PETRONAS returned to the market after its highly successful issue last May to take advantage of the current favourable market conditions, particularly with US interest rates at a record low. By raising low cost financing, the company will be able to reduce its weighted average cost of capital and extend its debt maturity profile. The transaction demonstrated PETRONAS’ ability to repeatedly raise sizeable financing in a volatile market.
The issue was re-opened in the morning of Wednesday, 13 November 2002 (Malaysian time) with an original size of US$500 million for the company’s 2012 papers. Investors responded strongly towards the issue, underlining their confidence both in the company’s strong credit rating and balance sheet as well as in Malaysia. The 10-year papers attracted orders exceeding US$1 billion.
As a result of the overwhelming demand, the company upsized the offer to US$700 million for the 10-year tranche and introduced a US$250 million 20-year tranche.
The transaction was priced late midnight on Thursday, 14 November 2002 (Malaysian time). The US$700 million tranche was twice oversubscribed and priced at 107.740 or 10-year US Treasury plus 196 basis points which was at the tight end of the launch range of 196-198 basis points. The outstanding PETRONAS 2012 bonds were trading at 198 basis points in the secondary markets at the time. The US$250 million 20-year tranche, which was 1.5 times oversubscribed, was priced at 104.313 or 30-year Treasury plus 255 basis points, again at the tight end of the range of 255-260 and at no new issue premium.
One hundred and fifty-two investors placed orders with 87 orders being allocated for the 10-year tranche. The geographic split was 21% in Asia, 14% in Europe, 61% in the US and 4% elsewhere. For the 20-year tranche, the geographic split was 5% in Asia, 10% in Europe and 85% in the US. There was a diverse range of high quality subscribers for both tranches; comprising mutual funds, insurance and pension funds, banks, investment advisors as well as corporates.
Good secondary market performance of the original deal has also enabled PETRONAS to attract a significant number of new investors into the transaction, accounting for 45% of the 10-year tranche and 55% of the 20-year tranche.
The proceeds of this re-opening will be used to finance a portion of the capital expenditures related to PETRONAS’ international oil and gas development activities and for general corporate purposes.
Morgan Stanley was the Global Coordinator for the transaction with Morgan Stanley and Salomon Smith Barley acting as Joint Bookrunners.
SUMMARY TERMS AND CONDITIONS
Issuer : PETRONAS Capital Ltd
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