Reuters: Bankruptcy News: Key test for Asian market as issuers jockey for position

Reuters: Bankruptcy News Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

Key test for Asian market as issuers jockey for position Sep 21st 2012, 13:46 By Helene Durand Fri Sep 21, 2012 9:46am EDT LONDON, Sept 21 (IFR) - The true depth of the Asian dollar Reg S market will be tested next week when Erste Bank, Raiffeisen Bank International (RBI) and ArcelorMittal all try to sell new transactions to private banks in the region amid competing supply from local issuers. Expectations are that the three deals will surface early next week, a step-up in the pace seen in recent weeks, with lead managers on Erste and ArcelorMittal already circulating term sheets in the market on Friday. The Asian dollar Reg S market has been a steady source of funding for European banks and corporates in recent months looking to sell more difficult, higher yielding instruments. Only last week, Danske Bank attracted an USD8bn order book for a USD1bn trade, getting a size and pricing level it would have struggled to get in euros. "The Asian investor base has been constant over the last two years and it's definitely not a flash in the pan and I would argue that they are less fickle than the European institutional investor base," said a senior syndicate banker. "However, you can question whether there is going to be sufficient depth. You have to remember that these issuers will not just be competing among themselves but also with Chinese high-yield companies." He added that while the names that had gone to the market so far - especially in FIG - had been well known, the market would now have to take another step. "Institutions like Erste and RBI are fairly new to the arena and it will be interesting to see whether you can sell the lesser known names there," he said. "They have done roadshows though, which should help with the reception." A DCM banker added that the market had developed well in recent years. "In the past, the recent supply we have seen would have likely caused some indigestion, but instead we are seeing ongoing demand in the secondary market and trades perform well." He added that while names like Erste and RBI might not be among the better known credits, they were coming with more defensive structures than ArcelorMittal. Erste has already said that its dollar Tier 2 will be a 10NC5 with a one time call in year five and no ability for the issuer to defer coupons, although there will be a reference in the documentation to the upcoming European Crisis Management Directive and resolution regimes. In contrast, ArcelorMittal's hybrid will be a perpetual non-call five trade and in traditional corporate hybrid style, the documentation will give the borrower the ability to defer coupons. SAFER OR JUICIER? Investors will have to decide what they prefer: the dated, non-deferrable instruments that yield less, or the perpetual deferrables that offer higher returns. The fact that ArcelorMittal carries a Baa3/BB+/BBB- rating at the senior level means that its hybrid will be firmly in sub-investment grade territory. A banker away from the trade said the most likely comparable would be the hybrid for unrated Louis Dreyfus priced in early September. The deal was priced with an 8.25% coupon and has since traded inside 8%. So ArcelorMittal will likely offer a juicy yield on what is a well-known name in the region. The pricing will likely leave some clear water between that trade and the Erste and RBI. Erste and RBI do not trade far from where ABN trades in euros, and the Dutch bank's USD1.5bn 10NC5 issue priced in early September therefore will be the closest comparable. That trade was quoted with a yield of around 5.6% on Friday, from the 6.25% pricing level. (Reporting by Helene Durand, Editing by Julian Baker) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions