Star Energy’s bonds draw strong demand amid heavy deal pipeline
Indonesia's independent power producer (IPP), Star Energy Geothermal (Wayang Windu), on March 21 priced a US$350 million bond issue to fund the repurchase and redemption of its existing notes. The company was able to take advantage of the stable market window and overcame a heavily competing pipeline as it had to contend with four other Asian US dollar bond deals launched on the same day.
The Reg S/144A seven-year non-call four deal was priced at par with a similar coupon and yield of 6.125%. This represented 50bp inside the initial guidance of 6.625%. Concurrent with the issue, the company has launched a tender and consent solicitation exercise with an early consent deadline on March 22.
Before launching the transaction, Star Energy conducted a one-week roadshow in Hong Kong, Singapore, London, New York, Boston and Los Angeles, and met several investors through one-on-one meetings. It announced the transaction at mid-morning, Asia time, with an initial price guidance of 6.625% area, after which the order book grew swiftly to over US$3 billion by London open.
The strong investor demand has enabled the joint bookrunners and lead managers - Barclays and DBS Bank - to tighten the final price guidance to 6.25% area, before finally pricing the deal at 6.125% in the New York morning.
The final order book amounted to US$4 billion from over 200 accounts with 46% of the bonds allocated in Asia, 33% in Europe and 21% in the US. Fund and asset managers accounted for the bulk of the paper at 86%, with the remaining 8% taken by banks and private banks, and 6% by insurance companies and public institutions.
Fitch Ratings, which assigned a B+ rating to the bonds, says the proceeds will be largely used to refinance Star Energy's outstanding senior secured US dollar notes of US$337.5 million, of which US$12.5 million are due in 2013, US$25 million in 2014 and US$300 million in 2015.
As part of the refinancing process, the company will have the option of repaying US$85 million of its US$102 million subordinated shareholder loan immediately and a further US$1 million per annum thereafter. Fitch says it expects the repayment of the shareholders' loan to be made out of Star Energy's existing cash at hand - US$139 million as at end-December 2012 - and as such does not expect the company's total indebtedness to change materially.
Star Energy is an IPP located at Wayang Windu in West Java. It commenced operations in 2000, and owns and operates one fo the largest geothermal power stations in Indonesia.