APAC CREDIT PREVIEW: Vedanta & Great Eastern Life Assurance join pipeline

** Vedanta Resources back in the spotlight

** Great Eastern reveals debut USD funding plans

The uptick in broader market volatility following Friday’s hot US economic data, which further dampened rate cut hopes, does not appear to have scuppered the USD funding plans of regional issuers however, based on what has been a handful of new additions to the near-term pipeline this session.

The latest two names to make their intentions known are The Great Eastern Life Assurance Company Limited, which is lining up an inaugural Subordinated AT1, and the more familiar Vedanta Resources Limited, after Health and Happiness (H&H) International Holdings Limited revealed its liability management driven funding plans earlier in the day.

Vedanta Resources continues funding spree

Vedanta Resources Limited (B1 stable by Moody’s & B CreditWatch Positive by S&P) has been a regular feature in the USD bond market as it continues to strive to bring down funding costs since teetering on the brink of default just a little over a year ago.

The company has sold US$2bn of bonds through four separate transactions since the Indian high yield metals and mining company burst back on the scene on 10^th September 2024 with its first public international bond issue since Feb 2021.

And the group is poised to add to that total near-term having mandated banks to arrange fixed income investor calls commencing on 13^th January, ahead of a planned USD benchmark 5.5NC2.5 and/or 8.25NC3 144A/RegS offering.

The deal will be issued by subsidiary Vedanta Resources Finance II plc and guaranteed by the company along with Twin Star Holdings Limited and Welter Trading Limited. The transaction, which is expected to be rated B2/B by Moody’s/S&P, is expected to launch as early as tomorrow (14-Jan-2024), subject to market conditions.

Vedanta’s previous foray was on 25^th November 2024 when it placed a dual-tranche offering which comprised a US$300m 10.25% 3.5NC1.5 and US$500m 11.25% 7NC3 tranches.

The timing of that offering was somewhat unfortunate, after the issuer’s original plans to access the market the week prior were temporarily ambushed by reports that some senior executives of the Adani group, including founder Gautam Adani, had been changed with attempting to bribe Indian government officials to secure solar energy contracts.

That hit the valuations of Adani’s USD-denominated bond issues hard which in turn had a ripple effect across a broader range of Indian credits.

That proved temporary though and the issuer eventually got the deal away the following week, albeit with what were probably more eye-catching yields in order to entice increasingly cautious investors.

That cautiousness appeared to be reflected by a rather underwhelming combined order book of >US$1.19bn (incl. US$20m JLM interest and an additional US$0.8m PROP per SFC code), equating to a cover ratio of 1.49x. That allowed the issuer to trim the yield by a modest 12.5bp on both tranches from 10.375% and 11.375% at initial price guidance, to 10.25% and 11.25% at reoffer.

Meanwhile, no target issue size has been communicated so far this time around, although its reasonable to assume Vedanta is eyeing another sizable deal in the US$1bn ball-park, given the fact that proceeds from the sale are primarily earmarked to refinance the company’s outstanding 9.25% 2026 and 13.875% 2028 bonds which have US$600m and US$459.54m outstanding.

The official comps include the aforementioned most recent 11.25% NC7 line along with the group’s US$900m 10.875% 5NC2 bond which marked Vedanta’s initial return to the USD primary market last September.

That deal priced at par giving a yield of 10.875% before the company capitalised on what was a very bullish secondary market performance to tap the line by an additional US$300m at 102.75 px (9.998%) around six weeks later on 21^-Oct-2024.

Great Eastern reveals debut USD funding plans

Singaporean multinational insurance company and subsidiary of OCBC Bank, The Great Eastern Life Assurance Company Limited (rated AA- by S&P), has mandated OCBC as Sole Global Coordinator and Citigroup, HSBC, OCBC, Standard Chartered Bank and UBS as Joint Lead Managers and Bookrunners to arrange a series of fixed income investor calls on 13 and 14 January 2025.

An inaugural US$-denominated Reg S (Category 1) Subordinated perpetual AT1 capital securities offering may follow, subject to market conditions. If issued, the subordinated perpetual capital securities are expected to be rated A by S&P. The expected tenor would be a Perp Non-Call 7-year.

APAC US$ AT1 supply is typically rare in nature, with only two issuances in 2024 - Woori Bank’s US$500m PNC5 printed in July and Sumitomo Mitsui Financial Group’s US$1bn PNC10 in February.

Add jurisdiction to the mix and you’ll find that the only outstanding Singaporean US$ AT1 belongs to DBS Group Holdings, a US$1bn PNC5 that was printed in February 2020.

Obviously if we turn to SGD comps there are more outstanding AT1s in the market, mainly from the three local Singaporean banks (DBS, UOB and OCBC).

Great Eastern themselves last visited the SGD market in April last year, where they raised SGD500m through a 15NC10 Tier II bond. Investors would pay close attention to this line given it is the only outstanding bond the issuer has.

It is also interesting to note how broader AT1 bank spreads have bounced back sharply since the Credit Suisse saga back in early 2023, where Swiss regulators shocked markets by writing down to zero around US$17bn equivalent of the bank’s AT1 debt as part of its rescue by UBS.

And a quick look at the UBS 4.875% US$1.5bn AT1 Perp nicely summarizes that. The yield rose to over 16% at its peak before heading back down to circa 7.5% currently, which is close to where it was before the saga.

Source: Bloomberg

Back to Great Eastern, where we see official comps released below.

** COMPS **

USD Comps:

Security Call Date M/S/F B Spd G Spd B Yield

AIA 4.95 03/30/35 -- A2/A-/A T+88 G+87 5.64%

OCBCSP 5.52 05/21/34 05/21/29 A2/BBB+/A T+81 G+85 5.39%

CHINLP 5.45 PERP 04/23/30 A3/A-/- T+84 G+83 5.42%

SGD Comps:

Security Call Date M/S/F B Yield

GESP 3.928 04/17/39 04/17/34 -/A/- 3.47% ($ equiv ~5.22%)

OCBCSP 4.05 PERP 10/16/29 Baa1/BBB-/BBB+ 3.67% ($ equiv ~5.35%)

Snapshot of APAC USD, EUR, CNH, CNY, HKD, SGD, AUD & NZD issues live on 13th Jan 2025 at the time of writing. Click on the links for the most recent updates:

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