
GlobalCapital Asia regional capital markets awards 2015, Part II: Equity

In the second part of our 2015 awards, we present the winners for Best Equity-Linked Deal, Best IPO, Best Follow-on/ABB and Best Equity House.
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BEST EQUITY-LINKED DEAL
Hyundai Heavy Industries $221.6m guaranteed exchangeable bonds due 2020
Joint lead managers and joint
bookrunners: Bank of America Merrill Lynch and HSBC
In a year when volume was so thin that nearly every
equity-linked deal was hailed as a market opener, Hyundai Heavy Industries’
exchangeable bond stood apart. It was the first offshore equity-linked deal
from South Korea in over a year, carried a rare credit enhancement from the
Korea Development Bank and used an unusual approach towards providing stock borrow.
For all these reasons, the $221.6m EB is GlobalCapital
Asia’s Best Equity-Linked Deal of 2015.
The five put three notes, callable in three years and
exchangeable into shares of Hyundai Merchant Marine Co, had plenty going for
them having been in the works for more than six months.
A lot of that time was spent convincing KDB to support the
trade. KDB often guarantees straight debt, but this marked one of the first
occasions it was backing an equity-linked transaction. While leads Bank of
America Merrill Lynch and HSBC spent a considerable amount of time with the
policy bank to get it comfortable, Hyundai also leveraged on its strong
relationship with KDB to get it on board.
The credit enhancement was critical given Hyundai is highly
levered but was adamant about not paying up. The work paid off. KDB’s support
boosted its status to investment grade, allowing it to pull off a zero coupon
and zero yield trade.
South Korean regulations also posed a hurdle as underlying
shares are banned from being used as stock borrow. This meant the leads had to
create a facility where borrow was provided by another entity – Hyundai Samho
Heavy Industries Co. This is also rarely done in equity-linked transactions but
was important for the deal’s success.
The combination of these factors makes Hyundai’s EB a clear
winner. The leads successfully juggled the objectives of each party – the
issuer’s goal of achieving a zero coupon; KDB’s of netting the best pricing on
the guarantee and Samho’s on receiving good pricing on the borrow.
Investors were also happy; their appetite evident as the
bonds traded up to 101/101.5 in the grey market. They put in enough orders to
make books multiple times covered, with the EB pricing at the high end of its
conversion premium range of 37.5%, setting a strong precedent for other such
structures to follow.
BEST IPO
GF Securities Co
HK$32bn ($4.13bn) IPO
Joint sponsors: GF
Capital (Hong Kong) and Goldman Sachs. Joint global co-ordinators: Bank of
America Merrill Lynch, BoCom International, Deutsche Bank, GF Securities (Hong
Kong) Brokerage, Goldman Sachs and Morgan Stanley. Joint Bookrunners: ABCI
Capital, CCB International Capital, China Merchants Securities, China
Securities, CIMB Securities, Guosen Securities,
Huatai Financial Holdings, HSBC, ICBC International, Industrial
Securities and Sun Hung Kai Investment Services
If there was only one theme in China ECM this year, it was
FIG. From IPOs to H-share placements, issuers from the financial sector went
full steam ahead with their fundraisings, making the most of an unprecedented
boom in China and Hong Kong.
And GF Securities Co’s HK$32bn ($4.13bn) juggernaut was the
one that started it all. The Chinese brokerage led the charge for the deluge of
FIG deals that followed, including HTSC’s IPO and placements from China Galaxy
Securities, Citic Securities Co and Haitong
International Securities Group.
But the journey was far from smooth. The mandate for the IPO
had been sitting on bankers’ desks for the better part of four years, as the
issuer bided its time to make the jump from A-share to dual listing. When 2015
rolled around, it got its chance.
There couldn’t have been a better time. Chinese brokers were
seeing their biggest rally in years as the A-share market exploded. But of all the
FIG deals on the table, GF was the first to take the plunge, setting the bar
high.
The IPO is a landmark on a number of counts. At the time of
pricing, it was the largest IPO for a securities firm globally, the largest IPO
in Asia ex-Japan since 2011, and largest overseas IPO by a Chinese broker. In
all, 12 new listings from the finance and insurance sector raised $16.22bn in
Hong Kong up to end-November.
GF’s success was down to the concerted effort of the leads
to reach out to investors early in the process. The move helped drum up $1.9bn
worth of demand from 18 cornerstone investors, who mopped up over 50% of the
shares even before bookbuilding started.
From there it was only a matter of time before hundreds of
global accounts flooded into the trade, allowing it to be multiple times
covered throughout the marketed range. Pricing, unsurprisingly, came in at the top
of its HK$15.65-HK$18.85 guidance.
While there have been larger IPOs this year, by coming first
GF Securities became the standard bearer and the trade everyone looked to as
the yardstick for their own success. For these reasons, GF Securities deserves
the title of Best IPO of 2015.
BEST
FOLLOW-ON/ACCELERATED BOOKBUILD
Industrial Bank Co
$2.07bn secondary
placement by Hang Seng Bank
Sole bookrunner:
Goldman Sachs Gao Hua Securities Co
Of the hundreds of block trades that priced in Asia this
year, none did it quite like Industrial Bank. Hang Seng Bank sold down a 5%
stake in Industrial Bank in February, in a trade that broke barriers and went
boldly against the grain.
Hang Seng was looking to cash in on the 953m A-shares it
held in Industrial Bank, mandating Goldman Sachs for the job. But there were
huge challenges to overcome, not least the fact that an A-share block had never
been distributed on a large scale before.
This was because block trades on the Shanghai Stock Exchange
had only previously been sold on a piecemeal basis to one or two buyers at a
time, and onshore market participants were not used to the kind of broad-based
price discovery this deal was trying to achieve.
So Goldman set out to pioneer the first ever institutionally marketed A-share block sale in
China, aided by the Shanghai-Hong
Kong Stock Connect. The platform was key to sealing the deal as it created a
bridge between China’s hard-to-access onshore market and institutional
investors offshore.
But being the first mover also
has its drawbacks. In order for the trade to be a success, Goldman had
to educate a wide array of parties,
including not only the issuer and investors, but the stock exchange and
regulatory bodies.
And because Goldman’s own QFII quota was too small to accommodate all the orders,
it quickly pooled together about $3.5bn worth of QFII with the help of several
banks.
Even when it came time to
execute the block, there was plenty working against the lead. It had less than
two weeks between kick-off and pricing, and on the day of the trade the lead
pulled off what can only be described as surgery.
With only a 30-minute
window to cross the shares, time was not on its side. Goldman got around this
by working on a minute-by-minute schedule with the brokers,
detailing each crossing to make sure the trade went off without a hitch.
And it paid off handsomely. The block
priced at Rmb13.36 a share, or a 7% discount to its last close. If that first
deal wasn’t ballsy enough, Hang Seng returned with a similar sell-down in
Industrial Bank just three months later – proof that it was a winning strategy.
BEST EQUITY HOUSE
Goldman Sachs
Calling 2015 a tough year for equities would be an
understatement, but Goldman Sachs managed to stand out by putting together a
game plan that worked to its advantage and helped it stay ahead of the pack.
The bank received bookrunning credits for 48 deals in Asia
ex-Japan ex-onshore China during GlobalCapital
Asia’s awards period, giving it a market share of 6.8% for $10.75bn of
volumes. It ranks second in the league table behind Morgan Stanley, which
executed 58 trades worth $14.08bn for a market share of 8.9%.
While numbers are important, 2015 was more about staying
relevant when markets turned choppy. Following a boom, China’s equity markets
crashed in the third quarter, bringing primary issuance to a near halt as
issuers and investors took pause. But Goldman steered its business
successfully, showing continuous leadership in execution and meeting the
demands of both issuers and investors.
China was a big theme this year despite the summer rout and
Goldman was quick to adjust its strategy to capture opportunities there. It
added more staff dedicated to China, including boosting the sales team from
both the institutional and corporate side. It also invested more into its China
equity derivatives operations to make it a meaningful part of the ECM franchise
and worked at providing alternative fundraising avenues for companies when the
onshore market was inaccessible.
This was evident from the suite of trades it executed.
Goldman was a sole lead on a $700m forward sale and placement of delta hedge
shares in China Pacific Insurance, through which German insurer Allianz hedged
part of its stake in the Chinese company. Goldman was also the sole bookrunner
on a $2bn A-share block for Industrial Bank —GlobalCapital Asia’s best follow-on offering — which marked the
first ever institutionally marketed A-share block.
And where there were big trades, there was Goldman. In
southeast Asia where deal flow was thin, the bank was involved in some of the
larger trades such as Sampoerna’s
$1.4bn rights issue and concurrent placement in Indonesia. In India, it
gained market share thanks to a sizeable $3.2bn block for Sun Pharmaceuticals.
And in Hong Kong, where financial names made their presence felt in the block
and IPO market, Goldman led the way including as a joint sponsor on GF
Securities HK$32bn listing, our IPO of the year.
What helped the bank maintain credibility is the way the ECM
syndicate team works in close collaboration with the sales force. This helps bankers
feel the pulse in the market, know what investors are looking to buy and know
where liquidity is, which means bankers are better positioned to have relevant
conversations with corporates and potential vendors.
Putting capital on the table quickly is important, but
bankers at Goldman also understand that being disciplined is equally critical
especially when markets are volatile. The bank achieved this by holding
conversations between the senior management, the sales, the ECM and syndicate
members before deciding to use the bank’s balance sheet for transactions. While
not a novel way of doing business for Goldman, it is an approach that held it
in good stead while avoiding any slip-ups.
Others such as UBS have a similar approach to their business
and also found success. But Goldman triumphed in identifying themes early on,
taking pole position in large transactions and having a wide geographic reach
in a difficult year to clinch the title of Asia’s best equity house.