High yield pressure takes toll on Interplex 

Debt bankers continue to highlight investor pickiness and the need for strong anchor orders to get new high yield deals done, as bond prices swing wildly in the secondary market.

Interplex, which provides mechanical and electro-mechanical component solutions, jumped into the market at a particularly rough time. The option-adjusted spread on Lucror Analytics’ Asia high yield index went up 100bp between the time the Interplex deal was announced at the end of October, and its launch on November 9. Over in the US, the industrial sector looked equally grim. Between the market open on Thursday and the close on Friday, the Dow Jones Industrial Average lost 150 points. Between Friday and the end of Monday, it lost another 600 points.

“I was surprised that Interplex came to the market last week, give the large rise in spreads over the preceding two weeks,” said Charles Macgregor, Lucror Analytics’ head of Asia.

Global co-ordinators DBS, Standard Chartered and UOB began marketing the three non call two year notes at the 8.875% area last Friday morning local time. But the banks terminated the trade before announcing final guidance, pointing to market conditions for the transaction’s failure.

“The high yield market backdrop is still tough” said one syndicate head on the trade. “Under better market conditions, we could have got this done.”

V‚Äčolatility will continue to be a theme for the market, given poor liquidity and low investor confidence, said Macgregor. He reckons the price of the Interplex notes looked too high for the issuer, and that without immediate funding needs, it decided to hold back.

While other high yield players shouldn’t be scared away, they will need to secure anchor bids before launching new deals, said the syndicate head. “The market has been very selective,” he added, explaining that price is a key factor for transactions’ success.

Cathay United Bank, China Minsheng Banking Corp Hong Kong branch, CTBC Bank, E.Sun Commercial Bank, ING Singapore branch and SMBC Nikko were also on Interplex’s Reg S transaction as lead managers and bookrunners.

Interplex was acquired by Baring Private Equity Asia in 2016. Its BB- rated notes would have been issued by Interplex and guaranteed by some of its subsidiaries.

13 Nov 2018

By Morgan Davis