For investors looking for a combination of stable returns and growth, the Bangkok Skytrain network presented one such opportunity.
BTS Rail Mass Transit Growth Infrastructure Fund’s IPO of Bt42bn (US$1.3bn) was Thailand’s largest private-sector float and its first infrastructure fund, opening an entirely new market and deepening the region’s capital markets.
The format allowed sponsor BTS Group Holdings, the operator of the Skytrain, to raise money to expand the network without either increasing its leverage or diluting current shareholders.
The deal also put Thai IPOs on the map for global institutional investors, proving that jumbo deals were possible in another South-East Asian market.
More importantly, it set a template for many more infrastructure fund IPOs in sectors as diverse as power, telecommunications and technology.
The IPO was two years in the making and had its share of hiccups, including a legal challenge to one of BTS Group’s concessions, which delayed the launch at the start of 2013. When it came to market in April, the benign global interest-rate outlook and optimism for Thai economic growth were still working in favour of BTS.
Foreign institutional participation, however, was crucial for an issue of this size from Thailand, where domestic investors have traditionally been key drivers. Attracting global investors, however, was far from straightforward due to the fund’s unusual structure.
BTSGIF’s only asset is ticket revenue from a core stretch of the city’s monorail network, and the concession will end in 2029. Unlike a standard business trust, the assets are not in the fund and only the cash passes through.
However, to provide comfort to foreign investors, the fund has a step-in right for a claim over the asset, in case the BTS Group went bankrupt.
The management conducted extensive prelaunch cornerstone marketing and a nine-day international roadshow for a strong response to the IPO.
The overall book was 7x covered and the institutional tranche 30x, excluding cornerstone investors. The fund also received 56,900 retail applications, the highest for a Thai IPO.
Around 20 cornerstone investors took 60% of the total offering, institutional investors 20% and retail investors 20%. Long only investors bought 61% of the deal, and 80% was distributed outside of Thailand.
At the top end of the Bt10.40–Bt10.80 price range, the fund raised Bt42bn, excluding the sponsor’s own portion. The final price implied a 2014 yield of 5.8% and a 2015 yield of 6.5%. Morgan Stanley, Phatra Securities and UBS were the joint global co-ordinators.
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