|Written by Alexis Lamb|
Monday, July 30, 2012
ASIA MARKETS – HALFTIME REPORT
INVESTMENT GRADE DEBT
What this means for Asia debt capital markets is that many of the bond deals which are going through right now involve issuers with a heavy degree of state ownership, or some other factor which makes them a less risky investment. One lawyer at a top US firm here in Asia mentioned to me that bond issuers are scrambling to find any tie to, say, state ownership to increase the perceived safety of the investment in their securities. While the sovereign relationship tie with some issuers is as obvious as a ‘Luke, I Am Your Father’,with other issuers it’s more of an ‘I am your father’s brother’s nephew’s cousin’s former roommate’. Which should make the relationship to a sovereign entity absolutely nothing, yet into the prospectus it goes!
SOUTHEAST ASIA AND OTHER DEVELOPING ECONOMIES
Deals out of the Philippines, Indonesia, Malaysia, Thailand, and even Sri Lanka and Mongolia have been buoying the Asia markets in 2012. Associates that I have placed in US capital markets practices and other practice groups in Singapore (or in Southeast Asia practices in HK) report being very busy, while some of their counterparts at firms which focus primarily on Hong Kong IPOs are reporting very little dealflow.
Southeast Asia also provides a strong pipeline of project finance, resources, and energy-related transactions. Associates in project finance or energy-related fields are extremely busy, with many of their deals out of Indonesia. A number of US law firms have their eye on opening an office in Singapore in order to take advantage of the project finance and energy/resources work flowing out of Southeast Asia, and this deal flow does not show signs of stopping.
DARK SPOTS ON THE HORIZON
Graff Diamonds pulled their billion-dollar Hong Kong IPO at the end of May, resulting in an absolute cessation of work according to conversations I had with several capital markets associates involved in the behemoth transaction. Manchester United also snubbed the Hong Kong Stock Exchange in favor of the NYSE for their IPO earlier in July. Graff and Manchester United were not the only potential issuers to yank a planned Hong Kong IPO – China Nonferrous Mining Corp, a copper producer, and China Yongda Automobiles Services, an automobile dealer, also shelved deals in May of this year. HK IPOs that are managing to close, such as Yitai Coal, the second biggest HK IPO this year to date, are being downsized and priced at the bottom of the indicative range, with uneasy markets resulting in low participation by skittish retail investors.
It’s not all bad news. There seem to be a number of strong Hong Kong offerings in the pipeline, including the planned listings of Russian oil major Lukoil and behemoth Mongolian state-owned mine Tavan Tolgoi (the latter more likely in 1Q-2Q 2013). And some associates report a hurry-up-and-wait sentiment among initial purchasers, meaning that client underwriters view it as more cost-effective to have the IPO ready to go while waiting for the right moment to pull the trigger, than to have their lawyers undertake a last-minute scramble to finalize the deal documentation when the investment climate becomes more favorable. So some associates are managing to bill a fair number of hours despite the lack of deals actually closing.
But are there layoffs? Rumors of ‘stealth layoffs’ have been circulating throughout capital markets departments of various law firms, but there is nothing to indicate that anything close to the carnage of March 2009 will occur, and some law firms are still hiring mode – even for capital markets associates. In fact, we recently placed 2 US cap markets associates in HK, in the past month. Law firms are still bullish on China M&A, with several seeking lateral partners who can provide them with entry into that potential market as well as other law firms actively hiring M&A associates.
Asia Markets - Halftime Report
Kinney Recruiting prides itself on placing the best lawyers in ideal legal jobs. Our recruiters strive to ensure that all of our placements are the best possible career moves for both candidates and the hiring law firm. If you are thinking about a lateral move, the only choice is Kinney!