Axiata secures lowest yield and coupon in latest debt offerings
Telecoms firm targets broadest possible investor base with combination of sukuk and conventional bond
14 Aug 2020 | Chito Santiago

One of Asia’s leading telecommunications companies, Axiata Group of Malaysia, has returned to the US dollar bond market with the combination of conventional bond and sukuk, achieving in the process the lowest yield and coupon ever for the offerings.

The company on August 12 printed a total of US$1.5 billion trade, including a US$500 million sukuk for 10 years and a US$1 billion conventional bond for 30 years. The 10-year sukuk was priced at par with a similar coupon and yield of 2.163%, representing a spread of 148 basis points over the US treasuries. This was the lowest yield ever achieved for a US dollar offering by a Malaysian corporate across both conventional bond and sukuk, and the spread was 52bp tighter than the initial price guidance of 200bp area.

The sukuk was structured based on the Shariah principle of wakala in which the underlying assets are airtime vouchers, representing an entitlement to a specified number of airtime minutes on the mobile telecommunications network of Axiata subsidiaries for on-net calls.

The 30-year conventional bond was also priced at par with a similar coupon and yield of 3.064%, or equivalent to a spread of 170bp over the US treasuries. This was the lowest coupon ever achieved by an Asian corporate for a 30-year tenor and the spread was 50bp inside the initial price range of 220bp area.

In issuing conventional bond and sukuk at the same time, Axiata targeted the broadest possible investor base. The transaction also represents the company’s commitment to proactively manage its balance sheet, extend its debt maturity profile and optimize its capital structure to match the assets and liabilities given the long-term nature of the telecommunications business.

The transaction marks Axiata’s first issuance of US$1.5 billion in the international capital markets. It is also its single largest issuance, and the 30-year tranche is its longest-dated offering to-date, securing strong cross-border participation from a wide and diverse base of investors.

Axiata president and group CEO Tan Sri Jamaludin Ibrahim says the issuances will enhance the group’s capital position greatly, while breaking new grounds in the financing market locally and within the region. “In addition to demonstrating Axiata’s ability to access the debt capital markets, this successful conclusion further affirms international investors’ confidence in the long-term fundamentals and resilience of the Malaysian economy and its ability to swiftly scale towards recovery in the aftermath of Covid-19 triggered challenges,” he adds.

In executing the transaction, Axiata opened the order book in the early morning Asia time on August 12, announcing an initial price guidance of 200bp area for the 10-year sukuk and 220bp area for the 30-year conventional bond. The deal immediately gained traction among investors with the order book peaking at US$11.8 billion across the two tranches, which enabled the deal arrangers to tighten the price guidance to 150bp area for the 10-year and 170bp area for the 30-year. The 10-year sukuk was eventually priced at 1.48%, while the 30-year conventional bond was printed at 1.70%

The final order book amounted to US$6.8 billion, with the sukuk attracting demand of US$3.8 billion, or a bid-to-cover ratio of 7.6 times, and the conventional bond garnering US$3 billion or a bid-to-cover ratio of 3 times.The issuances attracted interest from a diverse group of Islamic as well as conventional investors, comprising asset management companies, financial institutions, insurance companies and sovereign wealth funds, with participation from 245 accounts across key financial markets.

The sukuk represents the fourth issuance under Axiata’s multi-currency sukuk issuance programme of US$1.5 billion, or its equivalent in other currencies established on July 17 2012, while the conventional bond is the inaugural issuance under Axiata’s euro medium term note programme of US$1.5 billion, or its equivalent in other currencies established on August 10 2020.

CIMB Investment Bank, Citi, Standard Chartered and UBS acted as the joint bookrunners and lead managers for the transaction.

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