GlobalCapital Asia awards 2020: Bonds

In part three of GlobalCapital Asia's awards results announcements, we reveal the winning bond deals across different categories, as well as the best debt houses and the best bank for SRI financing.

  • By GlobalCapital
  • 10 Dec 2020
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BEST SSA BOND

The Republic of Indonesia's $4.3bn triple-tranche bond

Bookrunners: Citi, Deutsche Bank, Goldman Sachs, HSBC and Standard Chartered

Co-managers: Danareksa Skuritas and Timegah Sekuritas Indonesia

The Covid-19 pandemic fundamentally altered people’s way of life this year. Its impact also seeped into Asia’s bond market, forcing borrowers to adapt and find ways to use the capital markets to combat the impact of the coronavirus.

In April, the Indonesian sovereign led the way in raising funds from the international bond market to fight against the virus.

Indonesia's transaction, which was split between a 10.5 year bond, a 30.5 year tranche and a 50 year note, was not explicitly labelled a Covid bond. But the country’s ministry of finance made it clear to investors that the proceeds would help stimulate the economy and provide relief for those hit the hardest by the virus.

When the deal was priced in early April, the country, home to nearly 275m people, had reported just 2,700 cases of Covid-19. As of early December, the number had surpassed 550,000.

The deal was an important one in many regards. It was the first dollar bond from an Asian government that was focused on the pandemic. It was also one of the first market reopening transactions — after issuers and investors were overcome with panic about the spread of the virus globally — paving the way for other Indonesian and Asian credits to return to investors.

The trade also marked the first time an Asian sovereign had sold a 50 year bond — a tranche that was well received by investors.

The transaction, unsurprisingly, was yet another testament to Indonesia's savvy approach to the bond market. The country has been a frequent issuer for many years, and has long shown its sophistication by tapping different currencies and structures to build out its debt profile.

Faced with the shock of Covid this year, Indonesia, whose debt management office is headed by Luky Alfirman, made a quick adjustment. It moved its usual spring sukuk outing to June and instead marketed the pandemic relief trade to investors in April.

That was a smart move in the long run, as Indonesia went on raise $2.5bn from a three-tranche sukuk in June, one part of which sported a green label. Bankers on the sukuk pointed out that the Islamic financing exercise likely would not have been so successful had the issuer used the structure in April. A month after selling the sukuk, the sovereign printed a ¥100bn ($943m) Samurai bond.

BEST FINANCIAL BOND

Tongyang Life Insurance Co's $300m subordinated 30 year rolling in perpetuity non-call five year bond

Bookrunners: JP Morgan, Nomura and UBS

Tongyang Life Insurance's bond ticked a number of boxes when it came to the best financial deal of the year.

To start with, the September transaction was the issuer's first in the international market — no easy feat in a year defined by uncertainty. More important perhaps is the fact the deal reopened South Korea's insurance bond market, which had been closed for more than two years.

The country’s hybrid insurance debt market collapsed in 2018 amid a choppy environment and expectations of heavy supply. That year was marked by volatility, but the market started to show some signs of stability in 2019, before seeing a re-emergence of demand for subordinated bonds from Korean insurers this year.

That paved the way for Tongyang Life to reopen the issuance market with a $300m deal. Given how much was riding on the deal’s success — the ministry of finance of Korea was kept in the loop as it was keen to avoid any reputational damage that could hit the sector again with a pulled transaction — the issuer had to cover all its bases ahead of execution.

Tongyang Life first conducted a roadshow in 2018, when it did a lot of the heavy lifting to educate investors. It then revived its plans with a non-deal roadshow, before following up with investor calls just ahead of launch to secure indications of interest. A lot of work was once again needed to remind investors about the Korean insurance sector and about the Tongyang Life credit itself.

There were also regulatory questions to answer, given the Korean authorities are planning to introduce new requirements for the insurance sector, on top of compliance with the IFRS 17 that will be introduced in 2022. However, there is limited clarity on what the domestic regulations will include, meaning the best the lead banks and the issuer could do was communicate as transparently as possible with investors.

That wasn’t the end of it. The day that Tongyang Life decided to sell its bond, it faced volatility and competition from the likes of China National Chemical Corp, which took $3bn from its own bond sale. But the firm still managed to hit its capped deal size of $300m, selling the bond at 5.25%.

The deal reopened the market for similar transactions, while giving Tongyang Life access to a new pool of investors and liquidity. The market can expect Tongyang Life's competitors to follow suit in 2021.

BEST HIGH YIELD CORPORATE BOND

Vedanta Resources' $1.4bn bond

Global co-ordinators: Barclays, Credit Suisse, Deutsche Bank, JP Morgan and Standard Chartered

This was an unusual year for Asia's high yield market, given primary market access was cut off in March, April and May, before deal flow kicked off again with a frenzy.

The volatility was doubly challenging for Indian borrowers, as the country's regulators have caps on the price at which companies can sell their international bonds and loans. That ultimately kept most borrowers away from dollar bonds this year. But metals and mining company Vedanta Resources needed cash, and a dollar bond outing was part of the funding solution.

Vedanta's trade was unusual for the Asian bond market as it was tied to a delisting. The company had told investors in May that it would be taking its Indian commodities subsidiary private from the Bombay Stock Exchange and National Stock Exchange of India. To fund the delisting, the firm needed $3bn in total.

But as such an amount was not easy to raise in either the loan or bond markets alone, Vedanta used a combination of the two to meet its goals.

The company first signed a bridge loan of up to $1.75bn, with the flexibility of adding a second term loan later. So far, so good. However, when it came time to print the $1.4bn bond in August, plenty of work was needed to meet both the issuer's and investors' needs.

The leads decided on a three year non-call two amortising tenor, with a weighted average life of 2.5 years. That cut down on refinancing risk, offering comfort to investors. The notes were marketed in a 144A format — something bankers said was essential to garner orders.

The bonds were priced at a juicy 13%, reflecting the volatility in the company's existing bonds given the uncertainty of the take-private exercise. The notes were also secured — a first for Vedanta.

As an added layer of protection for investors, Vedanta said it will redeem the bonds at 101 should the delisting of its Indian arm not be completed. The inclusion of that feature was necessary given difficulties generally around getting enough support for take-privates in India.

That was the case for Vedanta in the end, as its delisting plan failed to get the necessary approval. As a result, the bond was redeemed and the bridge loan cancelled.

But Vedanta's failure to complete its delisting is not a reflection on the bond. If anything, it is evidence of how to structure an airtight deal as investors were able to walk away from their redeemed bonds unscathed — and with Vedanta’s reputation improved.

BEST STRUCTURED FINANCE DEAL

Korea Housing Finance Corp's €500m Covid-19 linked covered bond

Bookrunners: BNP Paribas, DBS, HSBC and ING

Covered bonds are still relatively rare in the Asian market, but Korea Housing Finance Corp (KHFC) is no stranger to the structure. The firm has established itself as a serious issuer, and as an added benefit to its investors, has favoured a social label for many of its trades.

This, by itself, is nothing spectacular given finding a social use of proceeds for KHFC's bonds is fairly easy, as the company was established to ensure affordable housing for low and middle income families in South Korea.

But KHFC's leadership in this market was not the only thing that helped its €500m covered bond win the best structured finance transaction award. It was the company's ability to adapt to the Covid-19 pandemic, tweaking its debt offering to sell a Covid-19 linked social covered bond.

The proceeds from the trade went a step beyond the issuer's usual social offerings. It targets disadvantaged groups in Korea that have suffered economically because of the pandemic. That made it the first Covid-19 social covered bond to be issued outside of Europe, and just the second to be sold anywhere in the world.

As a standalone transaction, the deal’s fundraising terms and execution also stand apart.

The issuer courted investors through phone calls and was able to attract enough interest to print its bond with a tiny 0.01% coupon. The bonds were priced at a yield of 0.003% — making it KHFC's second lowest yielding deal after it priced a negative yielding euro covered bond in February.

The issuer was able to gather a €590m book at reoffer, despite the extreme price sensitivities and selectiveness of European covered bond investors at the time of execution.

The deal shows the potential of covered bonds for Asian issuers, and the possibility for issuers in the asset class to link their transactions to social uses of proceeds. The investor demand shows there is a growing market for such products. Potential issuers should take note.

BEST PROJECT FINANCE DEAL

Star Energy Geothermal's $790m 18 non-call nine year green bond

Global co-ordinators: Credit Suisse, DBS and Deutsche Bank

Bookrunner: Barclays

Co-manager: BPI Capital

Project finance deals continue to be a rarity in the Asian dollar bond market, so when one does come along, it causes plenty of excitement among banks and investors. This year, Star Energy Geothermal's October transaction was a landmark trade, demonstrating the lead banks’ excellent execution and structuring capabilities.

Star Energy will be a familiar name to those familiar with Indonesia's project bond market. In 2018, the company netted $580m from its inaugural green deal. But much has changed for the company in the last two years, and the lessons learned from its maiden outing — which ran into hurdles amid volatility — were given close attention for its return.

When Star Energy approached the market this year, there were a number of differences compared to its trade two years earlier.

For starters, it used different issuing vehicles and underlying assets for its bond. The project was based on the Salak and Darajat geothermal plants, which Star Energy acquired from US energy giant Chevron in 2017.

The lead banks also had to prove their mettle with the deal structure. They worked closely with the ratings agencies to identify the tenor, size and amortising structure that would give the transaction an investment grade rating — a contrast to the 2018 trade's high yield status. The new bonds were rated Baa3/—/BBB-, while the previous notes were rated Ba3/—/BB-.

The rating difference proved to be a game changer. As a project finance offering, the trade was unique enough, but the fact it came from an Indonesian corporate credit in the investment grade market pushed its standing to a whole new level. A new set of investors was allowed to access the notes.

One of the keys to the deal was its balance between two tenors of notes. The company sold a public 18 year amortising bond, but also closed a 8.5 non-call 3.5 year privately-placed bond worth $320m. The $790m 4.85% 18 non-call nine year bond had a weighted average life of 14.1 years, while the private note, printed at a 3.25% yield, came with a weighted average life of 5.3 years.

If the structuring was not remarkable enough, Star Energy added additional glitz with a green label. The green aspect opened the pool of potential investors wider, but it also put Star Energy's transaction in contrast to other notable project bonds, such as Paiton Energy's $2bn trade.

Paiton, another Indonesian power producer, relies on coal. Bankers on the Star Energy deal believe pricing on Star Energy's bonds versus Paiton’s shows the clear pricing advantage that a green bond can secure. It is yet another example of the changing winds for coal power, and the future that companies like Star Energy will have.

BEST INVESTMENT GRADE CORPORATE BOND

BEST BOND

Petroliam Nasional's $6bn 10 year, 30 year and 40 year transaction

Global co-ordinators: Bank of America and Citi

Bookrunners and lead managers: HSBC, Maybank and MUFG

Few of Asia's dollar bond issuers faced easy markets when they sold their deals this year, but Malaysia's Petroliam Nasional (Petronas) faced a particularly difficult time when it made its return in April. The borrower overcame the hurdles to secure a $6bn triple-tranche trade, becoming GlobalCapital Asia’s winner of the best investment grade corporate bond and best bond of 2020.

The deal's timing, when it became one of the first corporations to reopen the Asian dollar bond market after a shock shutdown due to Covid, stands out. But Petronas’ ability to attract $37bn of orders and its skill in comforting investors in the face of a ratings outlook change to negative, the headwinds from Covid and volatile oil prices were also all remarkable achievements.

Before this transaction, the government-owned issuer had not sold a dollar bond since 2015. Its scarcity was a draw for investors, but the nature of the oil and gas company's business caused some hiccups.

Petronas initially began looking at the market earlier in the year, but decided to postpone its trade because of the choppy backdrop. The oil industry had a tumultuous start to 2020 when a price war broke out between Saudi Arabia and Russia. Malaysia’s political turmoil also didn’t help, with its prime minister resigning in February. The onset of the pandemic added further to the country’s woes, with Malaysia going into lockdown in mid-March, less than a month before the Petronas deal was sold.

Naturally, Petronas was not able to meet with investors in person, and instead had to rely on the then relatively novel way to hold a virtual roadshow to explain the state of its business and sector. In a further blow the week the bond was launched, the A2/A-/A- rated borrower's ratings outlook was changed to negative from stable by Fitch.

A lot had to be discussed with investors, but Petronas was quick to take their feedback and respond accordingly.

The oil giant was ready to market 10 and 30 year tenors, but added a 40 year portion based on investor preference. The 40 year portion set a new record, as the longest ever note sold by a Malaysian issuer.

Demand for all the tranches surpassed expectations. Even after the price guidance was tightened, the order book stood at $35.3bn. That allowed the bonds to be printed inside of fair value estimates, meeting Petronas’ goal of selling the deal without any new issue premium.

The quality of the book was strong as well, as asset and fund managers and hedge funds took at least 67% of each tranche of notes. US investors took about half of the trade.

Given the reception, Petronas could have easily sold a larger trade. But it was focused on setting a benchmark and taking a prudent approach to its funding. Its goal of selling a truly global transaction was apparent in its use of conventional bonds rather than the sukuk structure that Malaysia often favours. 

These layers of complexity and savviness were not unnoticed by rival bankers, with many saying this was one transaction they wished they had worked on this year. It’s a clear winner for 2020's best bond award.

BEST HIGH YIELD BOND HOUSE

Credit Suisse

It's tough to be number one in high yield in a year like 2020, but Credit Suisse managed to do just that.

The Swiss bank has always been a leader in the high yield bond market, but a bank’s true skills and leadership become even clearer in a tough year. The second half of 2020 saw such a flood of Chinese high yield property deals that it was almost easy to forget that the primary dollar market had been essentially closed for issuers at the start of the year.

When the Covid-19 pandemic spread globally in March, high yield deal flow ground to a halt. The few investment grade names that sold deals were forced to pay up. Many questioned how quickly the high yield market would reopen, and if the often financially pressured companies would be able to meet their refinancing needs.

Credit Suisse proved itself in two ways. One, it ensured its clients had access to funding when a public dollar bond trade was not readily available, by pursuing private placements, tapping its private banking clients, and underwriting deals when necessary.

Two, it was one of the banks that led the way in reopening the public market for its clients.

The bank's top ranking by volume in the Asia ex-Japan high yield G3 league table during our awards period, according to Dealogic, is a testament to its ability to find the right issuance windows for its clients. The bank had a market share of 9% and deal volume credits of $4.6bn, unseating Haitong Securities, which had held the number one spot in the league table in previous years. It also put Credit Suisse ahead of fellow Swiss bank UBS, which had credits for $4.23bn and ranked second during our awards period.

Being a leading bank in the Asian bond market requires a strong presence in China — something that Credit Suisse easily demonstrated with its numerous transactions. But it also necessitates a presence across the Asian region. On top of that, the winning bank must be able to work with numerous clients in different markets, and offer those clients funding in creative ways. Credit Suisse did that this year with its presence in Indonesia, India, Malaysia and the Philippines — the last of which offered more deal flow this year than in the past.

Credit Suisse worked on a number of remarkable, and sometimes difficult, deals.

For instance, the bank was part of the Vedanta Resources delisting trade that won GlobalCapital Asia’s best high yield deal of 2020 award. It led a number of Chinese property trades, rare Indian high yield deals like the October transaction from JSW Steel, Lenovo's high yield market opener in April and Philippine fast food chain operator Jollibee's dollar market debut.

The bank was also key in assisting many issuers with their liability management exercises. These trades were a theme of 2020 as many Chinese property companies in particular made an effort to prefund and take advantage of open markets when they appeared.

While many banks are guardedly optimistic about the high yield market’s development in 2021, they are nevertheless gearing up for some volatility too. Credit Suisse is well placed to lead its clients through any turbulence.  

BEST G3 BOND HOUSE

BEST HOUSE FOR SRI FINANCING

HSBC

HSBC is nothing if not consistent. The bank has topped Dealogic’s Asia ex-Japan G3 DCM bookrunner league tables for the past 10 years, and 2020 was no different.

During the awards period, HSBC had a 7% market share, with league table credit of close to $28bn, giving it the top spot despite heavy competition from Citi, which is clawing its way up on the league table.

HSBC has long touted its leadership in liability management, with these transactions making up a notable portion of 2020's bond trades. HSBC put the team and tools it had in place to lead the way for these deals, helping its clients with the increasingly sophisticated transactions needed to navigate a market that could shut any minute.

One of the most notable liability management transactions of the year was Mongolia's $600m trade. HSBC helped the sovereign take advantage of the market window in September to tackle its upcoming maturities and clinch a new 5.125% 2026 bond.

The bank was a leader in some of the challenging but market opening transactions following the closure of the primary market in March. HSBC worked on our deal of the year — Petronas' $6bn triple-tranche April transaction. It was also a bookrunner on Hong Kong insurance company AIA Group's $1bn deal, one of the first trades following the onset of Covid, China National Travel Service Group Corp's $900m outing and our best SSA bond of the year — Indonesia's $4.3bn Covid-linked sale.

Those April trades offer a glimpse of the clients that HSBC works with. The bank is a clear leader in Greater China and is building its onshore business further. It also had a solid presence in the rest of Asia too, with its breadth of coverage spanning deals from the Philippines, India, Indonesia, Malaysia and Singapore.

What set apart HSBC from its rivals this year? HSBC adapted rapidly to remote work, virtual roadshows and client meetings in 2020. The bank was able to use the technology and resources it already had in place to provide continuity of service for its clients, using its long-established relationships to ensure smooth executions even under trying circumstances.

One key change was the creation of the strategic solutions group this year. The group puts advisory first, looking at ratings, environmental, social and governance (ESG) standards, capital solutions and balance sheet advisory. The initiative is broader than just for DCM, but it allowed the bank to offer its clients the most appropriate solutions this year amid the pandemic. When the market shut for some borrowers, HSBC was able to adapt, offering private placement solutions or the ability to look at different markets for financing.

Part of HSBC's stellar performance also comes down to its abilities as the region's best house for SRI financing.

The bank was number one in this area as well, holding a market share of 12% and league table credits of almost $3.3bn for Asia ex-Japan G3 ESG bonds during the awards period, according to Dealogic.

As was seen in the winning bond categories this year, SRI is only becoming more important. Covid put a spotlight on the need for social funding in 2020, and HSBC was there to take related transactions to the international market. For example, HSBC led Kookmin Bank's debut euro social covered bond in July and Korea Land & Housing Corp's $300m social bond.

HSBC notes that of the 33 green, social and sustainable bond transactions it led, 17 were inaugural trades, including new deals from the China property sector. HSBC also worked on more creative SRI offerings, such as Castle Peak's energy transition bond. The bank's abilities in SRI will serve it well as ESG spreads further in Asia.

A special mention needs to be made for Crédit Agricole and its strengths in the SRI market this year. The French bank may not have the bond volume that HSBC does, but it continues to be a leader in the SRI market, working with clients across bonds and loans. Crédit Agricole actively supported less traditional green companies to break into the sector through sustainability-linked bonds and loans, as well as transition bonds, showing its commitment to developing the ESG market in Asia.

  • By GlobalCapital
  • 10 Dec 2020

Panda Bonds Top Arrangers

Rank Arranger Share % by Volume
1 Bank of China (BOC) 17.59
2 Industrial and Commercial Bank of China (ICBC) 14.82
3 China Merchants Bank Co 12.42
4 Agricultural Bank of China (ABC) 10.40
5 China Construction Bank (CCB) 9.39

Bookrunners of Asia-Pac (ex-Japan) ECM

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 Morgan Stanley 3.43 12 18.65%
2 CITIC Securities 2.34 7 12.75%
3 Goldman Sachs 1.69 7 9.21%
4 China International Capital Corp Ltd 1.43 9 7.76%
5 Citi 1.24 5 6.74%

Bookrunners of Asia Pacific (ex-Japan) G3 DCM

Rank Lead Manager Amount $bn No of issues Share %
  • Last updated
  • Today
1 Citi 3.01 18 8.07%
2 JPMorgan 2.54 22 6.81%
3 HSBC 2.28 26 6.12%
4 Standard Chartered Bank 1.97 18 5.28%
5 BofA Securities 1.86 15 4.99%

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