Pipeline power
The success and innovation around GreenSaif Pipelines' US$4.5bn triple-tranche bond offering helped to banish the clouds around Middle East project bonds, revitalising a market that had seen deals previously fail to capture investors’ imagination, through what was a truly global deal.
The bonds, placed in February, set a number of firsts. A US$1.5bn August 2032 tranche marked the first sukuk project bond sold on international markets, while a US$1.5bn February 2042 note was the first Formosa project bond. Combined with a US$1.5bn February 2038 conventional bond, the transaction drew final orders of over US$20bn, the largest book ever for a MENA project bond. The scale of demand meant the deal easily beat initial size expectations of US$3bn.
GreenSaif is a private consortium which has purchased a 20-year leasehold stake in Aramco's gas pipeline and is indirectly owned by BlackRock and its affiliates and the investment arm of Saudi Arabia's Social Insurance Fund.
Success was far from guaranteed. Previous Middle East project bonds had undershot size expectations. The leads on GreenSaif learnt from those transactions, most notably the need to a structure a deal which would have as broad an appeal as possible.
GreenSaif’s tactic of tapping into regional demand by structuring one of three tranches as a sukuk, for example, paid off. The decision to bring in Islamic investors was key to building momentum in the book, while the Taiwan listing of another bond secured incremental demand for the longest tenor.
The company wanted to raise funds to partially repay a US$13.4bn acquisition bridge facility in a cost-effective way and there is little doubt that the issuer was able to achieve competitive pricing.
The three notes were placed at spreads to Treasuries of 200bp, 245bp and 275bp, well inside initial price thoughts and, while estimates on new issue concessions were speculative given the inaugural nature of the transaction, bankers said they were limited.
Not only did the syndicate bring in a wide pool of investors through the use of sukuk and Formosa tranches, but just as important, they engaged potential investors early.
A global non-deal roadshow took place in 2022, with a series of investor meetings in the US, London and the Middle East, allowing accounts to get a feel for the credit well ahead of the deal announcement.
BNP Paribas, HSBC and JP Morgan were the global coordinators, and were joined as active bookrunners by Citigroup, First Abu Dhabi Bank, MUFG and SMBC Nikko.
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