BEST FOLLOW-ON/ ACCELERATED BOOKBUILD
ICICI Bank’s Rp150bn ($2bn) qualified institutional placement
Bookrunning lead managers: Axis Capital, Bank of America, BNP Paribas, Citi, Edelweiss Financial Services, Goldman Sachs, HDFC Bank, ICICI Securities, IIFL Securities, Jefferies, JM Financial, JP Morgan, Kotak Mahindra Capital, Morgan Stanley, Motilal Oswal Investment Advisors, Nomura, SBI Capital Markets and Yes Securities
ICICI Bank treated investors this year to its first primary equity raise in over a decade, pulling no punches with the largest ever qualified institutional placement by a private sector lender in India.
The bank turned to the market in August with the aim of raising Rp150bn in a single day, despite following close on the heels of a flood of issuance from some of its peers, with Housing Development Finance Corp and Axis Bank raising Rp140bn and Rp100bn, respectively, from placements just days earlier.
But ICICI Bank was undeterred. It was looking for a way show the strength of its position against an extremely challenging market backdrop in India, while beefing up its capital base, and decided that a share sale was the best option.
Market conditions were anything but easy. The financial industry in India was still under pressure following the government rescue of Yes Bank at the beginning of 2020. On top of that, ECM activity in India dried up and markets dived after the government enforced a nationwide lockdown at the end of March in an attempt to stem the spread of the coronavirus. The country’s lenders were also coming to grips with a moratorium on loan instalment payments handed down by the Reserve Bank of India during the lockdown.
The restrictions caused by Covid-19 meant almost everyone involved in ICICI Bank’s deal was working from home. But the lead banks and the issuer used that to their advantage. They shrunk the execution timeline on the qualified institutional placement by taking a novel approach to the roadshow, splitting into three teams to pitch investors virtually.
The success of that strategy and the strength of ICICI’s name was evident in the final book, which was four times covered by more than 125 investors. These included high-profile names like Singapore’s sovereign wealth fund GIC, BlackRock, T Rowe Price and an array of domestic mutual funds.
The large oversubscription by investors in Asia, Europe and the US meant the bookrunners were able to price the 419m shares at the tight end of the marketing range, with just a 1.53% discount to the stock’s previous close.
To ensure strong aftermarket performance, the leads also allocated as much stock as possible with long-only accounts, which ultimately took 85% of the offering.
ICICI Bank made a bold move with its QIP. It came amid a market barely recovering from the coronavirus lockdown. It raised a large amount despite coming after $4bn in new equity was raised by other issuers. It was also a test for the bank’s relatively new management, with chief executive Sandeep Bakhshi only taking ICICI’s reins at the end of 2018. This meant investors raised questions around the bank’s long-term strategy and vision for growth.
But the issuer and its bookrunners successfully navigated the challenges to seal the deal, making it GlobalCapital Asia’s pick for best follow-on/accelerated bookbuild.
BEST EQUITY-LINKED DEAL
Citi’s $300m bond exchangeable into Longfor Group Holdings
Asia’s equity-linked market supplied a stream of deals this year. But while previous years have been strong in particular markets, such as deals printed by Chinese issuers listed in the US last year, 2020 threw up a medley of structures designed for unique situations amid the pandemic.
The most eye-catching deal for GlobalCapital Asia was a combination of transactions: Citi’s $300m four-year bond exchangeable into the Hong Kong-listed shares of property company Longfor Group Holdings. The issuance, executed in early May, followed a structured financing solution provided by the US bank to one of Longfor’s largest shareholders.
A $900m collar transaction was initially supplied in mid-April to Cai Kui, former spouse of Longfor’s chairwoman Wu Yajun. Cai had previously raised capital by simply selling stock in the real estate company, but this time around, a more comprehensive solution was needed given the firm’s share price was lower than where Cai wanted to sell.
As a solution, Citi suggested a collar to help him raise money instead.
Equity-linked bankers praised the structure, which is very rarely seen in Asia’s sometimes conservative public market. Equity collars are created for a stock by selling a series of out-of-the-money call options and buying out-of-the-money puts. This structure caps the potential return from the investment if the share price rises, but at the same time sets a floor for any losses.
With Longfor shares pledged as collateral, and an equity collar in place, Citi was able to provide financing that required no margin call — ideal at the time, given lenders were dealing with swathes of unpaid margin calls and a fall in the value of collateral.
Citi used a cash-settled exchangeable bond to hedge its exposure to Longfor after the financing, taking Longfor equity as collateral for the loan. The bank’s primary exposure was then to the underlying shares, so it needed to sell stock to hedge the transaction. It did that with a $470m public block sale.
The cash-settled structure allows bank issuers to raise funds while hedging their corporate derivative exposures. JP Morgan, for instance, used the structure last year with Tencent Holdings’ equity underlying an EB, to hedge its exposure to the internet giant after a correction in the company’s stock price.
While not unheard of, cash-settled equity-linked bonds are rare in Asia. Longfor’s EB proved popular with European and Asian long-only investors, as well as Asian hedge funds, which covered the offer multiple times over.
The demand allowed Citi, the sole bookrunner, to price the zero-coupon notes with a 24% exchange premium, off the bottom of the range of 22.25%. The paper was sold at par with no call or put options.
BEST ECM DEAL
JD.com’s HK$34.6bn ($4.46bn) secondary listing
Sponsors, global co-ordinators, bookrunners and lead managers: Bank of America, CLSA and UBS
Global co-ordinators, bookrunners and lead managers: BOC International, CCB International, China Renaissance and Jefferies
Bookrunners and lead managers: ABC International, BoCom International, CMB International, Guotai Junan International, Haitong International, Huatai International, ICBC International, Mizuho and Nomura
This year’s best IPO award goes to JD.com’s secondary offering. The company’s homecoming is the largest listing in Hong Kong in 2020 and played an important role in adding momentum to the trend of secondary offerings by US-listed Chinese firms — an extremely popular part of Hong Kong ECM this year.
JD.com was of course not the first to kick off the secondary listing market in Hong Kong. Alibaba Group Holding set the benchmark with its HK$88bn deal in November 2019 and Chinese game developer NetEase was the first to follow in 2020 with its HK$21.1bn offering in early June.
But it was JD.com that truly turned this trend into reality with its jumbo transaction.
NetEase priced its IPO on June 5, and JD.com hit the market that same night. But despite the close proximity of the deals, the sponsors were able to secure enough pre-deal demand for JD.com. This meant they kicked off bookbuilding with full visibility through the deal and within hours had converted that into firm orders that covered the IPO multiple times over. This was despite launching at a time when markets globally were still reeling from coronavirus-fuelled volatility, and coming close on the heels of NetEase’s success.
The syndicate used a virtual roadshow to market the IPO, holding video calls with investors from across the world. The bookbuilding was run without price guidance, instead using JD.com’s American depository shares (ADS) as a reference.
The Nasdaq-traded ADS climbed 7.4% during the deal, a sign of confidence for the issuer. However, the bookrunners had to deal with a slip in markets in Hong Kong, with the benchmark Hang Seng Index falling 2.3% through the last few days of the IPO bookbuilding.
While that did cause some worry among the lead banks about demand, JD.com’s pedigree played a big role in attracting investors. Institutional investors piled in around $40bn of orders and local retail investors subscribed their tranche 178.9 times.
The final price of HK$226 net the issuer HK$30.1bn at the base offer, which rose to HK$34.6bn post-greenshoe, giving the firm a market capitalisation of HK$703bn.
JD.com’s deal stands out as the largest listing in Hong Kong in 2020. More importantly, however, its trade fuelled a spate of other secondary IPOs on the bourse for the rest of the year, including from a host of technology focused companies, truly cementing the Hong Kong exchange’s position as Asia’s technology hub.
BEST ECM HOUSE
Global equity markets had to endure uncertainty and volatility this year on a level not seen since the financial crisis. Yet 2020 proved bountiful for Asia’s equity capital markets. Despite a dry spell in the first quarter, a big ramp up in deal flow soon after meant a large number of trades were up for grabs.
Citi was best positioned to jump on these opportunities, making it GlobalCapital Asia’s ECM house of the year.
The bank, a repeat winner of this award, certainly benefits from having a more well-established ECM platform compared to some its peers. But it does not rest on its laurels. While Citi uses its size as an advantage, its teams also work together on complex deals, including this year’s best equity-linked deal — the Citi-issued Longfor exchangeable bond that required collaboration across the equity syndicate, equity-linked and structured equity teams.
During the awards period, Citi worked on 79 deals worth a combined $13.88bn, ranking sixth among bookrunners in the Asia ex-Japan ECM league tables, according to Dealogic data. The volume is nearly three times as much as the $5.76bn of credits it got during the same time last year from 68 deals. Its market share has also risen to 4.17% from 2.83% year-on-year.
The bank secured leading roles on two of the most coveted deals during our awards period: Alibaba Group Holding’s HK$88bn secondary listing in November 2019 and the suspended dual IPO of Ant Group.
Alibaba’s trade was the first homecoming deal by a US-listed Chinese company, which ultimately drew a raft of issuers to secondary offerings in Hong Kong. Citi embedded itself in that part of the market, working on high-profile secondary IPOs by companies such as game developer NetEase, e-commerce solutions provider Baozun, biopharmaceutical company Zai Lab and logistics company ZTO Express.
These secondary listings are recorded as follow-on offerings by Dealogic, with Citi ranking third among its peers in Asia ex-Japan. It had credits for $10.7bn from 53 trades, giving it a market share of 5.91%. In comparison during the last awards period, the US bank ranked sixth for $3.2bn in credits and a smaller 3.95% share of the market, shows Dealogic.
For Ant’s mega listing — the fintech giant was gearing up to raise $34bn from the world’s largest ever IPO — Citi won a leading sponsor role. While the deal eventually got put on hold by China’s regulators, Ant is still planning an IPO return. Citi is likely to have a key role in the trade.
In Hong Kong, Citi used its market read to play a leading role in deals from every hot sector, including healthcare, technology and property management. But its presence was not limited to the city’s equity markets. It also ran some of the largest ECM trades in south, southeast and north Asia.
Its expertise in South Korea, for instance, was called upon for SK Biopharmaceuticals’ $792m IPO in June — the country’s first listing after the outbreak of Covid-19 and a deal that sparked a fervour in the local market in the second half of the year. It also helped SK E&S, a Korean energy company, sell most of its shares in China Gas through a $1.49bn block trade in April.
In India, Citi’s equity-linked and equity capital markets teams worked together on Bharti Airtel’s $3bn fundraising in January, helping the telecommunications giant execute a concurrent $2bn share placement and a $1bn convertible bond. Citi was also a bookrunner on ICICI Bank’s $2bn qualified institutional placement, GlobalCapital Asia’s best follow-on/accelerated bookbuild of the year.
This year has been unique. Extreme bouts of volatility stemming from the pandemic were often accompanied by big rallies in both Asian and US stocks. Opportunities across the gamut of ECM products were there, but they all required foresight, careful timing and strong relationships with both sides of the market. Citi checked all the right boxes, making it 2020’s best ECM house.