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For the third part of our annual awards, we cover Best Local Currency Bond, Best Structured Finance, Best High Yield Bond, Best Investment Grade Corporate Bond, Best Financial Bond, Best Sovereign Bond, Best Local Currency Bond House and Best G3 Bond House.
BEST LOCAL CURRENCY BOND
Nirchem Cement Rp40bn ($600m) four tranche bond
Rp11.5bn due 2018, Rp12.5bn due 2019, Rp8bn due 2020, Rp8bn due 2021
Arrangers: Barclays, Credit Suisse and IDFC
Nirma's acquisition of Lafarge India's cement assets in July is the largest acquisition in the country this year and the most high profile one. However, as regulators forbid Indian corporates from using bank loans to fund an acquisition in the country, the consumer and industrial product manufacturer turned to the bond market for help.
The journey to sell the largest rupee bond for a leveraged acquisition and the largest AA-rated debt instrument was a bumpy one.
Investors had concerns over the success of the acquisition given that Nirma was going into a new business segment, not to mention the amount of work to be done structuring such a complex transaction.
More importantly, while there is a deep pool of liquidity in the onshore rupee market, Nirma was unable to fully access this as the same rule that prevents banks funding domestic acquisitions through loans, also stopped them subscribing to the bond. In addition, non-banking financial companies were only eligible to buy short-dated tenors. This left only mutual funds and insurers which make up just 5% of the domestic investor pool.
If that wasn't enough, the rapidly changing global macro factors and the fast approaching deadline of the completion of the M&A left the leads no time to hesitate. The pressure proved too much for some, causing some banks who were uncomfortable with the underwriting risk to drop out.
A special purpose vehicle, NirChem Cement, was created for the buyout, as well as for the bond issuance. The management of both Nirma and Lafarge took part in the roadshow and the leads built a shadow book to ensure there was good demand and liquidity. In the end, the bond was wrapped up within four months and achieved a 2x covered order book.
The leads were pleasantly surprised by both the price compression and oversubscription,...