A Guide to Asian High Yield Bonds : Financing Growth Enterprises, + Website

480 Pages·2013·9.194 MB·English

by  Florian H A Schmidt

Additional Praise for
A Guide to Asian High Yield Bonds
“FlorianSchmidt’stopicisofincreasingrelevancetoaregionwhere
a substantial proportion of even listed companies either are not
rated or, when rated, are assigned sub-investment grade ratings.
Asianeedsawideraccesstosourcesoffinancingsuchashighyield
bonds. This book offers many real life examples and is pleasant to
read in spite of its technical angles. It is a comprehensive, well
researched tool for investors and issuers to understand those
instruments in the specific context of Asia’s financial markets.”
—Philippe Delhaise,
President, CTRisks Rating, Hong Kong
“A modern book for the modern era. The growth rate in Asia-Pac
economies has been the development story of recent times and it is
evident that the region will continue attracting ever-increasing
capital inflows. As such this is a timely publication. Both domestic
and international investors will find much of value in the text,
which contains a wealth of genuine value-added data. The authors
also cover the market’s diversity in useful fashion. Another sign of
moderntimes:the“interactive”contentthatrangesfrominterviews
and case studies to investor guidelines and key facts. A worthy
addition to the finance literature.”
—Professor Moorad Choudhry,
Department of Mathematical Sciences,
Brunel University and author of The Principles of Banking
“The Asian high yield bond market is developing steadily. This
exceptional book serves as an outstanding guide on the Asian high
yield bond market. The content is well structured and presented. It
notonlyactsasagoodrefresherforpeoplewhoareexperiencedin
the high yield bond process, it is also a high-quality reference for
peoplecontemplatingforahighyieldbondtransaction.Inlinewith
the recent market trend, the book delegates an entire chapter on
RMB high yield funding, effectively analyzing the benefit of “dim
sum” bond and its less protective covenants.”
—Estella Ng, Chief Financial Officer,
Country Garden Holdings Company Limited
Founded in 1807, John Wiley & Sons is the oldest independent publishing
company in the United States. With offices in North America, Europe,
Australia and Asia, Wiley is globally committed to developing and
marketing print and electronic products and services for our customers’
professional and personal knowledge and understanding.
TheWileyFinanceseries contains books written specificallyforfinance
and investment professionals as well as sophisticated individual investors
and their financial advisors. Book topics range from portfolio management
to e-commerce, risk management, financial engineering, valuation and
financial instrument analysis, as well as much more.
Foralistofavailabletitles,visitourWebsiteatwww.WileyFinance.com.
A Guide to Asian
High Yield Bonds
Financing Growth Enterprises
Second Edition
FLORIAN SCHMIDT
WITH SHARON TAY
CoverDesign:Wiley
CoverImage(Top):samxmeg/iStockPhoto
CoverImage(Bottom):JensCarstenRosemann/iStockPhoto
Copyright©2014byJohnWiley&SonsSingaporePte.Ltd.
PublishedbyJohnWiley&SonsSingaporePte.Ltd.
1FusionopolisWalk,#07-01,SolarisSouthTower,Singapore138628
Allrightsreserved.
FirsteditionpublishedbyJohnWiley&SonsSingaporePte.Ltd.in2008.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedinany
formorbyanymeans,electronic,mechanical,photocopying,recording,scanning,orotherwise,
exceptasexpresslypermittedbylaw,withouteitherthepriorwrittenpermissionofthe
Publisher,orauthorizationthroughpaymentoftheappropriatephotocopyfeetotheCopyright
ClearanceCenter.RequestsforpermissionshouldbeaddressedtothePublisher,JohnWiley&
SonsSingaporePte.Ltd.,1FusionopolisWalk,#07–01,SolarisSouthTower,Singapore
138628,tel:[phone],fax:[phone],e-mail:[email protected].
LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest
effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe
accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied
warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreatedor
extendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategiescontained
hereinmaynotbesuitableforyoursituation.Youshouldconsultwithaprofessionalwhere
appropriate.Neitherthepublishernortheauthorshallbeliableforanydamagesarising
herefrom.
OtherWileyEditorialOffices
JohnWiley&Sons,111RiverStreet,Hoboken,NJ07030,USA
JohnWiley&Sons,TheAtrium,SouthernGate,Chichester,WestSussex,P0198SQ,
UnitedKingdom
JohnWiley&Sons(Canada)Ltd.,5353DundasStreetWest,Suite400,Toronto,Ontario,
M9B6HB,Canada
JohnWiley&SonsAustraliaLtd.,42McDougallStreet,Milton,Queensland4064,Australia
Wiley-VCH,Boschstrasse12,D-69469Weinheim,Germany
LibraryofCongressCataloging-in-PublicationData
ISBN978-1-118-50202-0(Hardcover)
ISBN978-1-118-50203-7(ePDF)
ISBN978-1-118-50205-1(ePub)
Typesetin10/12pt.Sabon-RomanbyMPSLimited,Chennai,India.
PrintedinSingaporebyC.O.SPrintersPteLtd.
10 9 8 7 6 5 4 3 2 1
’
A ship is safe in harbor, but that s not what ships are for.
—
William G. T. Shedd
To my Wife, Montatip, and my Daughters,
Chollada and Anchalee
Contents
Preface xi
Acknowledgments xvii
CHAPTER 1
Why High Yield’s Time Has Come in Asia 1
1.1. The Asia Pulp & Paper (APP) Legacy 1
1.2. Necessary Corporate Developments Benefiting Asian
High Yield 4
1.3. Necessary Macro Developments Benefiting Asian
High Yield 8
1.4. Asia’s Corporate Landscape of Family Enterprises 12
1.5. Traditional Generic Business Strategies for Family
Enterprises 12
1.6. A Theoretical Approach to Debt versus Equity Funding 15
1.7. The Factor “Growth” Makes All the Difference 17
1.8. An Asian Growth Market: China’s Real Estate Sector 19
1.9. Suitability of High Yield Bonds for Family Enterprises 21
1.10. A Wall of Liquidity 27
Notes 31
CHAPTER 2
An Overview of the High Yield Bond Market 33
2.1. The Genesis 33
2.2. The World’s Largest High Yield Bond Market 36
2.3. Europe’s Growing High Yield Bond Market 42
2.4. “True” High Yield Arrives in Asia 50
2.5. The Asian High Yield Renaissance 57
2.6. Through and Beyond the Subprime Crisis 71
2.7. The Asian High Yield Market Comes of Age 80
2.8. More Tests of Resilience 84
2.9. Outlook—Disintermediation of Bank Lending 97
Notes 98
vii
viii CONTENTS
CHAPTER 3
Asian High Yield Issuers 101
3.1. What’s in a Name? 101
3.2. The Technology, Media, and Telecoms Sector 102
3.3. The PRC Real Estate Sector 119
3.4. The Metals and Mining Sector 151
3.5. Highly Concentrated New Issue Universe 190
3.6. Issuer Interviews 192
3.7. Australian Corporates Enter the High Yield Market 201
Notes 208
CHAPTER 4
The Buy-Side and Secondary Market for Asian High Yield 211
4.1. The Age of Liquidity 211
4.2. The New Fast Money Reality in Asia 216
4.3. “Real Money” Institutional Investors 218
4.4. The Regional Private Wealth Management Bid 224
4.5. Regulation S versus 144A 227
4.6. Why Going Down the Credit Curve? 235
4.7. Investors’ Approach toward High Yield 241
4.8. Limitations of Acceptance 250
4.9. Trading Asian High Yield 252
4.10. Investors in the Future, for the Future 259
Notes 275
CHAPTER 5
Structuring and Transacting High Yield Bonds 277
5.1. Changes in the Corporate Capital Structure 277
5.2. Structuring High Yield Bonds 282
5.3. Disclosure for High Yield Bonds 300
5.4. Marketing, Pricing, and Distributing High Yield Bonds 308
5.5. Credit Ratings and the Ratings Advisory Process 325
Notes 339
CHAPTER 6
Asian High Yield Bond Covenants Offer Superior Investor Protection 341
Jeannie-Marie Noyce, Alexander Dill, and Laura Acres
6.1. Key Concepts in Assessing Covenant Structures 343
6.2. Structural Protections against Key Risks Follow a
Common Pattern Globally 348
6.3. The Standard Asian High Yield Structure 349
Note 363