FinanceAsia Achievement Awards 2000 - Best Investment Grade Bond Deal

Goldman Sachs, HSBC, Merrill Lynch

The year 2000 may have proved thin pickings in Asia for the international debt markets, but those deals that have been launched, have in the main been well executed and well received. And none proved the case more effectively than the $600 million bond offering by the MTR Corporation.

Long considered Hong Kong's proxy sovereign borrower, the A3/A-rated credit has traditionally vied with China in being able to maintain the tightest spread levels among non-Japan Asia's sovereign credit spectrum. Consequently, getting a deal right for the group is not so much a matter of resolving particular credit issues, but making sure timing is perfect.

The group's subsequent 10-year offering in early November was, in this respect, a text book example of how to complete a swift, smooth and successful transaction for borrower and investor alike. Launched in the space of 48 hours, it caught a narrow issuance window in unstable markets and provided MTR with a successful endnote to its recent partial privatization. Indeed, the final decision to proceed was literally taken the day before the three lead managers and Finance Director Clement Kwok headed off to New York for pricing.

This ability to dispense with formal roadshows was largely the result of careful credit and investor relations work over the years, which paid off in spectacular fashion when the group needed to act decisively.

However, what really sets the deal above its peers this year is the fact that it was able to price flat to its outstanding issues without any need for a new issue premium. This is even more impressive as the deal launched in the face of weakening single-A rated spreads, particularly in the telecom sector. Indeed, one of the main lessons MTR had learnt from its last deal of January 1998 was the importance of securing a regional backstop bid that could act as a counterweight to the Asian pricing premium still often demanded by US accounts.

For the three leads, the deal also underscored MTR's loyalty to those banks that have served it well in the past. Each describes their pride in the fact that the train operator keeps coming back. Further testament to the deal's success was its immediate secondary trading record. Where Hong Kong/China spreads had been fairly range-bound for some months, MTR's success pulled the whole credit curve in between 2bp to 5bp over the following day.