Vingroup’s first high-yield bond was a landmark offering that reopened the offshore bond market for Vietnamese credits. After a prolonged lull in capital-market activity amid years of economic turmoil, the deal came as a vote of confidence in both the company and the country.
The US$200m 4.5-year non-call three 144A/Reg S bond, priced in early November, marked the biggest offshore offering from a privately owned company, as well as the first from a Vietnamese real-estate operator and the first issue from the country since May 2012.
The deal was far from plain sailing. Vingroup faced numerous challenges, principally the lack of comparable paper to use for marketing purposes, as well as the backdrop of a Vietnamese property sector where prices had consistently fallen due to oversupply.
Underlining the scale of the task at hand, Vingroup had already aborted one attempt to market the deal in mid-December 2012, due to little interest from investors as they had already shut books for the year.
The second time around, the deal again provided an early cliffhanger when it failed to priced on October 30 after being announced in Asia earlier in the day. The one-day delay was attributable to US investors, who had asked for more time to process the credit.
Despite this delay, the book was 1.5x covered, allowing the leads to tighten guidance from 12.000% down to 11.875%, where the deal priced.
Waiting a day meant the deal priced into a tougher trading session, with prices weak after a more hawkish statement from the US Federal Reserve than the market had anticipated. Nevertheless, there was little book attrition at the tighter guidance, and the delayed US orders came through.
Credit Suisse was global co-ordinator, while Deutsche Bank and ING were joint bookrunners.
The deal benefited from burgeoning demand for diversification among high-yield investors, many seeking an alternative to the Chinese property sector.
It also continued Vingroup’s efforts to diversify its investor base after issuing two convertible bonds in the past three years, and after a US$325m private-equity investment in May from a Warburg Pincus-led consortium.
The proceeds from the bond were destined to fund development projects at the group’s commercial property arm, Vincom Retail.
With a market capitalisation of around US$3bn, Vingroup is the fifth biggest stock on the Ho Chi Minh exchange, and is looking to create an international profile ahead of a potential overseas initial public offering. Its first bond issue puts it well on the way.
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