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Thursday, 20 June 2019

High-Yield Bond House

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With high-yield bonds under pressure for most of 2018, one bank excelled at guiding first-time issuers and challenging credits through tough markets. For picking its spots and supporting its clients, Credit Suisse is IFR Asia’s High-Yield Bond House of the Year.

Credit Suisse added to its already strong high-yield credentials in 2018 with an unmatched list of groundbreaking deals across Asia. It helped first-time and frontier-market issuers access funding, and dug up demand for borrowers from challenging sectors in difficult conditions.

The Swiss bank focused its efforts on clients who valued its advice, comfortably topping the fee tables for high-yield bonds despite slipping outside the top five by volume, according to Refinitiv data for IFR’s review period, covering Asia Pacific, excluding Japan.

Credit Suisse set itself apart from rivals with the two most eye-catching offshore debuts of the year – for Cambodia’s Nagacorp and the Papua New Guinea sovereign. It actively sought out sole mandates and was not afraid of underwriting commitments, at times taking bold decisions to give issuers confidence in challenging markets. In July, Credit Suisse underwrote a US$425m tap for Yuzhou Properties, a Chinese property issuer, to underwrite their deal on a sole basis to provide the issuer certainty of execution.

“There’s a story associated with all these deals,” said Derek Armstrong, head of debt capital markets for Asia Pacific at Credit Suisse. “You needed to be creative and prepared to do difficult deals in a market that has been as volatile as this year.”

Credit Suisse stood out when it came to more unusual credits. It demonstrated its leadership in frontier markets in May when it brought Cambodia’s first offshore deal via gaming and entertainment operator Nagacorp.

The US$300m 9.375% senior offering was arguably one of the most challenging of the year in Asia – an offshore debut from a country that did not even have an outstanding sovereign bond to use as a benchmark. However, adjustments to the size and tenor helped win over investors and ensure strong secondary performance.

In another remarkable transaction, Credit Suisse, as sole global coordinator, completed the Independent State of Papua New Guinea’s 20-year journey to the offshore bond market, which had seen three previous failed attempts with different banks. The US$500m 10-year bond, priced at 8.375% in September, set a rare long-term benchmark for a debut Single B issuer.

Appetite for Indonesian high-yield credit cooled this year, but Credit Suisse was able to bring issuers to market with success. Single B rated oil and gas explorer and producer Medco Energi had one of the hottest deals of the year in January, drawing eight times subscription for a US$500m seven-year non-call four trade, even though final pricing of 6.9% was inside most fair value estimates.

Even when interest in emerging markets weakened, the bank carried Single B Indonesian thermal coal producer Golden Energy and Resources across the line in February for US$150m before the window closed on the country’s high-yield issuers. In April, Credit Suisse brought Double B rated property developer Bumi Serpong Damai to market for a sensibly sized US$250m print, which it tapped for a further US$50m a week later. Though the companies both had to pay high premiums to clear the market, Credit Suisse’s advice proved justified when yields spiraled higher throughout the year.

In October, when demand for Chinese high-yield property bonds was at its lowest ebb, Credit Suisse brought Hengda Real Estate Group to market for a US$1.8bn deal, drawing on a variety of supporting factors that differed from previous trades from the group. The chairman of parent company China Evergrande Group announced at the outset that he would buy more than half of the bonds, the total deal size was clearly indicated to investors at final guidance, and the yield included a suitable new issue concession to ensure the deal cleared.

All of this was possible due to years of relationship-building with high-yield issuers and Credit Suisse’s ability to consistently identify pockets of demand for Asian high-yield bonds.

To see the digital version of this review, please click here .

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

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