The Banker 

Bonds: Corporates

CSL’s inaugural public bond offering 

Bookrunners: Bank of America, Citi, HSBC, JPMorgan

Co-managers: ANZ, Wells Fargo, Westpac 

Australia-based CSL is one of the world’s biggest protein-based biotech companies, operating in more than 35 countries and employing more than 25,000 people. The company has two main businesses: CSL Behring provides protein biotherapeutics to treat rare and serious diseases, while Seqirus is the second-largest influenza vaccine company in the world by sales.

In December 2021, CSL announced a $11.7bn deal to acquire Vifor Pharma, a Switzerland-based global speciality pharmaceutical company with strengths in iron therapies, dialysis and nephrology, and rare diseases. The deal complements CSL’s existing therapeutic focus areas and research and development capacity, while expanding its portfolio.

CSL took to the markets in April 2022, in a $4bn bond issue intended to part-repay a $6bn bridge facility associated with the Vifor acquisition, with five-year ($500m), seven-year ($500m), 10-year ($1bn), 20-year ($500m), 30-year ($1bn) and 40-year ($500m) tranches.

It was a landmark transaction on several counts: the largest ever single-currency debt capital market deal by an Australian corporate and one that achieved the biggest ever orderbook for an Australian corporate transaction, at $23bn. This was particularly impressive for an issuer making its debut in the US dollar market.

Notably there were 13 times investors in the book with combined orders over $300m, including one for more than$1bn. The transaction allowed for the company to achieve attractive all-in pricing across maturity buckets.

It was the biggest Australian corporate transaction since 2013, and the $500m 40-year tranche was the longest ever priced by an Australian company. After two days of investor calls, CSL had more than 105 individual investor discussions and attracted $1bn in ‘IOU’s before books opened. The burgeoning orderbook allowed CSL to tighten pricing by 25–35 basis points from initial price talks, and allowed for a diverse geographical allocation.

Bonds: Sovereigns, supras and agencies

Singapore’s syndicated 50-year green bond 

Sole green structuring adviser: DBS

Bookrunners: DBS, Deutsche Bank, HSBC, OCBC, Standard Chartered Bank

 Numbered among the few countries to boast a triple-A credit rating, Singapore is widely regarded as one of the world’s most robust sovereigns. In June 2022, ratings agency Fitch praised its “exceptionally strong external and fiscal balance sheets, high income per capita, sound macroeconomic policy framework and strong business environment”.

The city-state is thus in a strong position to place innovative debt instruments, as it did in August 2022 with a S$2.4bn ($1.8bn) bond issue, due in 2072. This was the government’s first green bond and first syndicated bond issue, the longest-dated green bond ever issued by a sovereign globally, and the longest-dated Singapore dollar-denominated bond ever issued.

That Singapore was able to place the bonds shows investor appetite for longer-dated paper, extending the curve for future benchmarking and supporting longer-term issues by Singapore corporate issuers, while developing the Singapore dollar bond market more broadly.

Due to the rarity of an issuance by a AAA-rated sovereign and demand for high quality long-dated bonds, the 50-year deal was well received by the investors. With Singapore’s credit credentials and bids from a range of high-quality institutional investors, the government was able to price the S$2.35bn in a placement tranche at 3.04%; the final orderbook was S$5.1bn (2.17 times oversubscribed) from more than 75 accounts. Some 73% of bids for the placement tranche came from insurers. An additional S$50m of bonds were opened to retail investors via public offer.

Proceeds from the bond will be used to fund expenditure under the Singapore Green Plan 2030, including expansion of the electric rail network. The Green Plan is designed to guide Singapore to a low-carbon future, with investments in areas including renewable energy, clean transportation and sustainable water management.

Equities

LIC’s IPO: largest in Indian capital markets 

Lead managers and bookrunners: Axis Capital, Bank of America, Citi, Goldman Sachs, ICICI Securities, JM Financial, JPMorgan, Kotak Mahindra Capital, Nomura India, SBI Capital Markets 

India’s primary market has been busy in the past couple of years with several companies making their way to the initial public offering (IPO) route. The Life Insurance Corporation of India (LIC) was one such company generating very high hopes. As well as being the country’s largest life insurer, it is also the fifth-largest globally by life insurance gross written premium, and 10th-largest worldwide in terms of total assets.

The Indian government-owned insurer ranked third globally in issuance in 2021, with 283 million policies serviced and 21 million sold. It has 1.35 million individual agents, 70 bancassurance partners, 215 alternate channel partners, and more than 3600 branch and satellite offices. It has a two-thirds market share in India, almost nine times that of its closest competitor, and was seen to have a great connection with general public.

It took a company of LIC’s size to break the record for the largest IPO in Indian history in 2022, at Rs205.6bn ($2.51bn). It remains one of just six Indian IPOs larger than Rs100bn, though the government only listed a 3.5% stake on both the National Stock Exchange and the Bombay Stock Exchange, India’s two leading exchanges.

The deal was launched at a price band of IRs902 to Rs949 per unit. LIC received a record-breaking 7.3 million IPO applications.

The offering came in several tranches for different investor categories, including qualified institutional buyers, retail investors, policy-holders and employees. Despite volatile equity markets and concerns over a central bank rate rise in the run-up to the IPO, each book was oversubscribed, from two times for the retail book to 6.1 times for the policy-holders’ tranche.

Some 98% of the anchor book went to long-only investors. Marquee anchor investors included Franklin Templeton, Norges Bank and Invesco Mutual Fund, among other leading mutual funds.

Financial institutions group financing  

Shinhan Bank’s $500m climate bond 

Joint lead managers: BNP Paribas, Citi, Crédit Agricole, Credit Suisse, HSBC, JPMorgan, Shinhan Investment Corporation

Shinhan Bank’s $500m 4.375% 10-year Tier 2 subordinated climate bond issued in April 2022 broke new ground, being both the first US dollar-denominated climate bonds from South Korea and the first from the Asian financial institutions group sector since 2020.

One of South Korea’s largest lenders, Shinhan Bank is part of the Shinhan Financial Group, one of the country’s ‘big five’ financial groups. This was the bank’s largest US dollar Tier capital issuance since 2017.

On Wednesday, April 6, 2022, the bank successfully priced a $500m 10-year Tier 2 subordinated climate bonds in 144A/ Reg S format, at a reoffer spread of Treasuries +185 basis points. The offering was well received by Asian investors and the orderbook size exceeded $1bn within 90 minutes.

Demand from institutional investors, including in Europe and the US, led to a final orderbook of $2bn, allowing the issuer to tighten pricing by 40 basis points from initial price talks. It has a coupon of 4.375% and reoffer yield of 4.436%.

The offering was well geographically spread, with Asia and Americas being allocated 59% and 25%, respectively. In terms of investor type, asset and fund managers accounted for 69%, insurance companies and pension funds 23%, sovereign wealth funds 4%, and banks and other investors 4%.

The proceeds from the issue, which was certified by the Climate Bonds Institute (CBI), will be used to finance (and refinance) low-carbon transport projects – Seoul Metro Line 9 and the Great Train eXpress (GTX) Line A – in accordance with CBI criteria, as well as Shinhan Bank’s own sustainable development goals financing framework. Sustainalytics provided a pre-issuance verification letter.

Infrastructure and project finance

ReNew Power’s ‘round the clock’ renewable power project 

Mandated lead arrangers: BNP Paribas, Crédit Agricole CIB, DBS Bank, Intesa Sanpaolo, Mizuho Bank, MUFG Bank, Natixis, Société Générale

Participant banks: Rabobank, Siemens Bank, Sumitomo Mitsui Banking Corporation, Nord-LB 

Intermittency is a key challenge for wind and solar power plants. ‘Round-the-clock’ (RTC), or non-intermittent, power stations aim to address the problem by combining renewable power with battery storage. With battery technology advancing quickly, RTC plans are becoming increasingly viable.

In 2021, Nasdaq-listed ReNew Power, India’s largest renewable power company, signed the country’s first power-purchase agreement (PPA) for RTC renewable energy supply, having won a tender for a 400 megawatts (MW) of capacity launched by Solar Energy Corporation of India, the national renewable energy off-taker.

Japanese corporation Mitsui took a 49% stake in the project in April 2022, and in October, the partners secured $985m in project financing from 12 global lenders. The deal is seen as a milestone in the Indian renewables industry, as the country looks to increase its non-fossil power capacity to 50% of the total 500 gigawatts (GW) by 2030, up from around 166GW in October 2022.

The project’s financing structure is also one of the first external commercial borrowing (ECB) loans in India and the largest it has yet secured in the renewable sector. (An ECB loan is raised by Indian entities from non-resident lenders.) ReNew Power already has a range of major foreign investors, including Goldman Sachs, Abu Dhabi investment Authority and Canadian Pension Plan Investment Board.

The deal will see developments at sites in three Indian states, totalling 900MW of wind capacity, 400MW of solar photovoltaic and 100MW hours of battery storage, with a minimum 400MW of RTC capacity.

The 25-year PPA underpins the deal, which requires the projects to have outsized capacity to meet minimum delivery levels. The project will thus deliver extra capacity, which can be disbursed in merchant sales. Under the deal, the banks considered merchant and uncontracted revenues that the projects may generate when forming their overall base case revenues.

Islamic finance  

Indonesia’s $3.25bn global sukuk offering 

Bookrunners: CIMB Group, Deutsche Bank, Dubai Islamic Bank, HSBC, Standard Chartered Bank

Co-managers: PT Danareksa (Persero), PT Trimegah Sekuritas Indonesia 

With a population of 275 million, Indonesia is the world’s fourth-most populous country and is the most populous predominantly Muslim nation. It is also widely regarded as one of the most promising emerging markets. This makes it one of the more dynamic Islamic finance markets globally; the country’s Islamic banking sector saw financing grow by 18.8% in the first nine months of 2022, according to Fitch Ratings.

The government of Indonesia is keen to strengthen the country’s position as a leader in Islamic finance markets and is an active participant. In June 2022, it issued its fifth global green sukuk as part of its largest global sukuk yet. The $3.25m global trust certificates came in two tranches: $1.75bn and a $1.5bn green issue, with five-year and 10-year tenures, respectively. The latter was the largest green sukuk tranche issued globally to date and the first green sukuk issued by Indonesia with a 10-year tenure.

The green issue is the first under Indonesia’s Sustainable Development Goals Framework published in 2021.

In difficult market conditions, including an increasingly hawkish turn by the US Federal Reserve to combat inflation, the issuer and participating banks, including arranger and bookrunner CIMB, identified an attractive issuance window. The issue attracted a final orderbook of more than $10.8bn from more than 200 accounts, an oversubscription rate of around 3.3 times.

This allowed Indonesia to squeeze pricing down by 35 basis points (bps) on the five-year tranche and 40bps on the 10-year tranche, landing a yield of 4.40% and 4.70%, respectively.

By investor type, asset managers and fund managers accounted for 41% and 49%, respectively, for the five-year tranche and the 10-year tranche, followed by financial institutions/banks at 30% for each. The offering was well-distributed geographically.

High-yield & leveraged finance 

BGH Capital’s A$495m acquisition of Virtus Health

Sole mandated lead arranger, underwriter and bookrunner on BGH Capital’s A$495m acquisition financing package: UBS

Financial adviser to BGH Capital: UBS

Financial adviser to Virtus Health: Jefferies 

Many deals made in 2022 were executed against a backdrop of market volatility, driven by the war in Ukraine and rising interest rates in particular. The A$495m ($331.9m) term loan B (TLB) raised by Australian private equity fund BGH Capital as part of its acquisition of ASX-listed in-vitro fertilisation services provider Virtus Health was no exception.

BGH achieved 90% shareholder approval for its takeover of Virtus in early June, at which point debt markets had been on the slide since March. By late June, UBS (the sole lead arranger, underwriter and bookrunner on the transaction, and sole financial adviser on the acquisition) had obtained credit and underwriting approval, and signed into the senior facilities agreement for 100% of the transaction — but then markets started to deteriorate again.

Syndication launched shortly after, but was followed immediately by the year’s most dramatic fall in market conditions. As a result of this, and investor feedback, margins on the BGH deal were increased, though by considerably less than the market overall. Despite further pressure to raise margin and fees, UBS was able to generate competitive tension to support pricing.

Thus, by mid-August, the lion’s share of the term loan facilities had been syndicated, despite only modest increases in secondary pricing in an environment of rising margins on leveraged loan primary transactions. The deal was fully allocated and oversubscribed by September 2, during what transpired to be a market window, with the market falling back towards historic lows in October. Final pricing was a success for the issuer, as was the covenant-lite structure, which gives BGH greater flexibility.

The underwriting and syndication package gives BGH the funding certainty to conclude the acquisition of Virtus, in which it had faced fierce competition from private equity firm CapVest, with 10 separate proposals in six months following BGH’s initial acquisition of a 20% stake in Virtus.

Loans  

Seaspan’s $1.17bn Sinosure-backed Jolco financing 

Mandated lead arrangers and bookrunners: BNP Paribas, Société Générale

Mandated lead arrangers:  Bank of China, Bank of Communications, Citi, HSBC, Standard Chartered Bank

Lead arrangers: Development Bank of Japan, Sumitomo Mitsui Banking Corporation 

A Japanese operating lease with call option (Jolco) structure is an operating lease that provides 100% financing from Japanese equity, with the lessee having an option to buy the asset at a predetermined price; it is generally accepted that they exercise this option. Jolcos are seen as tax- and accountancy-efficient structures that provide the lessee with 100% finance and competitive lease rates, while delivering yield and diversified fixed asset investments for the lender.

The structure is often used in the airline industry to finance aircraft acquisitions — hence its usage decreased during the Covid-19 pandemic — but it saw a resurgence in 2022, particularly as bank lending became scarcer and more expensive.

In December 2022, Hong Kong-based shipping company Seaspan secured a landmark $1.17bn underwriting deal for 15 container ships, combining a Jolco structure with underwriting from Chinese state-owned enterprise China Export and Credit Insurance Corporation, known as Sinosure.

The transaction combined three unique financing structures. First, a 12-year post-delivery syndicated loan backed by Sinosure. Second, sale-leaseback arrangements under the Jolco, under which special purpose companies (SPCs) established by Seaspan will sell and lease back the ships to SPCs set up by the Japanese equity arranger on their delivery. Third, the underwriting of a Jolco ship financing with Sinosure cover, which was a first.

The deal provides Seaspan with a longer tenor than traditional Jolco financing, lower costs compared to traditional commercial shipping loans, and diversified sources of funding. For the lenders, the Jolco will provide a considerably faster pay-out than traditional commercial lending structures. They also benefit from credit enhancement from the export credit agency throughout the financing term.

Importantly, the lenders in this deal have future-proof collateral in the form of vessels that have an Energy Efficiency Design Index in line with the Maritime Organisation Phase 3 targets for 2025.

M&A  

UOB’s purchase of Citigroup’s consumer business in four countries 

Financial adviser to UOB: Credit Suisse 

In April 2021, Citigroup announced that it would be exiting consumer banking operations in 13 markets as part of an ongoing strategic review. This included 10 in Asia, in which its retail operations lacked scale.

The withdrawal follows a trend by major international banks, including HSBC and Standard Chartered, to sell retail banking arms in regions in which they are less competitive, while refocusing on developing wealth management.

For regional banks in Asia, the Citi sale presented a unique opportunity to acquire a quality banking franchise and consolidate market share. Singapore’s United Overseas Bank (UOB) was the only buyer to acquire Citi subsidiaries in multiple markets in the highly competitive auction process.

In the largest overseas acquisition by a Singaporean bank since 2014 and the largest acquisition of retail banking assets in south-east Asia, UOB took over Citi’s consumer business in Indonesia, Malaysia, Thailand and Vietnam for a total of $4.92bn. The acquisition includes Citigroup’s unsecured and secured lending portfolios, wealth management and retail deposit businesses in the four countries.

UOB said that the purchase was fully funded by the bank’s excess capital.

As UOB’s biggest acquisition for 20 years, the deal enables the bank to meet its customer growth target five years ahead of time by doubling its customer base across the four markets to 5.3 million. Following the transaction, UOB is now the biggest foreign bank in Malaysia, second in Thailand and third in Indonesia by the same measure, and its card business ranks second, third and sixth in each market, respectively.

The deal sees the Singaporean lender raise its income by 1.4 times and loan growth by 1.2 times in the markets concerned, allowing UOB Group to target higher return on equity of more than 13%, and return on risk weighted assets of 2% by 2026.

Restructuring

Successful restructuring of China Fishery Group 

Adviser to the ad hoc creditor group: Houlihan Lokey 

The eight-year saga of China Fishery Group (CFG) is one of the longest and most complex restructuring processes on record. It includes liquidity issues, a loan covenant breach, an investigation revealing questionable deals, a Chapter 11 filing, tensions with trustees over a stalled sale and an inter-creditor dispute.

In November 2022, the deal finally closed with an agreement resulting in significant deleveraging, a simplified capital structure and the transfer of assets to a new company wholly owned and controlled by senior creditors.

Peru-based, Singapore-listed CFG is the largest anchovy fishing business in the world, producing fishmeal and fish oil products that are sold globally. It was previously a subsidiary of the Pacific Andes Group, a Hong Kong-based vertically integrated seafood company.

Following its climate-driven loan covenant breach in 2014, CFG creditor HSBC unilaterally applied to have the company put in provisional liquidation. The fisheries company successfully applied for Chapter 11 protection in 2016, following which club loan holders were able to put in place a trustee to govern the Peruvian business. After the trustee failed to sell the business, an ad hoc group of creditors appointed investment bank Houlihan Lokey as a financial adviser to structure and negotiate a creditor-led restructuring plan.

Houlihan Lokey had to negotiate several settlements. Concerns over the guarantee structure between the two types of senior debt stalled progress on the transaction for a year and a half, with an innovative solution found under which senior note holders agreed to give 12.5% of their recovery to club loan holders, opening the way to the deal and avoiding litigation in Peru.

The transaction raised $150m in new capital and significantly reduced CFG’s $700m debt. Senior creditors received $300m of new notes, 100% of the equity of the Peruvian fishing business, more than $54m in participation fees and $75m in cash distributed by the company.

Securitisation  

Bayfront Infrastructure’s third infrastructure ABS issuance 

Sole global co-ordinator: Citi

Bookrunners: Citi, ING, MUFG, Standard Chartered Bank, Sumitomo Mitsui Financial Group 

Bayfront Infrastructure Management (Bayfront) is a Singapore-based company established by Clifford Capital Holdings (with shareholders that include Singaporean sovereign wealth fund Temasek and the Asian Development Bank) and the Asian Infrastructure Investment Bank (AIIB) to mobilise private capital to address the infrastructure gap in Asia.

It was set up following the successful launch of the first infrastructure project finance securitisation — infrastructure asset-backed securities — in Asia by the Clifford-backed Bayfront Infrastructure Capital (BIC) in 2018, a $458m portfolio of project and infrastructure loans across 16 Asian countries. Bayfront’s second offering, BIC II, securitised $401m of loans and launched in 2021.

In September 2022, Bayfront launched BIC III, offering investors access to a $402.7m portfolio of 28 senior secured project and infrastructure loans. The loans are spread across 13 countries and eight industry sub-sectors, including conventional power and water (accounting for 36.2% of weighting); renewable energy (23.6%); and liquefied natural gas and gas (14.8%). Jurisdictions, by country of risk, include India (17.4%), Saudi Arabia (15.4%) and Indonesia (11%).

Around $163m, or 40% of the portfolio, is categorised as sustainable (green or social) assets under Bayfront’s externally verified sustainable finance framework. The securitisation included a specific sustainability tranche worth $110m or 27% of the total, to be fully allocated to green and social assets. It was 1.43 times oversubscribed, against 1.25 times for the transaction as a whole, and received a five basis points green premium, or ‘greenium’, (lower yield) on the conventional equivalent.

The AIIB acted as anchor investor, though its participation in one tranche was reduced due to the strength of investor demand. After extensive international pre-marketing, orders totalled $465m by the pricing date. Banks accounted for 40.6% of the final investor pool, followed by insurance companies (29.5%) and multilateral development banks (16.8%). The transaction, like BIC I and BIC II, thus successfully drew institutional investor liquidity into a project finance space that has historically been financed by bank balance sheets.

Sustainable finance

Ant Group’s $6.5bn sustainability-linked revolving credit facility 

Sole ESG structuring adviser: Citi

Joint co-ordinators: Citi, Credit Suisse, JPMorgan and Morgan Stanley 

Ant Group is a Chinese fintech and parent of Alipay, one of the world’s biggest mobile and online payment platforms, serving more than one billion annual active users and 80 million monthly active merchants as of mid-2022.

In October 2022, Ant Group signed an amendment and restatement of its key offshore funding structure, a $6.5bn revolving credit facility, to convert it into a sustainability-linked loan (SLL) with key performance indicators (KPIs) and sustainability performance targets (SPTs) to fit the company’s ambitious environmental, social and governance targets.

The new facility is the first ever syndicated SLL for a Chinese technology, media and telecommunications company, the largest-ever SLL in Asia-Pacific, and one of the largest SLLs issued globally in 2022. Support from investors was robust, with 20 banks from China, Europe, the US and the rest of Asia participating.

Ant Group achieved carbon neutrality in 2021, and now aims to reduce its absolute emissions by 30% in the 2020–25 period, and reach net-zero emissions by 2030, through reducing both direct and indirect impacts, including in its supply chain and leasing agreements.

The SLL’s environmental KPIs include reducing emissions from leased data centres, and leveraging the network effect of Alipay’s user base and technology to have a positive social impact. The SPTs align with the company’s net-zero roadmap and include supporting the general public to reduce its carbon footprint. It illustrates the company’s commitment to provide a safe, trusted, diversified and open ecosystem to drive common development with partners.

The structure incorporates a two-way incentive, with a margin step-up or step-down dependent on Ant Group meeting or missing the SPTs. The company hopes to make its facility a model for other companies to design and implement sustainable finance programmes.