now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
RoI attracts new investors as it returns to euro bond market
Chito Santiago 1 Sep 2015

The Republic of Indonesia (RoI) returned to the euro bond market, pricing on July 23 a 1.25 billion euro (US$1.37 billion) bond offering as it further diversifies its investor base.

The Reg S/144A 10-year deal was priced at 98.507% with a coupon of 3.375% to offer a yield of 3.555%. This was equivalent to a spread of 250bp over mid-swaps, or 10bp inside the initial price guidance of 260bp area.

The RoI did an extensive European roadshow at the beginning of June, covering a number of cities, including Geneva, Frankfurt, Paris and Amsterdam. It also went to Scandinavia for the first time, visiting the cities of Copenhagen and Oslo to bring in new investors.

The latest euro bond deal was part of the RoI’s overall funding plan for 2015 as they are constantly looking to diversify their funding sources as well. The sovereign had earlier raised US$4 billion in January this year and tapped the sukuk market in May for another US$2 billion.

“The roadshow went very well and we had positive feedback from investors,” says Raj Malhotra, head of debt capital markets for Southeast Asia and India for Societe Generale CIB, which acted as a joint bookrunner for the transaction. “But there were noises around the Greek debt crisis, so we advised the RoI to wait until markets settled before we launched the deal. We wanted to make sure that when we launched the transaction, it was in the right window and under the right terms.”

So it was not until July 23 after the Eurozone leaders had agreed to the Greece bailout that the arrangers felt there was an appropriate window to launch the transaction. “It was a window where we believed investors would engage, and we obviously wanted the RoI to get a good benchmark size transaction at the best price,” adds Malhotra.

The arrangers launched the offering just as the European market opened on July 23 and started to get good traction from the Asian accounts, who know the RoI credit very well. The deal also attracted good participation from the US investors.

In terms of pricing, the RoI paid a new issue premium of about 15bp, according to Malhotra. “In this market, we’ve seen a number of issuers paying significantly higher than what the RoI had to pay,” he points out. “The RoI clearly had certain pricing objectives, and we wanted to ensure those objectives were met in this transaction. Final pricing was mid-swaps + 250bp, or 10bp tighter than initial guidance, while ensuring a high quality order book and a further diversification of the investor base.” The bonds were trading slightly above re-offer in the morning of July 27.

The offering attracted an order book of 2.4 billion euro from 135 accounts, which was smaller than the 6.7 billion euro that its debut euro deal of one billion euro garnered last year.

In terms of geographic distribution, 37% of the bonds were allocated in the US, 20% in Asia (including 7% in Indonesia), 17% in the UK, 9% in Germany and Austria, 8% from Scandinavia and Switzerland, and 9% in the rest of Europe. By type of investors, fund managers accounted for 66%, banks and private banks 16%, insurance companies and pension funds 9%, and central banks and sovereign funds 9%,

Malhotra believes the euro bond market will be attractive to a number of Asian issuers. He explains: “Interest rates are still low in Europe, so the absolute coupon that issuers pay is quite low. There is also a view that the euro is a depreciating currency, making it an enticing prospect for borrowers. And if they have natural needs for euros and do not need to swap into US dollar currently, the euro market is a compelling proposition. In addition, many European fund managers are seeking diversification away from the traditional Euro borrowers and we believe many Asian issuers offer an attractive investment opportunity to those investors.”

Deutsche Bank and Standard Chartered were the other joint bookrunners for the transaction, while Bahana Securities, Danareksa Sekuritas and Mandiri Sekuritas acted as co-managers. 

Conversation
Sandy Tan
Sandy Tan
head of ecosystems, institutional banking group
DBS Hong Kong
- JOINED THE EVENT -
Exclusive roundtable
Unlocking the potential of sustainable supply chains
View Highlights
Conversation
Gloyta Nathalang
Gloyta Nathalang
executive vice president, corporate branding, communication and sustainability activation
Bangchak Corporation
- JOINED THE EVENT -
5th ESG Summit
Swinging into action
View Highlights