially for financing future multi-billion dollar infrastructure and industrial developments in Saudi Arabia.

The judges were also impressed by the deal involving Abu Dhabi-based Shams 1 – the largest solar project transaction to date. It attracted a 22-year, $600m bank loan from eight foreign and two local banks, among them Goldman Sachs and National Bank of Abu Dhabi.

Bahrain’s $320m Muharraq public-private partnership (PPP) project is also highly commended. As the first PPP in the country’s wastewater sector, it represents a pathfinder deal for PPPs in Bahrain.

ISLAMIC FINANCE

JOINT WINNER: GENERAL AUTHORITY FOR CIVIL AVIATION’S $4BN SUKUK

Sole lead manager and bookrunner: HSBC

JOINT WINNER: ALMANA’S $215M SUKUK

Sole bookrunner: Gulf International Bank

Joint lead managers: Gulf International Bank, Qatar Islamic Bank, Barwa Bank

In January 2012, Saudi Arabia’s General Authority Of Civil Aviation (GACA) issued a record-breaking SR15bn ($4bn) sukuk due in January 2022. The deal is not only the largest ever single-tranche sukuk issued globally, it is also the largest sovereign-guaranteed issuance in emerging markets in the past 10 years. In terms of Saudi milestones, it is the first sovereign-guaranteed sukuk in Saudi Arabia.

Issued to finance the expansion of Jeddah’s international airport, the Islamic bond attracted an unprecedented order book of SR52.5bn (representing a 3.5 times oversubscription) given the rarity of such governmental guarantee and additional features such as being eligible for repo arrangements and being assigned 0% risk weighting. Banks, sovereign funds, pension agencies, insurance companies, corporates and supranational entities all showed strong demand.

The sukuk is significant in helping to build a much-needed local yield curve that is important not only for the Saudi market, but for the Middle East as well. It also sets a benchmark for banks to price long-tenor instruments in the absence of government bonds. 

Qatari Almana’s $215m five-year dollar-denominated sukuk also impressed the judges. Its early redemption of the outstanding Dh600m ($163m) sukuk due in 2013 ranks as the first ever early redemption by a Qatari corporate.

Almana was targeting an issue size of $163m in order to redeem the existing sukuk. However, due to substantial oversubscription, it was able to upsize the deal by about 30%. It also stood out for the fact that only Gulf banks were involved in the deal.

Despite uncertainty in the capital markets resulting in Eurobonds being pulled or cancelled, Gulf International Bank’s regional placement capabilities and relationships with Gulf Co-operation Council investors enabled it to focus on regional liquidity and close the transaction in line with launch price guidance of US$ Libor plus 450 basis points.

LOANS

WINNER: LFZ HOLDING’S $400M FINANCING FOR ACQUISITION OF MEDGULF INSURANCE

Mandated lead arrangers and global bookrunners: Bank Audi, Deutsche Bank

Lending banks: BankMed, Emirates Lebanon Bank, Banque Libano-Française, Credit Libanais, Banque Misr Liban, Fransabank, IBL Bank, BBAC, Lebanon & Gulf Bank, BLC Bank, Fransa Invest Bank, Société Générale de Banque au Liban, IBL nvestment Bank, and CSC Bank

HIGHLY COMMENDED: EMAAR’s $698m islamic forward start facility

This year’s winning loan in the Middle East is the $400m transaction in support of LFZ Holding’s acquisition of the remaining stake in Medgulf group from Saudi Oger Group. Medgulf is a leading regional insurance and reinsurance group.

It was a milestone due to the fact that it is the largest acquisition financing ever to be syndicated and funded in Lebanon. It is also the largest pan-Middle East leveraged buy-out (LBO) since 2007 and the largest ever insurance group LBO in the Middle East and north Africa region.

Its success has since helped reopen the market for large Middle East acquisition financings, an area that has been slow since the onset of the global financial crisis.

By closely examining Medgulf’s group structure, Deutsche Bank and Bank Audi were able to identify pockets of cash that were ‘trapped’ within the regulated subsidiaries of the group. The banks therefore developed a unique concept to ‘bridge’ this pool of cash and cash equivalents, thus creating $115m of additional debt capacity structured as a six-month loan.

In addition, despite the many regulatory limitations around dividend distributions, the two banks designed a $175m, 5.5-year senior secured term loan funded by a syndicate of 16 commercial banks.

Launched in March 2011, this deal involving subordinated lenders and the vendor achieved successful close during delicate regional economic and political conditions.

M&A

WINNER: NBK CAPITAL’S SALE OF A 40% STAKE IN HANCO TO BIN SULAIMAN HOLDINGS

Financial advisor to NBK Capital: HSBC

Amid the extremely slow period for buyout firms across the Middle East and north Africa (MENA) region, NBK Capital, a leading alternative investments firm, stands out in this category for the successful sale of its 40% stake in Hanco – Saudi Arabia’s second largest vehicle fleet leasing and rental company.

The sale in January 2012 valued the entire company at $140m, making NBK Capital’s stake worth about $56m.

Only 11 deals backed by private equity investors targeting companies in the Middle East were completed last year, according to Bureau van Dijk, a Dutch research firm.

NBK Capital bought its stake in Hanco in 2008, and the deal has yielded returns in excess of twice the initial investment for the firm’s $250m NBK Capital Equity Partners Fund I, the firm’s private equity fund focused on providing growth capital to companies in the MENA region.

The significant returns were driven by NBK Capital’s active involvement in implementing growth and profitability initiatives. During its holding period, Hanco’s fleet size more than doubled to approximately 13,000 vehicles, driving significant growth in revenue and profit. 

The sale is even more meaningful in the context of the global financial crisis that unravelled during its investment period.

Subject to market conditions, NBK Capital is planning an initial public offering of Kilic, the largest aquaculture company in Turkey. It has hired Is Invest, the investment banking arm of IsBank, for the process.

The company is also currently marketing its second private equity fund to investors and is planning to raise $300m to $350m. NBK Capital has been one of the most active private equity players in the market with investments in healthcare, education, consumer goods and services, and food and beverage.

NBK Capital Alternative Investments Group also manages the NBK Capital Mezzanine Fund I, the first dedicated mezzanine fund in the MENA region.

RESTRUCTURING

WINNER: NAKHEEL RESTRUCTURING

Financial advisor to Nakheel: Rothschild

Financial advisor to government of Dubai: Moelis & Company

HIGHLY COMMENDED: Al-Ittefaq Steel Products Company’s $2bn restructuring

The announcement in November 2009 by state-owned Dubai World that it was requesting a six-month standstill on its $25bn debt sent shockwaves through global financial markets and cast a considerable shadow over the emirate’s economy.

Therefore it is little surprise that the successful restructuring of Nakheel, a former subsidiary of Dubai World, in August 2011 is viewed as a turning-point in the emirate’s road to recovery. Rothschild and Moelis both reaffirmed their status as leaders in the restructuring field through their work on the deal.

With a total of some $32bn in claims and new money commitment, Nakheel – Dubai’s largest real estate developer – is believed to be the largest corporate real estate restructuring in history.

The deal represented the largest restructuring of sharia-compliant instruments ever and in doing so, it created the concept of such an instrument that could be offered to trade creditors (the trade sukuk). Rothschild also introduced another innovative proposal to restructure Nakheel’s customers’ claims – approximately $9bn of claims will be restructured through a programme of swaps and consolidations with other Nakheel properties. 

The deal faced an equally big hurdle in requiring 100% consent from a group of 30 lending institutions across multiple syndicated and bilateral facilities.

Moelis played an equally crucial role. Following the standstill announcement, it was hired as exclusive financial advisor to the Dubai government on the restructuring of Dubai World and its $49bn of total liabilities. It led the discussion to spin out Nakheel and advised the government on the creation of Decree 57 – a bespoke insolvency regime. 

Al-Ittefaq Steel Products Company’s restructuring in July 2011 of approximately $2bn in debt facilities and liabilities was another landmark transaction – constituting the first successful standstill-based corporate debt restructuring in Saudi Arabia.

STRUCTURED FINANCE

WINNER: THE DUBAI GOVERNMENT’S $800M SALIK TOLL ROAD SECURITISATION

Joint bookrunners: Emirates NBD, Dubai Islamic Bank, Citi, Commercial Bank of Dubai

HIGHLY COMMENDED: Dubai Electricity & Water Authority’s $2bn receivables securitisation

This year’s winning structured finance deal from the government of Dubai, acting through the country’s department of finance, was the standout winner in this category.

It is one of the most applauded transactions of 2011 because of its unique monetisation structure. Executed in July 2011, the $800m, dual-currency, six-year facility is based on the monetisation of receipts from the Salik toll road collection system in Dubai.

The transaction has a unique structure, where unlike typical infrastructure and corporate financings, debt service is paid prior to operating and maintenance costs. The primary source of repayment is Salik revenues, and these revenues are released to the department of finance only after all conditions of cash waterfall are satisfied. The financiers will receive Salik cash flows until all debt is fully repaid. Additional liquidity is provided by a debt service reserve account to protect against fluctuations in monthly revenues.

The deal is also innovatively structured in combining a key infrastructure asset with a relatively short-tenor, self-liquidating financing structure. Furthermore, it qualified as both the first and one of only a few deals in 2011 to combine both Islamic and conventional tranches.

Recognising its value, it received an overwhelming response from financiers. Overall commitments of $1.75bn ensured the deal was more than twice oversubscribed. It was taken up by a diversified group of local (49%), regional (10%) and international (41%) financial institutions. 

Our highly commended deal is the structuring and establishment of a $2bn receivables-backed financing programme for Dubai Electricity & Water Authority (DEWA) – the monopoly provider in the emirate.

It is a robust, self-liquidating structure with monthly amortisations (starting after a 12-month revolving period), from eligible, ring-fenced receivables. The initial issue under the programme is $500m, but there is flexibility to raise additional advances up to the value of $2bn, backed with incremental flagged accounts.