Asian-mena Counsel’s review of the top transactions and matters that closed during 2016
By Nick Ferguson
In a year that was characterised by the slowdown in the Chinese economy, the presidential election in the US, Britain’s exit from the EU and the Federal Reserve’s continued struggle to normalise interest rates, it is notable that plenty of large, interesting and innovative deals still managed to get done.
That success is testament to the advisers who worked hard to help clients achieve their goals despite the challenging conditions. Our list of the top deals of 2016 includes market-opening transactions in Myanmar, landmark restructurings in troubled sectors such as shipping and Chinese real estate, the financing of much-needed infrastructure projects and outbound M&A from China. There was also a focus on new technology and the environment.
The period under review was December 2015 to November 2016.
Qihoo 360 LBO
- Kirkland & Ellis: Represented consortium of China investors
- Latham & Watkins: Represented Qihoo360
- Skadden, Arps, Slate, Meagher & Flom: US legal counsel to Qihoo 360
- White & Case: Counsel to China Merchants Banks
- Fangda Partners: PRC legal counsel to the consortium
- DeHeng Law Offices: Advised Citic Guoan
- JunHe: Advised the special committee on PRC law
- Haiwen & Partners: Advisers to the consortium
- Wilson Sonsini Goodrich & Rosati: Advisers to acquirer
- Simpson Thacher & Bartlett: Counsel to the financial adviser to the special committee
- King & Wood Mallesons: PRC legal adviser to acquirers and HK counsel to New China Capital
- Appleby: Acted as Cayman Islands counsel to China Merchants Bank
- Conyers Dill & Pearman: Advised Qihoo 306 on Cayman Islands law
- Maples and Calder: Advised the special committee on Cayman law
This transaction is the largest take-private transaction ever, and the first to use an entirely domestic buyer group structure. In the future, it is expected that buyers will attempt to replicate this structure so that they can also obtain a clearer path to re-listing in China. The deal involved consortium of more than 30 China-based investors, who agreed to buy Qihoo 360 Technology, one of the largest internet companies in China, in an all-cash transaction that valued Qihoo at approximately US$9.3 billion, including the assumption of approximately US$1.6 billion of debt. It is the largest leveraged buyout of a Chinese company, surpassing the previous record set in 2013 when Focus Media was sold to a group of private equity investors.
AP Renewables Climate Bond
- SyCip Salazar Hernandez & Gatmaitan: Philippines Counsel to Aboitiz
- Picazo, Buyco, Tan, Fider & Santos: Philippines Counsel to the lender group
- Freshfields Bruckhaus Deringer: International Counsel to the lender group
- Gibson, Dunn & Crutcher: International Counsel to Aboitiz
This innovative project bond is the first of its kind in the Asia-Pacific region and marks the first time that a bond certified by the Climate Bonds Initiative has been issued for a single project in an emerging market. It is also the first local currency project bond in the Philippine power sector and one of the first credit-enhanced project bonds in South-East Asia since the 1997 Asian financial crisis.
The deal involved the issuance by AP Renewables of Ps10.7 billion (US$225m) of guaranteed fixed-rate term project notes and the extension of up to Ps1.8 million of a senior secured fixed-rate term loan facility by the Asian Development Bank, among others, to refinance a portion of invested equity in the Tiwi and Makban geothermal power plants it owns.
The project bond model could serve as a template for similar future activity in the region, as it allows issuers in developing Asian countries to tap into domestic debt capital markets for projects that would otherwise be ineligible for financing. It also allows more investors to gain exposure to emerging market infrastructure.
LRT 1 Cavite Project
- Shearman & Sterling: Counsel to Light Rail Manila Corporation
- SyCip Salazar Hernandez & Gatmaitan: Counsel to the Light Rail Manila Corporation and the sponsors
- Abuda Asis & Associates: Counsel to the lender group
- Nabarro: Counsel to EPC contractors (Bouyges Travaux Publics and Alstom Transport)
- Pinsent Masons: Counsel to the government
- C&G Law: Counsel to the government
This deal proved the bankability of large-scale Philippine public-private partnership projects and has helped to boost investor confidence of projects in the PPP pipeline.
Work on the deal included the bidding for, and financing of, a 32-year concession for the extension, operation and maintenance of the Light Rail Transit Line 1 (LRT1), including obtaining the operating franchise.
The structure allowed Light Rail Manila (LRMC) to obtain financing on a limited recourse basis despite challenges relating to right-of-way delivery by the government and the limitations under the concession agreement, especially in respect of the prohibitions and restrictions regarding the creation of the usual security interests taken by lenders. The deal structure was also able to take into account the nuance of the termination payments under the concession agreement in a way that is mutually acceptable to the lenders, the borrower and the sponsors.
As part of the LRT 1 project, LRMC, as concessionaire, will operate and maintain the existing LRT Line 1 and construct an 11.7-km extension from the present end-point at Baclaran to the Niog area in Bacoor, Cavite. A total of eight new stations will be built along this route covering the cities of Paranaque and Las Pinas, up to Bacoor, Cavite. The contractor for the construction is a consortium composed of French companies, Bouygues Travaux Publics and Alstom Transport.
Myanmar Telecoms Project
- Mayer Brown JSM: International counsel for lenders
- VDB Loi: Local counsel for lenders
- Allen & Gledhill: Counsel to Overseas Investment Private Corporation
With this award we are recognising the construction of Myanmar’s mobile network — one of the last greenfield telecommunications infrastructure networks in the world. Whereas many poor and developing countries have used mobile networks to leapfrog the construction of fixed telecoms networks, Myanmar was in an unusual position due to years of sanctions imposed on the previous military government. As a result, less than 10% of the country was covered, meaning that the developmental contribution of the project to the country is highly significant.
Two private mobile network operators, Ooredoo and Telenor, were awarded licences to build out the network in Myanmar. Financing for Ooredoo’s expansion involved the first investment in the Myanmar telecoms sector by both ADB and IFC, while the construction of thousands of telecoms towers for Telenor involved the first lending in Myanmar by OPIC, the US government’s development finance institution. This is a significant landmark in the development of Myanmar given the likely importance of these development agencies to the country going forward.
The project demanded advisers with not only excellent infrastructure finance experience, but also with a deep knowledge of undertaking transactions in developing markets such as Myanmar. The financing is reportedly the largest international debt deal in Myanmar to date.
First Myanmar Investment YSX Listing
- Duane Morris & Selvam: Counsel to First Myanmar Investment
After almost half a century of oppressive military rule, Myanmar’s gradual liberalisation process started in 2010 and the opening of a stock exchange was seen as a way of demonstrating the country’s progress towards modernisation. That hope became reality in March 2016 with the symbolic listing of First Myanmar Investment, which became the first company to be listed on the Yangon Stock Exchange. There was no public offering or new capital being raised as shares that had already been offered through direct subscription were simply transferred to the exchange, but the listing still required due diligence and a disclosure document, including responses to the YSX’s comments on the drafts of the disclosure document; revisions to FMI’s articles of association to comply with the listing rules; and the establishment of the nomination, audit and remuneration committees of FMI’s board of directors. The deal took more than 16 months to complete.
Indonesia Sovereign Sukuk
- Hadiputranto, Hadinoto & Partners: Indonesian counsel to the Joint Lead Managers
- Allen & Overy: US and English law counsel to the Joint Lead Managers
- Clifford Chance: US and English law counsel to the Government of Indonesia
- Assegaf Hamzah & Partners: Indonesian counsel to the Government of Indonesia
This was the largest Islamic bond issuance in Indonesia using the wakalah structure, which is a novelty in Indonesia and has never been used in any other sovereign sukuk issuance. The wakalah combines two structures commonly used in sukuk transactions: ijarah (or sale and lease back) and a forward lease. The government agreed to sell its beneficial rights under the underlying assets in the form of projects, and then procure the delivery of those assets once completed to the sukuk holders (through the issuer). The assets are then leased back under the ijarah arrangement.
The transaction involved due diligence on the underlying assets of the sukuk (comprising land, building and projects), which required parliamentary approval, and review of all of the transaction documents relating to the sukuk issuance. The joint lead managers also had to work closely with the Indonesian National Syariah Board to ensure the issuance of clean opinions on the structure and the transaction from a sharia law perspective.
MTR High-speed Rail Further Funding
- Slaughter and May: Counsel to MTR Corporation
This deal facilitated the completion of one of the most significant infrastructure projects in Hong Kong — a high-speed rail project linking Hong Kong and mainland China — after the construction became mired in political controversy amid cost overruns, delays and a fall in mainland visitors that raised question marks over the entire scheme. This meant structuring a deal that would provide access to the additional funding while also satisfying the interests of the various stakeholders, including MTR’s shareholders, the government, the Hong Kong Legislative Council and the general public.
The resulting structure involved the payment of a HK$25.76 billion (US$3.3bn) special dividend to all of MTR’s shareholders, including the government, with the size of the special dividend receivable by government approximately equal to the estimated remaining cost to complete the project. The success of the structure was demonstrated by the overwhelming support from MTR’s independent shareholders who voted more than 99% in favour of the arrangements. In addition, rating agencies judged that the deal had no impact on MTR’s strong credit ratings.
MUFJ TLAC Bond
- Paul, Weiss, Rifkind, Wharton & Garrison: International counsel to Mitsubishi UFJ Financial
- Simpson Thacher & Bartlett: International counsel to the underwriters
- Nagashima Ohno & Tsunematsu: Japanese counsel to Mitsubishi UFJ Financial
This deal was significant as it set a precedent for other banks such as Mizuho and Sumitomo Mitsui to file with the SEC for the issuance of total loss-absorbing capacity (TLAC) bonds. The structuring of the senior unsecured bond was complex for MUFG with the adoption of TLAC requirements being uncertain and potential effects of the revised Deposit Insurance Act unknown. It was also Asia’s first TLAC-bond issuance, setting a benchmark for other firms to structure their own TLAC bonds in the future.
Ponaflex IP Dispute
- Vision & Associates: Counsel to Ponaflex
This case has opened the opportunity for brand owners to reclaim their brands in Vietnam even in cases where they have not registered a mark domestically, despite the first-to-file principle being applied in the process of establishing the rights to a mark.
The dispute centred around a Korean manufacturer’s plastic hosepipes, sold under the Ponaflex brand. When the company tried to register its trade mark in Vietnman in 2009 its application was rejected by the National Office of Intellectual Property of Vietnam (NOIP) on the basis that it had already been filed. This led to a seven-year battle to win back control of the mark, which it transpired had been registered in bad faith by several former employees of an import company that distributed the hoses.
This was a challenging case given that Vietnam’s IP law does not define specific behaviours as acts of a “dishonest” nature, but the NOIP was nevertheless persuaded to cancel the cited mark, paving the way for others to follow — hopefully in a much more speedy process.
- Dechert: International Counsel to Lazada Group
- Sullivan & Cromwell: International Counsel to Alibaba Group
- Freshfields Bruckhaus Deringer: Counsel to Temasek
- Noerr: Counsel to Rocket and certain other sellers
- Morgan Lewis Stamford: Singapore counsel to Alibaba Group
- Weerawong, Chinnavat & Peangpanor: Thailand counsel to Alibaba Group
- SSEK: Indonesia counsel to Alibaba Group
- Jeff Leong, Poon & Wong: Malaysian counsel to Alibaba Group
- Picazo, Buyco, Tan, Fider & Santos: Philippine counsel to Alibaba Group
- YKVN: Vietnam Counsel to Alibaba Group
- Tilleke & Gibbins: Vietnam competition and regulatory counsel to Rocket Internet
With the need for further funding to continue its growth, Singapore-headquartered internet retailer Lazada sold a controlling stake to Alibaba for US$1 billion — the Chinese company’s biggest overseas investment to date. As well as being big, this unusually complex transaction involved legal issues around the world, including in Germany, Hong Kong, Indonesia, Luxembourg, Malaysia, Philippines, Singapore, Thailand, the US and Vietnam.
Established in 2012 by German tech incubator Rocket Internet, Lazada has 1.4 million customers in six South-East Asian countries — and at the time of the transaction had 22 existing investors from various jurisdictions, including Tesco from the UK, Singapore’s Temasek, JP Morgan and investment firms from the US, Sweden and Belgium.
Complex issues included bridge loans granted to Lazada during negotiations, a sophisticated put/call arrangement for certain Lazada shareholders, a highly complex management incentive and liquidity plan, and negotiations over warranty insurance and recently introduced antitrust regulations in several markets. But chief among the advisers’ accomplishments was the fact that the deal got done at all. To shepherd two-dozen stakeholders, each with their own priorities and interests, through the drawn-out, complex transaction meant building trust on all sides to see the transaction through to completion.
- Slaughter and May: Counsel to Alibaba Group
- Norton Rose Fulbright HK: Counsel to SCMP
- Conyers Dill and Pearman: Counsel to SCMP
The acquisition of Hong Kong’s leading English-language newspaper by China’s most famous billionaire represented a landmark deal in the Asian media landscape that would have merited inclusion in this list under any circumstances. But, as it happens, it also involved some interesting legal complications due to the suspension of SCMP’s shares after its free float dropped below the 25 percent minimum.
Through the HK$2.1 billion (US$266m) acquisition, Jack Ma’s Alibaba aims to transform the 112-year-old traditional print newspaper into a global media entity covering news in China for readers around the world, causing some to fear that the venerable old paper’s editorial independence would be compromised.
In addition to the sale of the newspaper, the disposal includes other media assets such as its digital platform, magazines, recruitment, outdoor media, events, conferences, education and digital media businesses. What is left of SCMP Group will continue to be listed on the Hong Kong Stock Exchange with a focus on property investment.
Big C Sale
- Baker McKenzie: Tax Counsel to Casino Group
- Weerawong, Chinnavat & Peangpanor: Counsel to Berli Jucker
- YKVN: Local counsel to Central Retail
- Allen & Overy: International counsel to Central Retail
- Linklaters: International counsel to Casino Group
- Audier & Partners: Local counsel to Casino Group
- Clifford Chance: Counsel to the banking syndicate on the €3.2 billion financing
Big C lived up to its name with this one. Owned by France’s Casino group, the sale of its network of stores and shopping malls in Thailand and Vietnam included complex issues across M&A, financing and capital markets.
In Thailand, Berli Jucker initially bought a controlling stake of 58.56% from Casino in an opened bid process and an additional 39.38% stake in a subsequent tender offer, for a total acquisition price of Bt204.3 billion (US$5.83bn). Some of the complex legal issues included the negotiation of the standard sale and purchase agreement provided by the seller, tender offer rules and regulations, and securities laws and regulations.
On the banking side, Berli Jucker raised a €3.2 billion bridge facility in the largest acquisition financing in Thailand in 2016 and was documented in just over two weeks from instruction to first drawdown. The lenders committed to provide funds on a “certain funds” basis, which is unusual in the Thai market, for both the acquisition of the controlling stake and the resulting Bt88 billion tender offer. The transaction involved a complicated financing structure with two facilities in different currencies. Berli Jucker partially repaid the borrowings through a rights offering.
In Vietnam, Thailand’s Central Group paid €920 million for Big C’s network of 43 stores and 30 shopping malls. Casino structured the transaction at the offshore level, which resulted in a wide range of work for the advisers, including tax planning and addressing several controversial issues with the tax authority.
Maybank Basel III Bond
- Ashurst: Counsel to Maybank
- Allen & Gledhill: Singapore Listing Counsel
- Adnan Sundra & Low: Singapore counsel to Maybank
This US$500 million offering by Maybank was the first ever Basel III-compliant tier-2 bond to be issued by a Malaysian bank and approved by Bank Negara Malaysia, blazing a trail for other domestic banks to raise capital in international markets instead of relying on local investors. The deal was well received among these dollar investors, with sufficient orders to cover the deal two-and-a-half times over. The structure included deep subordination and a write-down trigger for non-viability.
Abu Dhabi National Insurance Convertible Bond
- Hadef & Partners: Counsel to ADNIC
This was a landmark deal and the first of its kind in the region that overcame substantial challenges to deliver a valuable outcome for the client, Abu Dhabi National Insurance, which needed to raise Dh390 million (US$105m) of capital to maintain its rating.
The convertible bonds had to be deeply subordinated to achieve equity treatment by the rating agency, but the concept of subordination is not recognised under UAE law, forcing the legal team to come up with a creative solution. The result was a contractual mechanism in the prospectus that achieved more or less the same result as the concept of subordination.
As ever, coming up with a clever solution was only half the battle, as it then had to approved by the regulator, the Securities and Commodities Authority (SCA), who was not at all familiar with the concept of subordination or how it works, necessitating an education effort with the SCA officials and subsequent negotiation over the wording of the prospectus. Translating the concept and drafting it in Arabic was also a challenge.
This was also the first issuance of bonds under the new Commercial Companies Law, which contained new provisions in terms of bond issuance, presenting another challenge in respect of their interpretation and how SCA and other competent authorities would interpret and apply such provisions.
Cinda-Nanyang Commercial Bank Acquisition
- Freshfields Bruckhaus Deringer: Counsel to China Cinda Asset Management
- Zhong Lun Law Firm: PRC counsel to Cinda
- King & Wood Mallesons: Counsel to China Cinda on US regulatory matters
Bank of China’s US$8.7 billion disposal of Nanyang Commercial Bank to China Cinda Asset Management was the biggest banking acquisition ever completed in Asia ex-Japan — and was conducted through an unusual state-owned asset auction process that demanded an innovative approach from advisers.
Because Bank of China is government owned, the sale had to be carried out by way of a competitive auction process at a designated asset exchange, one of the requirements of which is that the seller has to publish a floor price and ask bidders to submit bids at or higher than the floor price. To test what kind of floor price was acceptable to the market, Bank of China ran a fishing exercise that was similar to the first and second rounds of a European-style auction, where limited due diligence information and a seller’s draft of the share purchase agreement were provided and bidders were asked to submit indicative offers.
It was also important that Bank of China secured a confirmation letter from each potential bidder’s financial adviser to confirm its sources of funds, similar to the requirement under Hong Kong’s takeover code. However, with China’s stock market in freefall during the summer, few bidders were able to step up to the plate, leaving China Cinda as the only bidder after it successfully negotiated a detailed term sheet with China Construction Bank in relation to a term loan facility of US$8 billion to finance the transaction.
Oyu Tolgoi Project
- Shearman & Sterling: Counsel to Erdenes Oyu Tolgoi
- Sullivan & Cromwell: Counsel to Rio Tinto
- Milbank, Tweed, Hadley & McCloy: Counsel to Lender’s group
The Oyu Tolgoi mine in the southern Gobi desert is a truly transformational project for Mongolia. It is one of the world’s largest copper-gold deposits and, once fully operational, the IMF estimates that it would account for approximately 40% of the country’s gross domestic product.
The second phase, which involves the underground portion of the project, is a giant undertaking. The latest feasibility study, which includes the underground expansion, shows recoverable copper of more than 11 million tonnes, 12 million ounces of gold and 78 million ounces of silver over a mine life of 41 years.
The project is jointly owned by Erdenes Oyu Tolgoi (34%) and Turquoise Hill Resources (66%, of which Rio Tinto owns 51%) and is subject to the “Oyu Tolgoi Underground Mine Development and Financing Plan” signed in Dubai in May 2005 between the Oyu Tolgoi shareholders and the government of Mongolia. The Multilateral Investment Guarantee Agency (MIGA) provided political risk insurance for the commercial banks.
- Simpson Thacher & Bartlett: International Counsel to Unisplendour
- Skadden, Arps, Slate, Meagher & Flom: Counsel to Hewlett-Packard for CFIUS related issues
- Zhong Lun Law Firm: PRC Counsel to Unisplendour
- Jingtian & Gongcheng: Counsel to lenders bank consortium
- Allen & Overy: International Counsel to Hewlett-Packard
- Chong Guang Law Office: Counsel to Unispeldour
- Davis Polk & Wardwell: Counsel to Hewlett-Packard
- Fangda Partners: PRC Counsel to Hewlett-Packard
This deal involved chipmaker Tsinghua Unigroup, a Chinese state-owned enterprise that is part of Tsinghua University, paying US$2.5 billion for a 51 percent stake in Hewlett Packard’s enterprise technology unit, H3C Technology. It lasted for more than 500 days in total, starting from the kickoff meeting in December 2014 through to the execution of the definitive transactional documents on May 21, 2015, after multiple rounds of intensive bidding, until final completion of the transaction in May 2016.
Important issues for Tsinghua included the formation of the bidding strategy, the use of an A-share listed subsidiary (Unisplendour) to implement the cross-border acquisition, the negotiation of transaction documents, the handling of Chinese and foreign regulatory approvals and the structuring of an innovative employee equity plan to provide A-share special incentives to H3C’s 8,000 employees.
Vizhinjam Seaport Project
- HSA Advocates: Counsel to Vizhinjam International Seaport
- Khaitan & Co: Counsel to the lenders
Successive Indian politicians have dreamed of building a deep-water transhipment port for at least 25 years. In the absence of such a facility, goods being shipped to and from the Indian market are offloaded from giant international container vessels at hubs in Sri Lanka, Singapore, Dubai or Salalah, from where they are brought into India in smaller ships. With the successful structuring of the project at Vizhinjam, which lies close to the major international shipping lanes in Kerala, the dream of bringing that maritime traffic direct to Indian shores may come true at last.
The Kerala government had earlier made three unsuccessful attempts to bid out the project. Given those earlier unsuccessful attempts, the structuring of the public-private partnership had to be approached carefully, to ensure that the project was financially viable for both the private developer — led by billionaire Gautam Adani — and the state government. For example, the construction of the breakwater was initially intended to be split out from the PPP due to the huge investment required. However, considering the risks involved in splitting the project relating to accountability, delays and cost overruns, and pursuant to various consultations, an innovative structure was adopted that enabled the inclusion of the breakwater construction within the PPP project, with the government funding the cost of construction while all responsibility for completion was solely borne by the private partner.
As with most projects in India, it is not without its critics, which only added to the challenges in successfully bidding out this potentially transformative piece of infrastructure.
Central Java Project
- Shearman & Sterling: Foreign Counsel to Bhimasena Power Indonesia
- Mochtar Karuwin Komar: Local Counsel to Bhimasena Power Indonesia
- Ali Budiardjo, Nugroho, Reksodiputro: Local Counsel to JBIC and other lenders
- Milbank, Tweed, Hadley & McCloy: Foreign Counsel to JBIC and other lenders
- Norton Rose Fulbright: Counsel to PLN
The US$4.3 billion Central Java project achieved a number of milestones. In terms of the technology involved, this was the first independent power project in Indonesia to use ultra-super critical technology, which allows the plant to operate at a higher level of thermal efficiency, resulting in lower coal consumption and emission rates.
On the financing side, it was the biggest project financing in Indonesia to date and the first public-private partnership infrastructure scheme to reach financial close. The PPP scheme was implemented by the government with the aim of accelerating crucial infrastructure development in the country, and is part of the government’s plan to increase much-needed power capacity in Indonesia. As such, it was also the first project to benefit from a guarantee from Indonesia Infrastructure Guarantee Fund and the finance ministry in relation to PLN’s obligations under the power purchase agreement.
The guarantee structure is complex and the documentation was the subject of extensive negotiation. The project also involved creative solutions to a number of hurdles, including regulations regarding the mandatory use of the rupiah. The project was also delayed for several years due to land acquisition issues.
- Simpson Thacher & Bartlett: Counsel to the underwriters
- Cleary Gottlieb Steen & Hamilton: US Counsel to Line
- Nishimura & Asahi: Japanese counsel to Line
- Anderson Mori & Tomotsune: Japanese counsel to the underwriters
The initial public offering of Japan’s favourite messaging app was the largest technology IPO in 2016 and the first IPO to feature a simultaneous dual listing on the Tokyo and New York Stock Exchanges, which presented numerous challenges in harmonising the registration and listing regimes in Japan and the US. By conducting a dual listing, Line was able to access both retail demand in Japan, where its services are extremely popular, as well as demand from international investors focused on the technology sector. The deal teams needed to have seamless coordination between Japan, the US and Korea, where Line’s parent company is incorporated.
As the first true Japanese dual-listed IPO, there were regulatory issues involving all three jurisdictions that needed to be reconciled. Due to several delays in the transaction, which lasted more than three years (an eternity for a company in the internet industry), there were many updates and revisions that needed to be made, including with respect to changes in strategies, acquisitions and dispositions, and changes in auditors, which entailed 12 filings with the SEC. Even so, the IPO successfully priced despite launching during the market uncertainties surrounding Brexit.
Astrea III Private Equity Bonds
- Sidley Austin: US counsel to Temasek Holdings
- Allen & Gledhill: Singapore counsel to Temasek Holdings
- Linklaters: Counsel to Credit Suisse and DBS
These were the first listed notes in Singapore backed by cash flows from private equity funds. Traditionally, private equity as an asset class is available only to a select group of investors, but this deal made it accessible to a wider investment community through a private equity bond structure, representing a significant milestone in the development of Singapore’s bond market that is expected to start a wave of similar offerings in the near future.
The four classes of notes are backed by cash flows from a diversified and mature portfolio of 34 private equity funds managed by 26 reputable general partners (including KKR, EQT Partners, TPG Capital, Blackstone and Silver Lake). The selected private equity funds predominantly employ a
buyout strategy, with the remainder employing a growth equity strategy.
There was strong market reception to the offering, with the bonds being subscribed by more than eight times for the US$510 million issue. About one-third of the bonds were allocated to individual sophisticated investors. The transaction has a core Singapore component — the issuer, sponsor and asset-owning companies are all Singaporean.
Hyundai Merchant Marine Restructuring
- Kim & Chang: Korean counsel to certain shipowners
- Yulchon: Korean Counsel to HMM
- Cleary Gottlieb Steen & Hamilton: International Counsel to HMM
- Shin & Kim: Korean counsel to certain ship owners
- Bae, Kim & Lee: Korean counsel to HMM
- Ince & Co: International counsel to certain of the ship owners involved
The shipping industry has borne the brunt of the slowdown in global trade and this restructuring was a significant response to these difficult conditions. Although a conditional workout under Korean law seemed impossible given Hyundai Merchant Marine’s financial difficulties, the legal advisers and corporate restructuring specialists Millstein nevertheless achieved a successful completion within just four months
The deal included restructuring of public bonds, rescheduling of charter hires, restructuring of debts to financial institutions and conducting debt-equity swaps by public offerings. This was the first case where a shipping company successfully completed a restructuring through a reduction of charter hire payments.
Unlike a typical debt restructuring, which involves dealing with a single creditor committee, the adjustment of the charter hire terms required separate negotiations with more than 15 ship owner groups around the world, within a tight deadline set by HMM’s financial creditors. An efficient and effective process had to be devised and executed for negotiations across various time zones.
Arranging the equity compensation component for ship owners presented additional unprecedented challenges, including the issuance of shares to numerous ship owners who had not previously invested in Korean equity.
These efforts helped bring HMM’s debt to equity ratio down to 200% from the March 31 level of 5,307%, ultimately contributing to the avoidance of HMM’s bankruptcy.
- Kirkland & Ellis: Counsel to ad hoc steering committee of the bonds and convertible
- Tanner De Witt: Lead Counsel to Kaisa Group Holdings
- Mourant Ozannes: BVI counsel to the ad hoc steering committee of Kaisa Group Holdings
- Ropes & Gray: Counsel to Kaisa Group Holdings on US and Securities law
- Sidley & Austin: Counsel to Kaisa Group.
- Harney Westwood & Riegels: Counsel to Kaisa Group Holdings on Cayman Law
- Mayer Brown JSM: Counsel to bank creditors in Hong Kong
- O’Melveny & Myers: Off-shore Counsel to bankholder creditors
- Clifford Chance: Counsel to trustees
- Walkers: Cayman Counsel to bondholders
- Latham & Watkins: Counsel to the onshore creditors
Kaisa became the first Chinese real estate developer to default on US dollar bonds after the downturn in the property sector and a sales freeze on its units in Shenzhen during an investigation. The landmark transaction, which involved borrowings of HK$82 billion (US$10.5bn), set an important model for similar cross-border restructurings in the future.
The company’s restructuring efforts were challenging both as a matter of commercial negotiation and from a legal perspective as there was limited precedent in Hong Kong for many of the legal issues faced. There is an obvious tension between the offshore and onshore creditors, with the onshore creditors having taken actions against Kaisa subsidiaries in China to protect their positions while the offshore creditors are structurally subordinated.
The deal also has a strong political overlay. Allowing the collapse of Kaisa will possibly lead to systemic contagion in the Chinese property sector, a tightening of liquidity and a concern by offshore creditors that the investment structures and their position, being structurally subordinated, places them at a serious disadvantage to onshore creditors. The realisation of this, absent a favourable restructuring, could lead to diminished investment capital for such developers.
Didi Chuxing-Uber China Acquisition
- Fangda Partners: PRC counsel to Xiaoju Kuaizhi (Didi Chuxing
- Han Kun Law Offices: PRC counsel to Uber China
- Skadden, Arps, Slate, Meagher & Flom: International counsel to Didi Chuxing
- Davis Polk & Wardwell: International counsel to Uber
- Walkers: Cayman Counsel to Uber China
Didi Chuxing was once known as the Uber of China, but after this deal it has turned the nickname into reality. The merger of China’s two biggest ride-hailing companies saw Uber swap its local operations for a minority stake in its Chinese rival, which boasts 300 million users in 400 cities and is backed by China’s biggest internet firms, including Alibaba, as well as other investors, including Apple.
As a result of the merger, Uber China has become a wholly owned subsidiary of Didi Chuxing, while Uber Technologies and other former shareholders of Uber China have become minority shareholders of Didi Chuxing.
Skadden’s Julie Gao, who represented Didi Chuxing, termed the deal an “epic battle”, involving many sensitive transactional issues, including structuring the deal in a manner that was attractive to two market-dominating competitors; handling a multitude of highly complicated multi-jurisdictional, multi-disciplinary legal issues; and addressing interests and demands from a savvy board and diverse shareholders. Each step required seamless implementation to obtain proper authorisations within a
- Baker McKenzie: Lead counsel to Foxconn
- Nishimura & Asahi: Japanese counsel to Sharp
- Tilleke & Gibbins: Thailand counsel to Sharp
- Khaitan & Co: Indian legal counsel to Foxconn
This was the first acquisition of a major Japanese consumer electronics manufacturer by a foreign company, marking a landmark transaction that attracted huge interest in both Japan and overseas.
Taiwan’s Foxconn (which is formally known as Hon Hai Precision) ultimately paid ¥389 billion (US$3.46bn) for a 66% stake in Sharp, the troubled Japanese manufacturer of displays.
Lawyers representing Foxconn say the most difficult aspect of the transaction was to develop a strategy to win against the competing bidder — Japan Display, an investment fund that was ultimately controlled by the Japanese government. In the end, they successfully put their client in a competitively advantageous position and closed the deal quicker than expected.
The deal required approvals in multiple markets in Asia and worldwide.
- Wilson Sonsini Goodrich & Rosati: International Counsel to KKR
- Allen & Overy: International Counsel to Go-Jek
- Latham & Watkins: International Counsel to Warburg Pincus
- Linklaters: Counsel to Farallon Capital
- Hadiputranto, Hadinoto & Partners: Indonesian Counsel to KKR
- Ashurst in association with Oentoeng Suria & Partners: Counsel to Capital International
- Ginting & Reksodiputro: Indonesian Counsel to Go-Jek
- Assegaf Hamzah & Partners: Indonesian Counsel to Warburg Pincus
- K&L Gates: Joint counsel to existing investors Sequioa and DST Global
- Clifford Chance: Joint international counsel to existing investors Northstar and NSI
- Goodwin Procter: Counsel to existing investor Formation Group
- Linda Widyati and Partners: Joint Indonesian counsel to existing investors Northstar and NSI
Go-Jek’s US$555 million equity capital raising was the largest single-round fundraising by financial investors for a South-East Asian technology company and deal created Indonesia’s first unicorn — a startup company valued at more than US$1 billion — and one of very few in the region.
The new investors included KKR, Warburg Pincus, Farallon Capital and Capital Group Private Markets, as well as certain existing shareholders and other international investors.
Large private equity deals in the region are taking even longer to close, according to market participants, but in this case exchange and completion were achieved within a matter of weeks despite the transaction involving detailed due diligence and negotiation of a complicated, multi-investor and late-stage financing. The transaction also had to address several novel Indonesian regulatory issues, which are specific to the multi-faceted nature and size of Go-Jek’s business, as well as factoring in the innovative technology and business strategy being adopted by the management.
Go-Jek’s business includes motorcycle ride-hailing, online food delivery, instant courier delivery and various lifestyle services, as well as services in the fast-growing e-wallet and car ride-hailing segments.
Greenko High-Yield Green Bond
- Shearman & Sterling: International Counsel to Greenko Energy Holdings and Greenko Investment Company
- Ashurst: International Counsel to the underwriters
- Cyril Amarchand Mangaldas: Indian counsel to Greenko Energy Holdings and Greenko Investment Company
- Talwar Thakore & Associates: Indian counsel to the underwriters
- Mayer Brown JSM: Counsel to the trustee (The Bank of New York Mellon)
- Bedell Cristin: Offshore Counsel to Greenko
This offering was India’s first high-yield green bond issuance and one of only a few successful high-yield offerings out of India. Green bonds are a new but growing class of securities designed to fund environment-focused projects or help renewable companies refinance debt, among other things. In this case, the deal enabled the company to access international capital markets for a competitive source of financing to address the continuing needs for green energy in India.
The seven-year bond raised US$500 million to help fund Greenko Energy’s Indian operating subsidiaries, including run-of-river hydropower projects, operational wind energy projects and two run-of-river hydropower projects under construction but near operational. It is one of the largest clean energy independent power producers in India, with more than 1GW of projects across hydro, wind and thermal energy.
The transaction included an innovative structure involving an orphan special purpose vehicle issuer and two tiers of bond issuances.
NTPC Green Masala Bond
- Cyril Amarchand Mangaldas: Indian Counsel to NTPC
- Allen & Overy: Counsel to the lead managers
This was only the second masala bond transaction after the new framework on external commercial borrowings was put into place by the Indian central bank and introduced a new flavour by going green. To qualify, the Rs30 billion (US$447m) offering had to comply with the Climate Bonds Standard version 2.0 and also the Green Bond Principles 2016 issued by the International Capital Markets Association. In another novelty, it was also the world’s first green masala bond to be listed on the Singapore stock exchange.
Masala bonds — rupee-denominated securities sold to overseas investors — had failed to take off until the new framework came into office and NTPC’s deal played an important role in opening this fund-raising channel for other Indian borrowers.
Palestine Investment Fund Hydrocarbon PSA
- Ashurst: Counsel to Palestine Investment Fund
This deal involved the Palestine Investment Fund signing a production sharing agreement (PSA) with the government of the State of Palestine that grants the fund the right to carry out certain hydrocarbon exploration, development and production activities within a designated area in the State of Palestine. In due course, the fund will transfer all of its rights and obligations under the PSA to a national company led by the Palestine Investment Fund.
The PSA is the first of its kind to be signed by the Palestinian government and aims to promote the development of Palestine’s nascent hydrocarbon industry to the wider benefit of the state.
CGNPC Investment in Hinkley Point Nuclear Project
- Ashurst: Counsel to CGNPC
- Clifford Chance: Counsel to EDF
- Herbert Smith Freehills: Counsel to EDF Energy and NNB
- Conyers Dill and Pearman: BVI counsel to CGNPC
This high-profile and controversial project is the UK’s first new nuclear power station for a generation. When operational, the £18 billion (US$23.4b) Hinkley Point C new-build nuclear power plant in Somerset is expected to provide 7% of Britain’s electricity needs for 60 years thanks to this strategic investment by the state-owned China General Nuclear Power (CGN), which also involves the establishment of a broader UK partnership for the development of new nuclear power stations at Sizewell in Suffolk and Bradwell in Essex, and a key joint venture designed to bring Chinese nuclear technology to the UK for future projects. It is the largest ever in-bound investment by China into the UK and, in a sign of the importance of the deal, was signed in the presence of the Chinese president, Xi Jinping, and the British prime minister at the time, David Cameron.
CGN and its legal advisers were involved in multiple complex negotiations, including shareholder arrangements with its joint venture partner EDF, the contract for difference and strategic investor agreement, nuclear fuel supply arrangements, state aid, power offtake, the generic design assessment process for Chinese technology and wider project due diligence. As a result of the deal, CGN’s share in Hinkley Point C will be 33.5%.
China Vitamin C Antitrust Litigation
- Sidley Austin: Counsel to China’s Ministry of Commerce
- Wilson Sonsini Goodrich & Rosati: Counsel to Hebei Welcome Pharmaceutical Co and affiliated company North China Pharmaceutical Group Corp
- Boies Schiller Flexner: Counsel to US plaintiff Animal Science Products
This remarkable case raised thorny questions regarding how courts should treat Chinese companies accused of violating US antitrust law when they are following the mandates of their own government.
Dated 2005, the antitrust case lasted for 12 years, with the plaintiffs alleging that the two defendant Chinese companies engaged in price fixing and supply manipulation in violation of US antitrust laws in connection with vitamin C exported from China. In March 2013, a Brooklyn, New York, jury found the companies liable for violating US antitrust
law. The judge awarded US$147 million in damages and issued an order barring the companies from violating the law in the future.
Then, in a historic move, China’s Ministry of Commerce participated in the case as amicus curiae (a friend of the court) and urged US judges to dismiss the case against the Chinese firms. It was the first time any entity of the Chinese government has participated in such a fashion in any US court. And the strategy worked. The US Court of Appeals for the Second Circuit vacated the judgment against the defendants, reversed on international comity grounds the district court’s denial of the defendants’ motions to dismiss, and remanded with instructions to dismiss the plaintiffs’ complaint with prejudice.
ICICI Pru Life IPO
- Davis Polk & Wardwell: International counsel to the lead managers
- Khaitan & Co: Indian Counsel to Prudential Corporation Holdings
- Cyril Amarchand Mangaldas: Indian counsel to ICICI
- S&R Associates: India counsel to the lead managers
This is the first initial public offering of an insurance company in India, making the company the first listed insurance company in India, after the rules for public offers of life insurance companies were liberalised in December 2015. The deal raised Rs60.6 billion (US$911 million) for the selling shareholder ICICI Bank, which held 68% of the joint venture before the IPO, with UK insurer Prudential holding roughly 26%. It is the country’s biggest IPO since 2010, when Coal India raised almost US$3.5 billion in 2010. The shares up for sale through the offering were all from ICICI, reducing its stake to 55%. Prudential did not sell any of its stake.
Despite the complexity of being the first IPO in a new sector, the offer witnessed one of the fastest executions (within five months of the kick-off). In addition to the Sebi review of the draft red herring prospectus, the offer was subject to the prior approval of Irdai. The regulator has been keen to prepare domestic insurers for heightened competition by encouraging consolidation and modernisation. This was reiterated in August by the announcement of a merger between HDFC Standard Life and Max Life, the first significant domestic M&A deal in the country’s insurance sector.
Postal Savings Bank of China IPO
- Davis Polk & Wardwell: Issuer’s counsel
- Clifford Chance: Counsel to the underwriters
- Haiwen & Partners: Issuer’s PRC counsel
- King & Wood Mallesons: PRC counsel to the underwriters
With the largest distribution network and customer base in China, Postal Savings Bank of China’s Hong Kong listing marked the world’s largest IPO in 2016, the world’s biggest new listing since Alibaba’s US IPO in 2014 and Hong Kong’s largest IPO since 2010.
PSBC is not an ordinary Chinese bank. Unlike other China-based commercial banks that have listed in Hong Kong, it is run under a directly-operational and agent-oriented business model, with China Post Group being the bank’s largest shareholder. Under this operational model, which consists of both directly-operated outlets and agency outlets in the form of post offices owned by China Post Group, the bank and its owner share a unique relationship in that the former has to pay the latter to help run its branches.
This was one aspect that regulators in Hong Kong were most concerned about, with the pricing of the agency fee being the biggest area of concern among investors. This involved a series of talks with authorities of the Securities and Futures Exchange in Hong Kong on issues including the price-setting method adopted for the agency fee and the disclosure of relevant operational agreements between both parties in the prospectus. All of those aspects needed innovative efforts to drive the deal to final success.
Pacific Andes Restructuring
- Mayer Brown JSM: International Counsel for Maybank
- WongPartnership: Singapore Counsel for lenders
- Linklaters: Counsel to HSBC
- Clifford Chance: Counsel for liquidators of China Fishery
- DLA Piper: Counsel for certain of bank creditors and Counsel for Rabobank and SCB
- White & Case: Lender counsel to the Taipei Fubon Bank syndicate
- Jingtian & Gongcheng: PRC counsel for Maybank
- Drew & Napier: Counsel for Pacific Andes Resources
- Rajah & Tann: Singapore counsel for Maybank
- Tan Rajah & Cheah: Counsel for Sahara Investment Group
- Advocatus Law: Counsel for the Informal Steering Committee of bondholders
- Cavenagh Law: Counsel for bondholders
- Meyer, Suozzi, English & Klein: Counsel for the Companies (US)
- Kelley Drye & Warren: Counsel for the Companies (US)
- Harney Westwood & Riegels: Counsel for Rabobank and SCB (British Virgin Islands)
- Sidley Austin: Counsel for Bank of America (US)
- Luskin, Stern & Eisler: Counsel for Rabobank (US)
- Lowenstein Sandler: Counsel for NS Hong Investments (BVI) (US)
- Forbes Hare: Counsel for Sahara Investment Group (British Virgin Islands)
- Appleby: Counsel for Maybank, Hong Kong Branch (Bermuda)
- TSMP Law Corporation: Counsel for Bank of America
- Walkers: Cayman counsel to HSBC
The list of firms involved on this deal is testimony to its complexity. The Pacific Andes group is one of the world’s biggest seafood companies and involves three listed entities in Singapore and Hong Kong, with Russian, European and South American operations. The group entered negotiations with its bank lenders with a view to rationalising the overall group’s more than US$1.5 billion debt structure, given the significant imbalance between its debt and cash.
The complexity of the corporate structure gave rise to significant challenges in trying to establish creditors’ rights and the effects of any action at specific levels of the corporate group, particularly in light of guarantees and security on a syndicated and bilateral basis. The summary of competing interests, due to the level at which the barrowing was given has caused significant complexity to this assignment. The creditor profile is further complicated by the involvement of both institutional and private bondholders at different levels in the corporate structure.
The restructuring has involved an informal standstill among the banks; a petition for the winding up of China Fishery and the contested appointment of provisional liquidators in Hong Kong and the Cayman Islands, in the midst of allegations of extensive fraud, supported by an external report from FTI Consulting; the subsequent removal of the provisional liquidators by the Hong Kong court; and the appointment of chief restructuring officers at all three companies; extensive security/enforcement reviews across the group; and processes for asset sale implementation.
- Freshfields Bruckhaus Deringer: International counsel to Rosneft
- Soemadipradja & Taher: Indonesian counsel for Rosneft
- Dentons: International counsel for Pertamina
- Anya & Associates: Indonesian counsel for Pertamina
Rosneft’s US$13.8 billion joint venture with Pertamina, the Indonesian state-owned oil and gas company, to build an oil refinery in Tuban in the East Java region of Indonesia constitutes the largest-ever Russian investment into Indonesia. The deal involved complex political, economic and legal dynamics, and was achieved in a very short space of time under considerable political pressure on both sides.
Through the deal, Rosneft acquired a 45 percent stake in the Tuban refinery and petrochemical project, with Pertamina holding the remainder. The new refinery, the first to be built in Indonesia since 1997, will have a crude processing capacity of 300,000 barrels per day and is expected to become operational in 2021.
The project forms part of Indonesia’s Refinery Development Master Plan, which involves the upgrade and expansion of four of the country’s seven existing refining facilities and the construction of two new major greenfield refinery projects.
It also forms the centrepiece of the strategic cooperation between Pertamina and Rosneft, not just in Indonesia but throughout South-East Asia and Russia, and across the full oil and gas value chain. The project is linked to an option for Pertamina to acquire assets producing 35,000 barrels of oil per day from Rosneft’s portfolio of upstream interests, constituting the biggest upstream deal by a South-East Asian company in Russia to date.
BHP Billiton Forests Bond
- Baker McKenzie: Counsel to BHP Billiton
BHP Billiton is one of the world’s biggest producers of commodities such as iron ore, metallurgical coal, copper and uranium, but it is also committed to demonstrating the validity of the UN’s initiative to reducing emissions from deforestation and forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries (Redd+).
The Forests Bond was co-developed in conjunction with, and issued by, the IFC. It focuses on providing conservation finance to protect forests under the Redd+ mechanism. It is a first of its kind globally and has a highly innovative structure involving BHP Billiton providing price support for the Redd+ carbon rights issued as part of the bond coupon.
Baker McKenzie provided legal and strategic advice in respect of the bond’s structure, and legal advice in relation to the documentation of the bond and negotiation with the IFC and other relevant parties, as well as assisting on detailed due diligence on the underlying Redd projects into which the bond would invest in Indonesia, Peru, Brazil and Kenya among other countries.
The bond will leverage private sector capital into Redd+ projects, an area that is critically important to meet global efforts to achieve the goals set under the Paris Agreement.
Samsung BioLogics IPO
- Cleary Gottlieb Steen & Hamilton: US counsel to Samsung BioLogics
- Kim Chang & Lee: Korean counsel to Samsung BioLogics
- Simpson Thacher & Bartlett: US counsel to the underwriters
- Bae, Kim & Lee: Korean counsel to the underwriters
- Lee & Ko: Korean counsel to the Samsung Electronics
Samsung BioLogics’ W2.25 trillion (US$1.97bn) IPO was the largest equity deal in Korea since Samsung Life Insurance’s launch in 2010 and the largest ever IPO in the biopharmaceutical industry in Asia. The company is one of the world’s fastest-growing players in the large-scale biologics contract manufacturing industry, and also engages in the development and commercialisation of biosimilar drugs through its joint ventures.
The 144A/Regulation S deal presented some unusual challenges as Samsung BioLogics was the first company to go public on the KRX Kospi market despite reporting a net loss every year since its formation. Indeed, senior executives told investors during the roadshow not to expect a profit until 2020. This lack of positive earnings meant that potential investors placed special emphasis on the due diligence — and the success of this effort was demonstrated by the response to the deal. The offering priced at the top of the marketed range and surged more than 25% during the first few days of trading, despite some market uncertainty caused by the US presidential election, which was decided between pricing and the first day of trading, and several disappointing Korean IPOs that had preceded it.
Yum Brands Spinoff
- Simpson Thacher & Bartlett: Counsel to Primavera Capital Group and Ant Financial Services Group
- Fangda Partners: PRC legal counsel to Primavera and Ant Financial
- Wachtell, Lipton, Rosen & Katz: Counsel to Yum China
Primavera and Ant Financial’s US$460 million investment in Yum China, the largest fast-food chain in China and owner of KFC and Pizza Hut, and concurrent spinoff from Yum Brands set a precedent and opened a new path for Chinese investment in US listed companies. It was also an important milestone in Yum’s business expansion on the mainland and set a solid foundation for its future as an independent restaurant business.
As well as being high profile, the transaction involved highly complex structuring and implementation — it is only the third known spin-off with a concurrent private investment in the past decade in the US market, and the only one involving any Asia-based investor. Due to the complexity of US tax, corporate, regulatory and stock exchange rules, this type of sponsored spin-off is challenging to execute even for seasoned US-based investors, and in this cross-border transaction, the legal advisers played an instrumental role in helping their clients navigate the complexities and designing an innovative transaction structure to accomplish the business goals.
After the spinoff and concurrent completion of the investment, Yum China started trading on the New York Stock Exchange as an independent company under the ticker symbol YUMC.