Asia debt pipeline: DBS, Tenaga bond issues herald promising deal flow

After a slow start to the beginning of the year for primary debt issuance, the pipeline for Asian bond issues is beginning to build up, with the reductions in US interest rates helping to entice borrower interest in the debt market.

  • 09 Mar 2001
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Forthcoming regional transactions are being spearheaded by two deals, with a perpetual non-call 10 year tier one issue from Development Bank of Singapore (DBS) in the offing and Malaysian power company Tenaga Nasional aiming to launch a new global bond to help finance a cash tender for two outstanding bonds.

DBS' tier one issue, comprising a $500m tranche and a S$100m tranche, is being roadshowed in the US this week, with the transaction tentatively expected to be launched by late this week. Goldman Sachs and Morgan Stanley Dean Witter are joint lead managers for the hybrid deal, with DBS joining as joint lead manager for the Singapore dollar tranche.

The deal is being launched by the bank's financial unit DBS Capital Funding Corp.

Some market observers anticipate that the pricing for the US dollar tranche could be around 240bp-250bp over US Treasuries, or slightly wider levels to where HSBC tier one paper, one of the closest comparables, was trading last week.

Tenaga Nasional's cash tender and new global bond offering is also in full swing, with the new deal expected to price by March 22. Lehman Brothers, Commerce International Merchant Bank and HSBC are joint bookrunners for the new transaction, while Lehman Brothers and HSBC are dealer managers for the cash tender. Earlier today (Monday), Standard & Poor's rated the proposed bond issue BBB, the same level as the company's rating.

Officials familiar with the 10 year transaction have said that a spread of 250bp-260bp over US Treasuries is likely, although some market observers think that 280bp-290bp is more probable, given comparable Malaysian corporate spreads. "The deal looks interesting but it might come through a bit on the expensive side for the issuer," said one banker.

Strong pipeline from Hong Kong issuers?

Following the DBS and Tenaga transactions could be an international deal from commercial property manager Hongkong Land. The company has expressed an interest in tapping the Yankee bond market and has awarded Goldman Sachs and JP Morgan the mandate for a $500m 10 year transaction, said bankers.

"The company is interested in accessing the market at a decent time and getting good pricing for longer dated paper," said one banker familiar with the company. Depending on market conditions, the likely timing for a deal would be in April, the official added.

The deal is expected to roadshow in the coming month. Last week Moody's and Standard & Poor's assigned respective long term foreign currency ratings of A3/A- to the company.

"Hong Kong issuers are very realistic about market conditions to evaluate the pricing expectations for issues," said the banker. "Given the low interest rates right now, the outlook for further Hong Kong corporates accessing the market is very optimistic." Tried and tested Hong Kong companies such as Mass Transit Railway Corp are potential issuers this year, said observers, while new names such as Hong Kong Mortgage Corp could also access the market. In late January, the government entity spoke to several banks with a view to appointing a ratings adviser in late January and was planning to finalise its choice this month.

So far this year, Hutchison Whampoa has led the way to take advantage of the reduced US interest rates, arranging a $1.5bn 10 year bond in February. Goldman Sachs, JP Morgan and Merrill Lynch joint lead managed the transaction, and the company indicated that further issues could be arranged later in the year. Hutchison is well known for its astute timing when accessing the international debt markets, and the fact that it has taken advantage of market conditions is seen as a good indication of Hong Kong-based borrower interest.

KDB to delay bond plans until second half

Korea Development Bank (KDB), a frequent borrower in the international capital markets, is likely to issue later in the year, according to a spokesman at the bank. "We were intending to launch a deal in the first half but due to lower than expected local demand for loans we may delay a dollar bond until the second half," said the company official.

No mandate has yet been awarded for the bond issue and the structure has not been finalised, but a size of $500m is likely, the spokesman added.

The transaction's tenor will depend to some extent on market conditions and on whether it is arranged as a global, a Yankee bond or a Eurobond. KDB last accessed the market through a S$100m 3.5% transaction via Barclays Bank and JP Morgan in July 2000.

Some banks also hope to see Malaysian company Malaysian International Shipping Co access the market in the coming months. The corporate has been speaking to a number of banks to gain a ratings adviser, but company officials have said that no specific bond issue has been considered. A final decision from the company regarding the rating advisors is anticipated soon.

Chinese issuance levels depend on sovereign bond launch

One of the most anticipated transactions for the year is a potential $1bn global bond for the Ministry of Finance for the People's Republic of China. The MoF selected JP Morgan, Goldman Sachs and Morgan Stanley Dean Witter to joint lead manage the deal last year, but subsequently delayed its plans.

Bankers hope to see the MoF make a final decision after the National People's Congress, which is taking place this week.

"If the MoF does decide to do a deal it could open the door for several other issuers to access the market," said one Hong Kong banker. "But it all depends on the transaction from the MoF which will act as a benchmark for other issuers."

Despite the potential for a healthy regional pipeline, bankers remain cautious. "There are always lots of deals being discussed but most never get launched," said one regional banker.

Set against the economic background worries of a US recession later in the year, some bankers are also concerned that unless issuers seek to access the market early in the second half, economic conditions will deteriorate, closing the window of opportunity for many potential issuers.

  • 09 Mar 2001

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 328,982.98 1272 8.11%
2 JPMorgan 320,525.86 1391 7.90%
3 Bank of America Merrill Lynch 295,678.15 1012 7.29%
4 Barclays 247,860.38 923 6.11%
5 Goldman Sachs 218,821.95 732 5.39%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 45,800.95 180 7.01%
2 JPMorgan 44,256.04 91 6.78%
3 UniCredit 35,452.34 152 5.43%
4 Credit Agricole CIB 33,170.05 159 5.08%
5 SG Corporate & Investment Banking 32,244.80 125 4.94%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 13,643.79 60 8.96%
2 Goldman Sachs 13,204.47 65 8.67%
3 Citi 9,716.40 55 6.38%
4 Morgan Stanley 8,471.86 53 5.56%
5 UBS 8,136.41 33 5.34%