Malaysia’s national oil company PETRONAS tapped the US dollar bond market for the second time in two months this year as it priced on April 21 an upsized dual-tranche offering totalling US$3 billion.
The Reg S/144A deal consisted of a 10.75-year bond amounting to US$1.25 billion, which was priced at 92.5bp over the US treasuries for a coupon of 2.48%. This was 42.5bp tighter than the initial price guidance of 135bp area. The other tranche was a 40-year bond amounting to US$1.75 billion, which was priced at 115bp over the US treasuries for a coupon of 3.404%. This was 40bp inside the initial price range of 155bp area.
At these levels, the pricing represented the lowest coupon and tightest issue spreads ever achieved by PETRONAS and any other Malaysian corporates in both the 10-year and 40-year bond tranches. The yields achieved on both tranches were lower than PETRONAS’ existing secondary curve and borrowing costs.
The highly sought-after 40-year bond was the largest ever by an Asean issuer and priced at a mere 22.5bp over the 10.75-year bond yield – a far tighter spread than that achieved by most international and Asean issuers.
The offering, drawn from PETRONAS’ US$15 billion global medium-term note programme, garnered a total order book of US$7.4 billion. In terms of geographical distribution, the 10.75-year bond was sold to investors in Asia (48%), the United States (43%) and EMEA (9%), while the 40-year tranche was distributed 46% in the US, 40% in Asia, and 14% in EMEA.
This issuance follows the US$600 million bond offering printed by PETRONAS Energy Canada and guaranteed by PETRONAS in March this year, which generated a total demand of US$3.3 billion. The company issued in April last year a triple-tranche bond of 10/30/40 years totalling US$6 billion, which attracted one of the largest order books ever for an Asian issuer amounting to US$37 billion.
Proceeds from the issuance will be used for debt refinancing and general corporate purposes, thereby further optimizing the balance sheet and extending PETRONAS’ debt maturity profile. BofA Securities and Citi acted as joint global coordinators for the transaction, as well as joint bookrunners along with HSBC, Maybank and MUFG.