US investors helped swell the book size for Georgian telecoms firm JSC Silknet’s first bond since 2019 on Wednesday.
Initial price talk for the $300m January 2027 bond was at 8.5% area and books were in excess of $370m at approximately 1.30pm London time.
Lead managers tightened guidance to 8.375% and the order book grew to over $470m once US investors had seen the deal. Final pricing was expected late Wednesday as GlobalCapital went to press with a lead manager suggesting the coupon could fall further.
At 8.375% guidance, the level was still well below the 11% it paid on its only other bond, which was priced in 2019. Volatility was likely to prevent the issuer from lowering the coupon any further, the lead manager added, but he could not rule out a move tighter by final pricing.
Nonetheless, Silknet had been hoping to secure an even lower coupon had it been able to bring the new issue sooner.
Silknet announced the $300m new issue on January 7, but Tuesday was the earliest it could bring the deal because the tender for its 2024s only ended on Monday afternoon.
As an example of the rates move in that period, the five year US Treasury has cheapened from 1.504% on January 7 to 1.620% on Wednesday.
The company mandated JP Morgan and UBS as bookrunners. JP Morgan and UBS were also acting as lead managers alongside TBC Capital.
The wider market has been volatile this week and Silknet’s leads were keen to print without delay.
A lead manager on the deal said that having to wait until later this week or even after the weekend would have led to a loss of momentum in the issue given that the mandate had already been out for 12 days.
The $200m bond that Silknet issued in 2019 matures in 2024. Silknet will use the new bond to fund a tender offer for the 2024s.
That first issue was Reg S only but the new issue has 144A status meaning some US investors can take part.
On Wednesday the lead managers saw an opportunity with the market calmer than it had been earlier in the week and having had Tuesday to update US investors after their bank holiday on Monday.
The new bond will be callable in January 2024. Silknet put in the call date because it wanted the option to refinance before 2027 if it can do so at cheaper cost.
“Investors would rather it not be there,” said the banker. “But after some conversations, they were OK with it, and they would get paid at a premium to par if the call date is used.”
Moody’s is expected to rate the issue at B1 and Fitch at B.
Private Georgian investment firm Silk Road Group is the owner of Silknet, which provides internet, mobile, and satellite television services in the country.
Silknet posted revenue in 2020 of Gel382m ($124.2m), with Ebitda at Gel211.5m. This was 1% and 2% lower than 2019 respectively.