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Dealtalk: Glencore, other deals may be hit by Japan effect
March 16, 2011 / 11:50 AM / 7 years ago

Dealtalk: Glencore, other deals may be hit by Japan effect

<p>Logos are seen in front of Swiss commodities trader Glencore building in Baar near Zurich January 5, 2010. REUTERS/Christian Hartmann</p>

SINGAPORE/LONDON (Reuters) - A slew of new share offerings and debt deals, including Glencore’s landmark IPO, are in danger of being delayed or canceled as investors turn jittery after Japan’s deadly earthquake and nuclear crisis.

Bankers and fund managers said extreme market volatility means institutional investors will demand a higher return on their investments. That means stock and bond deals in the market will have to either expect lower valuations, or be pulled altogether.

While the impact of this effect will be most immediate in Japan, it’s expected to spread across the globe.

“Market sentiment is weak so investors will be very careful when they apply for IPOs. Even when they apply, they will not put in a high bid,” said Wong Kok Hoi, chief investment officer of Singapore-based APS Asset Management, which manages $2 billion.

According to IFR, a Thomson Reuters publication, one major deal in the pipeline that’s at risk of cancellation is the planned $6-$8 billion London-Hong Kong IPO of Swiss commodity trading group, Glencore, a deal expected in May.

Uncertainty could also hit an upcoming S$1 billion IPO for property trust Mapletree Commercial Trust in Singapore, according to Reuters sources.

Debt markets could also be disrupted as companies across the globe face a potential spike in borrowing costs as Japanese investors pull their cash out of international markets to pay for reconstruction at home.

“When there’s volatility, people want protection around valuations,” said the head of equity syndicate at a European bank.

Japanese stocks rebounded on Wednesday after their worst two-day sell off since the 1987 crash, while Asian markets were also limping back.

Secondary prices of the region’s equity-linked markets came under some selling pressure on investor nervousness. Some key Convertible bonds such as China Unicom’s 2015 fell slightly to 106.75 from 108.75 late last week while CapitaMall Trust’s 2014 CBs moved down to 99 from 100.70. The biggest impact was on CBs by issuers perceived to be directly impacted by the Japan incidents.

Uranium production company Paladin Energy’s 2013 CBs fell to about 96 from 110 while its 2015 CBs went down to 98 from 105 quoted late last week. Bankers said that primary CB activity would come to a standstill in the coming days.


Equity share sales in Japan were the first to be hit by the deadly quake that triggered a tsunami and widespread destruction north of the capital Tokyo on Friday.

Japan’s United Urban Investment (8960.T), which had been in the market with a follow on share offering of 63.7 billion yen ($789 million) canceled its sale on Tuesday after a steep decline in its shares, according to IFR Asia.

The shares were trading at 107,300 yen when the deal was being launched but the shares have since fallen to 93,600 yen . Nikko Cordial and Citigroup (C.N) were joint global co-ordinators.

The smaller 11.8 billion yen IPO of RaQualia Pharma through Daiwa, was also canceled after the close, IFR reported.

Japan has seen $12.3 billion worth of share sales between January and March 16, compared to $15.5 billion in the same period a year ago, according to Thomson Reuters data.

The Japanese syndicate loan market is also feeling the ripple, with syndicated loans of $6.5 billion facing delays, according to Thomson Reuters LPC data.

Similarly Japanese mergers and acquisitions may also be on hold. Chemicals and pharmaceuticals firm Kyowa Hakko Kirin (4151.T) said on Tuesday that it would postpone the sale of a subsidiary as it assesses the impact of the quake.

“M&A will probably be put on hold until there is some clarity on the impact (of the quake) on future business. All companies, whatever the industry, will wait until the situation settles down,” said Koichiro Doi, head of corporate finance group at JPMorgan Securities Japan Co.

Beyond Japan, the planned sale of Hong Kong depository receipts by Japanese online financial services group SBI Holdings (8473.T), is also not expected to be launched, IFR said.

The company was seeking regulatory approval for a $300-$500 million listing next week.

In other deals, books of China Hongqiao Group’s $900 million IPO, Top Spring and Hilong Holdings were still covered as markets closed in Asia on Tuesday, although investors may press for the deals to be postponed.

“People will be looking at this very carefully - all we can do is wait and watch,” said David Stannard, a partner at Norton Rose in Hong Kong who specializes in equity capital markets

Additional reporting by Shankar Ramakrishnan and Fiona Lau in Hong Kong, Emi Emoto in Tokyo, Rachel Armstrong and Kevin Lim in Singapore; Editing by Anshuman Daga and Michael Flaherty

Our Standards:The Thomson Reuters Trust Principles.
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