It has been an annus horribilis for the global banking industry with the impact of the US sub-prime crisis resulting in huge write-downs in the US and Europe and higher funding costs for banks everywhere. A bad year, that is, except for banks in Asia.
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Indonesia has raised US$4.7bn from three issues this year as it scrambled to plug the hole in its deteriorating public finances. Despite the success of these deals, with a US$17bn-equivalent funding target for 2008, future financings are likely to become progressively more difficult.
If this is the sort of market that scares borrowers away, nobody told the Tata Group. Across its disparate businesses – motors, chemicals, power – it has been active both in syndicated lending and debt capital markets, at times seeming to keep the markets moving almost on its own.
Supermarket operator Wesfarmers, faced with a gargantuan task of refinancing A$4bn of debt in tough markets achieved the seemingly impossible earlier this year. The company raised A$2.5bn through a fully underwritten accelerated one-for-eight pro-rata entitlement offer and the balance A$1.5bn from the debt markets in a drama-riddled exercise.
The rest of the world normally views China’s A-share market as illogical because there seems to be no norms in the heavily regulated market. The recent Rmb6.54bn (US$955.5m) A-share IPO of China South Locomotive & Rolling Stock (CSR), however, has shown that an increasingly rigorous pricing logic is entering domestic listings. Investors are getting sensitive to pricing and the fundamentals from which price is derived.
Adaro Energy, which raised about Rp12trn (US$1.3bn) through its Jakarta Stock Exchange listing in July, was South-East Asia’s largest sole-bookrun deal this year. The deal was also one of the few IPOs of 2008 to trade in positive territory. But critics point out that most of the deal was distributed among only a handful of investors, who were richly rewarded when the IPO made a strong debut.
The South Korean equities market has been thrashed like the rest of the world by the ongoing financial panics. However, a W1.2trn (US$1.1bn) disposal in LG Display on April 12 proved that jumbo deals can be done if issuers are willing to seize their funding opportunities with both hands.