FT beyondbrics: Taiwan opens to RMB – and Chinese banks
8 February, 2013FT beyondbrics: India lays out its bewildering stall to first-time retail investors
12 February, 2013FT Beyondbrics, February 11 2013. To see it at the FT click here:
Last week’s HK$24bn ($3bn) placement for China Petroleum & Chemical Corp, better known as Sinopec, was a striking deal for its sheer size. But perhaps it was most remarkable for the fact that it involved only one bookrunner.
Talk to any equity or debt capital markets banker in Asia and they will swiftly raise a familiar gripe: the trend to put far more bookrunners on a straightforward deal than ever used to be the case.
The gold standard for this irksome trend is last year’s AIA/AIG HK$46.7bn block trade, which featured nine different bookrunners and introduced the world to the fabulous concept of the passive global co-ordinator. But at least that was a big deal. Many mainland Chinese bond issues worth scarcely $100m have featured six or more bookrunners.
Bankers don’t like this, and not just because of the split in the fees – indeed, it can still be the case that the true global co-ordinator of a deal is well-rewarded no matter how many names on the prospectus. (Not always, though: the six bookrunners on Coal India’s record $3.46bn IPO in December 2010 shared a grand total of $34 in fees between them.)
Instead, bankers are irritated that a glut of bookrunners means nobody’s really going to take responsibility, particularly when it comes to supporting a deal in the aftermarket. “Once you get beyond two or three, it’s very easy to hide, and for one bank to leave supporting the deal to the others,” says a banker in Hong Kong.
In particular, international banks moan about local banks, which are often there chiefly as an investor rather than a bookrunner, and in order for a client to reward a bank for other services. “They don’t broaden the distribution at all,” one banker says. “I understand the company’s point of view. Increase the number of bookrunners and reward your banks. But it certainly doesn’t help in terms of either execution or accountability.”
So a sole-led deal on this scale – the biggest ever single-bookrunner block trade in Asia ex-Japan – stands out. And nobody was more delighted than the bank in question, Goldman Sachs, which after the deal found itself with a one-quarter market share of year-to-date Asian equity capital markets issuance.
