The best deals in the Asia-Pacific region over the past year are celebrated.

Corporate bonds 

Winner: AC Energy Philippines’ $400m ‘fixed-for-life’ green perpetual bonds

Sole global coordinator: BPI

Joint bookrunners: CLSA, Credit Suisse, UBS

AC Energy, the energy production arm of Ayala Corporation – one of the Philippines’ oldest and largest conglomerates – has ambitious plans to increase its renewable energy generation by 5 gigawatts by 2025, with at least 50% of energy generated from renewable sources.  

To support these goals, in November 2019 AC Energy issued a $400m green fixed-for-life perpetual bond, with the proceeds supporting renewable energy expansion across the Asia-Pacific region, including the Philippines, Indonesia, Vietnam, Myanmar, India and Australia. 

The bonds were listed on the Singapore stock exchange and were certified under the Asean Green Bonds Standards by the Philippines’ Securities and Exchange Commission.

Despite busy market conditions that saw three other competing issuances at the time, the order book was three times oversubscribed, with AC Energy able to tighten pricing by 35 basis points from initial guidance of 6% to a final fixed coupon of 5.65%. Investors were spread evenly between the Philippines and the rest of Asia, and with a smaller proportion of European investors. 

The bond was the world’s first ever fixed-for-life perpetual green bond and the first perpetual green bond in south-east Asia. AC Energy opted for a perpetual structure since it offers increased flexibility, and already had an established track record of fixed-for-life perpetual bond issuance, an asset class typically reserved for especially reputable companies. AC’s impressive debut performance for its green perpetual issuance marks a strong endorsement from investors for its wider renewable energy and sustainability plans. 

Equities  

Winner: Alibaba’s $12.9bn Hong Kong secondary listing

Joint sponsors and joint global co-ordinators: CICC, Credit Suisse 

Joint global coordinators: Citigroup, JPMorgan, Morgan Stanley 

Until December 2019, Chinese e-commerce and technology giant Alibaba’s 2014 $25bn initial public offering (IPO) on the New York Stock Exchange held the record for the world’s largest ever IPO. And while its 2019 secondary listing on the Hong Kong Stock Exchange (HKEX) may not have reached quite the same heights, at $12.9bn it was still a blockbuster and the second largest IPO of the year.  

The November 26 offering saw 500 million ordinary shares listed, with an extra 75 million added to the listing as part of the 15% greenshoe, over-allotment option, representing 2.7% of the company’s total value. Shares were sold at HK$176 per share (about $22.88). 

Alibaba timed the listing to capitalise on positive sentiment following its third-quarter 2019 results, released at the beginning of November, which showed sales had increased 40% year on year – yielding a big jump in profits – as well as in the weeks following ‘singles day’, the company’s busiest trading day of the year. 

The listing, which was Hong Kong’s largest equity offering since 2010, came at an important time for its capital markets, as the special administrative region was in the midst of a period of civil unrest, and market confidence had been dented. Disruption within the territory did little to knock investor demand, with the offer multiple times oversubscribed from a range of global investors. 

The Chinese government has been keen to see a ‘homecoming’ of Chinese tech companies that have listed overseas, and now that Alibaba’s shares are listed on the HKEX, they can be bought and sold by mainland investors via the Shanghai-Hong Kong Stock Connect channel.

Following the listing, Alibaba became the largest dual-listed stock globally and the largest listed company in Hong Kong by market capitalisation.

Financial institutions group financing 

Winner: Kookmin’s $500m issuance of sustainability AT1 notes

Bookrunners: BNP Paribas, Bank of America, Citi, Crédit Agricole, JPMorgan, Mizuho

In June 2019, Kookmin Bank, one of South Korea’s largest commercial banks, issued its first ever tranche of additional Tier 1 (AT1) notes. This debut AT1 issuance was also notable for being done under a ‘sustainability’ framework, the first time that any issuer in the world has issued sustainability-linked AT1 notes. 

The notes were priced at 4.35%, with a perpetual non-call five-year structure. Given the scarcity value of the issuance and a solid credit narrative, the order book was multiple times oversubscribed at $2.7bn-worth of orders at final pricing, with investors across Asia, the US and Europe, Middle East and Africa. The strong demand allowed pricing to be tightened by 35 basis points – the biggest compression of any international bond issuance out of South Korea in 2019.

Kookmin Bank developed its sustainability framework in 2018 ahead of issuing its first sustainability-linked bonds, a $300m tranche of senior notes. It followed this up with a $450m sustainability-linked Tier 2 issuance in January 2019. Sustainability bonds allow issuers to fund a mix of green and social projects. Kookmin will use the proceeds to fund lending to small and medium-sized businesses or low-income families (in line with South Korean government aspirations to see increased lending to these groups) as well as energy projects. 

South Korea is one of the world’s leading issuers of sustainable bonds, with Kookmin’s AT1 issuance taking sales of green, social and sustainable bonds by South Korean issuers to above $6bn in the year to date, at the point of issuance. 

Green finance 

Winner: ICBC Hong Kong’s multi-tranche mega-green bond issuance

Bookrunners: Agricultural Bank of China, Bank of America, Bank of China, Bank of Communications, BNP Paribas, Commonwealth Bank of Australia, Crédit Agricole, ICBC, Industrial Bank, HSBC,

SMBC Nikko, Standard Chartered, UBS

Industrial and Commercial Bank of China’s (ICBC) Hong Kong branch joined the green bond markets with a bang in 2019, printing more than $3bn-worth (currency equivalent) of bonds in its inaugural green transaction. This jumbo transaction saw it issue bonds across five tranches in three different currencies: Rmb1bn ($141.4m) of one-year fixed rate notes at 3.1%, HK$4bn ($570m) two-year fixed rate notes at 2.2%, $500m three-year fixed rate notes at 2.25%, $1bn of three-year floating rate notes and $1bn five-year floating rate notes. 

The proceeds will be used to finance, or refinance, green developments in the Hong Kong-Macau-Guangdong Greater Bay Area, an economic hub that is home to more than 70 million people, as part of the Chinese government’s Greater Bay Area initiative. This aims to foster growth in the region through technological innovation, improved infrastructure and increased financial links between cities. 

The ICBC group as a whole, which is China’s largest state-owned commercial bank, has been a strong advocate of green finance and a leading issuer of green bonds. It has issued 18 offshore bonds since 2017, with green debt the fastest growing segment within its lending activities. 

There was high demand for the bonds, with the issuer’s target issuance size reached one hour after opening in Hong Kong, and this allowed pricing to be tightened across the tenors. The bond attracted new green investors, including from emerging markets, with 20% of the allocation going to them. It was the largest green bond offering from a private sector issuer globally in 2019 and the largest green offshore transaction by a Chinese issuer to date. 

High-yield and leveraged finance 

Winner: Serba Dinamik’s $300m sukuk

Bookrunners: HSBC, Credit Suisse

Malaysian energy services group Serba Dinamik made its US dollar bond market debut in May 2019 with a $300m three-year sukuk. 

The group provides services across the engineering value chain. This includes maintenance, procurement, construction and commissioning to industries such as oil and gas, power generation and water treatment, with projects across Asia, the Middle East, Africa and Europe. 

The proceeds from the sukuk will be used to finance existing debts and general corporate purposes. Some of the funding has reportedly been earmarked for construction projects in Laos, Tanzania and Uzbekistan, as well as for working capital for the company’s Middle East operations and maintenance contracts.

There was huge demand for the offering, which achieved a BB- rating from both S&P and Fitch. Investors responded well to the company’s strong credit narrative about growth prospects across its diversified business model, with the order book multiple times oversubscribed. Serba was able to significantly tighten its pricing from initial guidance of 6.625% to a final coupon of 6.3%: an impressive result, as this was the lowest coupon for a debut high-yield-rated issuer since 2017.

It was also a groundbreaking transaction in other respects, marking the Asia-Pacific region’s first ever high-yield-rated sukuk and the first high-yield transaction out of Malaysia since 2017. It also reopened the global high-yield sukuk market in 2019, as the first issuance that year, with the deal coming to market at a time when other issuers in the same industry were finding market conditions tough.

Infrastructure and project finance 

Winner: Formosa 2 offshore wind farm’s T$62.4bn project financing

Financial adviser: Société Générale

Mandated lead arrangers: ANZ, BNP Paribas, Cathay United Bank, Commerzbank, Crédit Agricole, DBS, E.Sun Bank, Entie, HSBC, ING Bank, KGI, MUFG Bank, Natixis, OCBC, Siemens Bank, SMBC Bank, Société Générale, Standard Chartered, Taipei Fubon, Taiwan Life Insurance

The Taiwanese energy sector is expected to undergo rapid change over the next decade as the country seeks to diversify away from coal and nuclear power while reducing its reliance on oil and gas imports.

The Formosa 2 wind farm is being developed as part of the government of Taiwan’s goal to introduce 5.5 gigawatts of offshore wind power to the country by 2025. Expected to be operational in 2021, Formosa 2 will become Taiwan’s largest offshore wind farm, powering 380,000 households and displacing an estimated 18,750 kilotonnes of carbon dioxide during its lifetime. 

Formosa 2 is being developed by Jera (49%), Macquarie Capital (26%) and Swancor Renewable Energy (25%). Macquarie initially had a 75% stake in the project, of which Jera, a Japanese utility company, acquired 49% in a deal signed in October 2019. Jera has since established an operating base in Taiwan to gain experience in wind power generation and expand its business activity in the region. 

The $2.4bn deal attracted 20 financial institutions and four export credit agencies, setting a record in both the number of financial institutions and export credit agencies participating in a single transaction of this type. The six local Taiwanese banks provided approximately 30% of the project financing, the largest ever participation of local funding in an offshore wind project, both in terms of the number of participating institutions and the proportion of total funding.

The senior debt was structured as a long-term project financing with power revenues underpinned by a 20-year power purchase agreement signed by state-owned Taipower, with a long-term credit rating of A+/A1. 

Islamic finance 

Winner: Edra Solar power plant’s RM245m sustainability sukuk

Bookrunners: OCBC, Standard Chartered

Edra, a subsidiary of China General Nuclear Power Corporation (CGN), is one of south-east Asia’s leading power producers. In 2019, its solar energy arm, Edra Solar, successfully led on the construction of a new 50-megawatt solar energy plant in Kedah state in north-west Malaysia, its first renewable energy project. 

A 16-hectare buffer zone was added around the plant to provide land for pineapple farming, creating a valuable agricultural resource for the local community. The agricultural project will be managed by a government agency, along with local farmers, and Edra will not derive any economic benefit from it. It is estimated this will benefit more than 2600 farmers and create more than 100 jobs in the local community.

Construction of the solar plant was funded by Edra via shares and shareholder loans, and its RM245m ($55.77m) sustainability sukuk was issued to refinance the project costs. The project aligns with two of the UN’s Sustainable Development Goals: number seven, affordable and clean energy, and number eight, decent work and economic growth (via the agricultural project). The sukuk also conformed to international green bond principles and social bond principles, as well as the Association of South-east Asian Nations’ green, social and sustainability bond frameworks.

The sukuk was a hit, with investors attracted by its strong sustainability credentials. It launched on September 30 with eight tranches on offer, and tenors ranging from one year to 18 years. By the end of the business day, it was 11 times oversubscribed, even after pricing had been tightened. Investors included insurance companies, asset management companies and high-net-worth investors, representing their first investment in this sector for this final group. 

The project will assist Malaysia to hit its renewable energy commitments and emission-reduction targets, as well as forming a part of CGN’s corporate social responsibility programme, which has the principle of enabling local communities to be self-reliant in the long term.

Loans 

Winner: Cofco International’s $2.3bn sustainability-linked loan

Bookrunners: ABN Amro, Agricultural Bank of China, Australia and New Zealand Banking Group, BBVA, China Construction Bank, China Development Bank, ICBC, ING Bank, Natixis, OCBC

Cofco International is the overseas agriculture business platform for Cofco Corporation, China’s largest food and agriculture company. It has 11,000 employees and operates in 35 countries, focusing on global supply chains of grain, oilseed, sugar, coffee and cotton, and trades with more than 50 countries, providing farmers worldwide with access to Chinese markets. 

Meeting rising global demand for food via sustainable supply chains is a core element to the company’s international purpose. It believes embedding rigorous traceability processes into its supply chains is essential to achieve its sustainability goals, and has been investing significantly in implementing its traceability strategy.

Its commitment is such that it has linked its core bank financing to hitting sustainability targets. In July 2019 it secured a $2.3bn sustainability-linked loan, which refinanced existing terms and revolving credit facilities that were due to mature in 2019.

The margin of the loan is linked to the performance of Cofco’s environmental, social and corporate governance (ESG) rating by Sustainalytics and is contingent on it hitting two key performance indicators (KPIs) on traceability in supply chains (namely, Brazil soybean traceability and palm oil traceability). Hitting or missing these targets will affect the cost of the loan by as much as five basis points. 

There are three tranches to the loan: a one-year revolving credit facility, a three-year revolving credit facility and a three-year term loan, with the pricing of all three tranches linked to sustainability criteria. Cofco specifically requested that the targets applied to all three tranches of the loan, including the one-year facility – the first time that a one-year facility has been linked to sustainability indicators.

The deal is the largest sustainability-linked loan arranged by a commodity trader worldwide, as well as the first time a commodity trader has linked its financing to both ESG and KPI criteria.

M&A  

Winner: EG Group’s A$1.725bn acquisition of Woolworths petrol

Lead financial adviser to EG Group: Citi

Joint financial adviser to EG Group: Barclays

In November 2018, Australia’s largest retailer, Woolworths Group, announced it would be selling its network of 540 fuel and convenience sites, Woolworths Petrol, to EG Group, a leading petrol forecourt and convenience retail business. The transaction was completed on April 2, 2019 for A$1.725bn ($1.09bn).

The sale was of benefit to both parties, as Woolworths had been looking to sell the business for more than three years. In June 2018, it had been disappointed when a long-planned sale to fuel giant BP – which had been in the works since December 2016 – collapsed following opposition from Australian competition authorities. Woolworths’ shares increased by 1.4% off the back of November’s announcement. 

It was a significant strategic move for EG Group, which was entering the Australian market for the first time via the takeover. The company began life as Euro Garages in 2001, starting with a single petrol station site in Greater Manchester in northern England, and has since expanded its portfolio to cover more than 4500 petrol stations and convenience stores across the UK, as well as in mainland Europe and the US. 

As part of the transaction, EG Group and Woolworths entered into a 15-year commercial alliance, continuing with existing customer loyalty and fuel discount schemes and commencing in a new wholesale supply agreement, with Woolworths group providing a food product range to the network. The long-term fuel supply agreement that Woolworths Petrol reached with petroleum provider Caltex in July 2018 will also continue. 

The acquisition gives EG Group a strong platform for future growth as Woolworths petrol is a well-recognised brand with an established customer base, and there is considerable potential for EG Group to develop its convenience retail offering through its Australian sites, as it has done in other geographies. 

Restructuring 

Winner: China Singyes Solar’s $863m restructuring

Financial adviser to China Singyes Solar: Admiralty Harbour Capital

Financial adviser to the ad hoc committee of noteholders: Moelis

Founded in 1995, engineering and construction company China Singyes Solar, encouraged by the Chinese government’s generous solar power subsidies programme, had looked to shift most of its focus to building self-owned solar farms. Following an unexpected change in the government’s subsidies programme in June 2018, which drastically reduced solar tariffs, Singyes found its business prospects significantly impacted.  

Faced with the looming maturity of its $160m 2018 notes, Singyes attempted to secure rescue financing with a HK$230m ($29.7m) capital raise, but the offer failed to gain sufficient traction. Singyes defaulted on the notes in October 2018, which triggered a cross-default of its Rmb990m ($140m) loan debt, in addition to its 2019 notes and 2019 convertible bond. At their lowest point, the value of both the 2018 notes and 2019 notes fell to 50 cents on the dollar.

In November 2018, Moelis was engaged by Singyes’s creditors to begin consensual restructuring discussions with the company. A state-backed bailout was secured, in the form of state-owned energy group Shuifa investing $198m into Singyes and becoming its majority shareholder in the process. Moelis entered into complex negotiations with the Securities and Futures Commission of Hong Kong and the Singyes’s independent shareholders to gain approval for the transaction, which was granted in October 2019.   

The restructuring process concluded in December 2019 with the exchange of the 2018 notes, 2019 notes and 2019 convertible bonds. Creditors received an $8.6m consent fee, a $41.4m settlement fee and new notes to the value of the remaining money owed to them. The new notes offered 2% annual interest or a 4% payment in kind and will mature in 2022. Singyes avoided bankruptcy and preserved its business with both its management and operational continuity intact.

Securitisation 

Winner: Astrea V’s $600m private equity bonds issuance

Joint lead managers and underwriters: Credit Suisse, DBS Bank, Standard Chartered Bank

The Astrea V platform is a series of private equity related products issued by Azalea asset management, whose aim is to broaden investor access to private equity markets. Azalea invests in private equity funds and packages them into diversified portfolios and products to suit the investment objectives and risk tolerance of targeted investors.

The Astrea V issuance in June 2019 included an allocation specifically targeted at giving retail investors exposure to private equity via private equity bonds – asset-backed securities backed by cashflows from private equity funds. The bonds are backed by cashflows from a portfolio of more than 38 private equity funds, managed by 32 fund managers. It was Azalea’s third issuance of listed notes in Singapore backed by private equity cashflows, and the second available to retail investors. 

The $600m issuance was structured in three tranches: S$135m ($95m) class A-1 bonds, $230m class A-2 bonds and $140m class B bonds. Some S$180m of the A-1 bonds were distributed to retail investors in Singapore through ATMs, internet banking and mobile banking applications – and publicised through mainstream media advertisement, as well as in seminars open to retail investors – via a public offer. The public offer was more than four times oversubscribed by value, with 30,816 applicants. Final allocation was awarded to 28,358 retail investors with smaller investors prioritised, and anyone with an order of S$50,000 receiving some allocation in full or in part. 

Order books across the issue were more than seven times oversubscribed, allowing price tightening from initial guidance of between 15 to 40 basis points across all three tranches. A wide range of investors subscribed to the deal, including repeat interest and first-time investors, including those from Taiwan, Japan and the Middle East. 

Sovereigns, supranationals and agencies financing 

Winner: Power Holding Limited’s Rs200bn Pakistan Energy Sukuk

Mandated lead advisors and arrangers: Al Baraka Bank, BankIslami, Dubai Islamic Bank, Faysal Bank, MCB Islamic Bank, Meezan Bank 

Creating a reliable and financially sound power supply system has been an issue in Pakistan for several decades, stymied by factors such as supply shortages and circular debt (where debts have been passed around the system from one entity to another; for example, between distribution companies and the country’s central power purchasing agency). 

In 2009, Power Holding Limited (PHL) was formed to house debts from several entities within the energy sector, such as Pakistan Electric Power Company, the country’s Central Power Purchasing Agency, and its National Transmission and Despatch Company, which is wholly owned by the government.

In March 2019, the government issued a Rs200bn ($1.22bn) sukuk with the aim of reducing the circular debts held within PHL. The sukuk has a 10-year maturity with a semi-annual coupon, paid at the Karachi Interbank Offered Rate plus a margin of 80 basis points. An escrow mechanism was set up to ensure the payment obligations were met, and a group of eight Pakistani banks invested in the sukuk, covering the full order size. The sukuk, including its escrow mechanism, was the first of its kind in Pakistan. 

This transaction alone has not resolved the circular debt issues facing Pakistan’s power sector, but it has provided breathing space for further action to be taken and is a step in the right direction. As of mid-April 2020, plans were also well under way for a second Rs200bn sukuk to be issued to tackle the problem further.

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