A junk bond jamboree

Non-investment grade bond issuance soared during January as investors sought out bang for their bucks. The equity markets had a quieter beginning to the year but the future looks promising. Anita Davis and Clare Hammond report

  • 14 Feb 2013
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Asia Pacific high yield bond issuance enjoyed a record-breaking month in January. In total US$11.11 billion-worth of international debt was sold across 28 deals, the largest amount on record.

The total surpasses the US$148 million issued in January 2012 by a factor of 75 times, according to data provider Dealogic. It represents nearly 20% of total debt capital market (DCM) volume through the month, also the highest monthly share on record.

Sixty-two percent of the issuance was supplied by Chinese borrowers, totalling US$6.86 billion – a stark contrast from 2012 in which only US$1.14 billion was recorded.

Appetite for mainland China credits was fuelled by positive economic data at the end of 2012.

“[From November] the PMI [price manufacturing index] numbers have been moving in quite a positive trend,” says Frank Kwong, BNP Paribas’ head of syndicate, Asia Pacific. “People were previously worried that, amid the economic slowdown, Chinese companies wouldn’t be able to service their bond coupons. But now that the PMI is growing, investors are much more bullish about the demand for Chinese products and manufacturing.”

Debt sold by Filipino and Indonesian issuers follow China in terms of volume, with the two countries accounting for 13% and 11% market shares, respectively.

Globally, Asia Pacific accounts for 17% of high yield bond volume this year, also the highest level on record. This figure is up from 1% in January 2012.

Buyback opportunity

The strong start for Asia’s high yield market helped brand-name corporates use new bonds to buyback outstanding debt at cheaper rates.

Macanese casino operator Melco Crown Entertainment’s US$1 billion 5% eight non-call three bond issue on January 30 exemplified the trend. The ‘Ba3’/‘BB-’ rated borrower issued the deal ahead of its tender offer for a US$600 million 10.25% bond due in 2018, according to bankers close to the deal.

Any additional proceeds following the initial buyback would be used to repay a Rmb2.3 billion (US$369.8 million) transaction due on May 19.

Weeks earlier on January 8, Indonesian property developer Lippo Karawaci (‘BB+’/‘BB+’) tapped its 6.125% November 2020 bond issue for an additional US$130 million at a yield of 5.243%, bringing the total transaction to US$403.3 million. Part of the proceeds will be used to buy back a US$125 million outstanding deal due May 2015 that has a 9% coupon.

“Coupons for single-‘B’ [China] credits have come down from 12%-13% two years ago to 8.5%-9.5% now,” explains Herman van den Wall Bake, head of fixed income capital markets, Asia at Deutsche Bank, who arranged the Melco deal. “Names like Melco Crown borrowed in 2010 at 10.25% and now they’ve halved that coupon to 5%.”

A syndicate banker close to the Melco deal adds that Chinese high yield property companies are among the strongest candidates to sell bonds for buybacks, given their spreads have tightened “by up to 300 basis points (bp)” in the last three years. Likewise, the public debt market has become more familiar with Chinese technology names and Indonesian industrial names.

Korean constraints

Demand for high yield deals has come at the cost of would-be Korean borrowers.

Among companies to have struggled was Shinhan Bank, which sold a US$350 million 5.5-year senior unsecured bond on January 23, after cutting the deal size from US$500 million after investors balked at initial guidance of 130bp above five-year Treasuries. The ‘A1’/‘A’ rated bank finally priced the deal at 127.5bp over Treasuries.

“We wanted to price at that specific level,” Kim Jae Wook, a funding official at the Seoul-based bank, told Asiamoney on January 23, further noting that, “there’s a difference between what investors think and what we think” when asked why investor demand dropped during the deal.

Korea Development Bank’s US$1 billion duel-tranche deal on January 15 also met with lacklustre demand, but gained decent spreads by targeting short tenors. Likewise Hana Bank’s short-dated issue helped it to achieve the lowest spread for a Korean commercial bank in the market since 2005, according to EuroWeek Asia. It also sold a US$500 million three-year bond on January 29, priced at 105bp over Treasuries.


Equity market confidence is picking up, with total issuance for January at US$13.98 billion, almost five times the US$2.78 billion over the same period in 2012.

Block geography has been diverse in 2013, with Philippine-listed GT Capital Holdings, Thai telecoms company ShinCorp, India’s AXIS Bank and Taiwan’s Innolux Corp all selling shares.

In addition, a slew of big Chinese names have driven volume. On January 9, Industrial Bank placed a mega US$3.76 billion follow-on with four investors – Beijing Infrastructure Investment, China Tobacco, PICC Asset Management and Shanghai Zhengyang International Trade.

It was the biggest ECM deal globally in 2013 as well as the largest Chinese ECM transaction since August 2012, when Bank of Communications (BoComm) placed US$4.7 billion worth of shares via Credit Suisse, Citic Securities, Goldman Sachs and Hongta Securities.

IPO increase

The initial public offering (IPO) market remains subdued, with 18 new listings worth a total of US$1.15 billion. However, PanAsialum, Time Watch Investments and Chinalco Mining Corp International all closed deals in the last week of January with high participation from retail accounts.

Chinalco led the way on January 24 with a debut of US$398 million worth of shares, conducted via BNP Paribas and Morgan Stanley as joint global coordinators, plus a further four joint bookrunners. The shares fell 6.9% in immediate secondary market trading. However, some were not deterred by the poor after-market performance.

“You trade down, but you get more liquidity which allows a long only investor to find a proper stabilisation level for the stock. That will be a fundamental position from which to build and the retail investors will come back in,” says a head of ECM for Asia ex Japan.

The Malaysian IPO market was one of the few buoyant spots across Asia last year. ECM bankers expect an equally strong start to 2013. Malakoff Corp is looking to raise up to US$1 billion after March, while Ranhill Energy and Resources, Tune Insurance and Westports Malaysia are also looking to debut stock, according to EuroWeek Asia.

“I expect IPO levels to increase but it may take another 10% to 15% on markets to encourage entrepreneurs to sell equity stakes in their businesses,” says Gary Dugan, chief investment officer Asia at Coutts Private Bank.

  • 14 Feb 2013

Bookrunners of International Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 19,736.59 102 7.90%
2 HSBC 18,977.38 147 7.59%
3 JPMorgan 18,589.64 89 7.44%
4 Standard Chartered Bank 16,316.66 103 6.53%
5 Deutsche Bank 11,500.06 60 4.60%

Bookrunners of LatAm Emerging Market DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Bank of America Merrill Lynch 3,412.89 11 11.86%
2 JPMorgan 2,926.36 10 10.17%
3 Citi 2,873.13 13 9.98%
4 Morgan Stanley 2,678.21 7 9.31%
5 Santander 2,241.90 11 7.79%

Bookrunners of CEEMEA International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 10,384.27 32 5.85%
2 Citi 10,180.55 30 5.74%
3 Standard Chartered Bank 9,331.24 32 5.26%
4 HSBC 6,479.00 27 3.65%
5 Deutsche Bank 4,875.44 9 2.75%

EMEA M&A Revenue

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 02 May 2016
1 JPMorgan 195.08 50 10.55%
2 Goldman Sachs 162.26 37 8.77%
3 Morgan Stanley 141.22 46 7.64%
4 Bank of America Merrill Lynch 114.20 33 6.18%
5 Citi 95.36 35 5.16%

Bookrunners of Central and Eastern Europe: Loans

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 789.37 4 14.28%
2 MUFG 780.58 3 14.12%
3 Industrial & Commercial Bank of China - ICBC 742.79 3 13.44%
4 JPMorgan 301.80 3 5.46%
5 SG Corporate & Investment Banking 225.64 3 4.08%

Bookrunners of India DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Standard Chartered Bank 1,783.30 14 17.83%
2 HSBC 1,156.32 12 11.56%
3 JPMorgan 1,015.66 11 10.15%
4 Citi 906.15 10 9.06%
5 Barclays 767.96 9 7.68%