Reviewed by Stephen Mulrenan
The year 2002 was always going to have a lot to live up to in Asia, with the corporate world turning its attention on China following its accession to the World Trade Organisation on December 11 2001.
Sentiment might have been expected to be stronger were it not for the fact that the region had been drifting in recession mode ever since the 1997 financial crisis. With the death of the ‘new economy’ precipitating a period of economic adjustment, an upswing in corporate activity in 2001 showed signs of an improving economic climate.
All of this was shattered however in September 2001, with the terrorist attacks in the US. The world’s financial markets froze, with investor confidence the main casualty of the new ‘War on Terror’.
Given such activity, it came as no surprise that the year 2002 proved to be a difficult one. A slump in global stock markets meant that many offerings were postponed, with the net result that many companies found it difficult to raise the necessary capital to fund deals.
Announced mergers and acquisitions volumes dipped in Asia by 19.14% to US$117.49bn for the full year of 2002 from US$145.29bn for the same period in 2001.
Big-ticket project finance transactions were also few and far between, while the ‘old economy’ sectors, such as energy, industrials, real estate and media, were unable to bounce back to previous levels of activity.
China’s entry into the WTO, therefore, and its resulting commitment to develop its economic and legal structure, became something of a lifeline for law firms.
Despite lawyer participation in announced M&A deals totalling US$61.72bn, down 23.56% on 2001 figures, China leapfrogged a number of its neighbours to become the second busiest jurisdiction, accounting for 74 deal announcements valued at US$22.39bn.
Statistics such as these tell their own story and it is one reflected strongly in ALB’s review of the Top 10 deals of 2002, where no fewer than half have a China element to them. These include: the first major global offering by a Chinese state-owned bank (which went on to become the largest IPO in Hong Kong last year and the fourth largest IPO in the world in 2002); China’s first liquefied natural gas import project (among the first energy projects open to foreign participation); the first PRC financing where domestic lenders comprised a majority on the US dollar side (and which is hoped will have huge implications for the lending market in China); and the largest announced and completed M&A transaction of the year.
Other notable deals include new financing techniques being used in Vietnam and Korea that will hopefully set precedents, two significant initial public offerings in India and Singapore, and some good news Down Under, where the sale of Sydney Airport (which was the world’s largest trade sale of an airport, the largest government sale in Australian history and the largest privatization in Australia since 1997) provided welcome relief from a succession of corporate scandals.
ALB would like to thank all those firms that assisted with the research for this article. The criteria used to select the ‘Top 10’ deals of 2002 is subjective. Rather than being a quantitative survey of transactions in the region, we have sought to recognise those deals that made the headlines. Particular emphasis was given to the number and profile of the clients, the size of the transaction, its complexity and its significance for the region.
Special mention goes to Allen & Overy and Shearman & Sterling, both of which acted on four of the 10 transactions reviewed. Just behind these trailblazers comes Clifford Chance, Freshfields, Jones Day, Linklaters and Sullivan & Cromwell, who each have three deals to their credit.
DEALS
Guangdong's US$14bn LNG supply contract
What makes it a 2002 Top 10 deal?
It will be China’s first liquefied natural gas (LNG) import project and among the first energy projects open to foreign participation. Slated for completion in 2005, it will need three million tonnes of LNG every year for the next 25 years.It is also the largest single export deal in Australia’s history.
The rapid economic development and urbanization of China has dramatically increased its demand for energy. One of the world’s leading coal producers – coal provides up to 85% of its power needs – China historically has relied on high-sulfur, so-called ‘dirty coal’, widely blamed for the country’s high pollution rates.
But this is about to change.
Environmental concerns and market forces have led to the exploration of other fuel sources, particularly natural gas – a cleaner alternative. Gas will provide about 8% of China’s energy needs by 2010, and as the world’s fastest growing LNG market this decade, the Chinese market is expected to double again between 2010 and 2020.
Australia emerged victorious in the battle to secure China’s first liquefied natural gas (LNG) supply contract, worth US$14bn (A$25bn) in export income over the 25-year supply period. The US$600m Guangdong LNG Terminal and Trunkline Project is one of the largest gas development projects underway in China. As such, the contract was a hard-won one.
Six companies – from Australia, Indonesia, Malaysia, Qatar, Russia and Yemen – entered the bidding race in November 2001, but by the start of 2002, only Australia, Indonesia and Qatar remained.
Trumpeting Australia’s largest-ever single export deal, which will be established to supply LNG from the North West Shelf gas project to the Guangdong LNG terminal in China, prime minister John Howard praised the "fantastic team effort" of all involved.
The winning consortium – The North West Shelf Venture – comprised six equal participants: Woodside Energy Ltd (operator); BHP Billiton (North West Shelf) Pty Ltd; BP Developments Australia Pty Ltd; Chevron Texaco Australia Pty Ltd; Japan Australia LNG (MIMI) Pty Ltd and Shell Development (Australia) Pty Ltd.
The win also spelled good news for the Hong Kong office of Australian firm Minter Ellison and its managing partner and team leader Sam Farrands. For 18 months during the two-stage bid process, the firm took the lead role as principal legal adviser to Australia LNG Pty Ltd (ALNG), the North West Shelf Venture’s marketing group for China, which led the bidding for the supply contract.
The Minters team advised ALNG on the tender processes in China, legal and commercial risk identification and allocation, all the project documentation, tax effective structuring and all aspects of Chinese law relevant to the project.
A team of lawyers drawn from Denton Wilde Sapte’s Hong Kong office (advising on energy and financing issues) and from Jones Day’s Shanghai office (advising on China issues) advised the Guangdong LNG Joint Executive Office (JEO) on all aspects of the Guangdong LNG Terminal and Trunkline Project.
This was the first time Denton Wilde Sapte and Jones Day had teamed up for a project. They developed a package of contracts that were sent to the Government in Beijing for approval.
Energy partner Susan Farmer led the Denton Wilde Sapte team, which included Nicholas Grandage, a partner in the Hong Kong office. They negotiated fully termed LNG sales and purchase agreements during the 70 days between the issue of JEO’s model contract and the submission of the bidders’ final quotations on April 21.
Mitch Dudek, partner in charge of the Shanghai office, led the Jones Day team. The US firm advised on various legal issues and drafts, reviewed and/or negotiated all contracts in connection with the project, including invitations to bid for potential LNG supplier, invitations to bid for construction and design contractors, sale of gas to multiple downstream customers, project financing, and land requisition.
Jones Day’s Hong Kong based energy partner Peter Roberts was responsible for the overall project management of the Denton Wilde Sapte/Jones Day input.
JEO’s major sponsors included China National Offshore Oil Corporation (CNOOC), BP Global Investments Ltd., Shenzhen Investment Holding Corp., Guangdong Electric Power Holding Co., Guangzhou Gas Co., Dongguan Fuel Industrial General Co., Foshan Municipal Gas General Co., Hong Kong Electric Holdings Ltd. and The Hong Kong & China Gas Co. Ltd.
Leading the Denton Wilde Sapte team advising CNOOC, the Hong Kong and New York listed oil company, on its acquisition of a 25% interest in the Project was corporate partner Tom Deegan and head of energy for Asia David Moroney.
The preliminary terms envisage CNOOC paying approximately US$320m to purchase an approximate 5% interest in the upstream reserves of the North West Shelf gas project.
CNOOC retained the services of the UK firm after it advised the oil company on its US$585m acquisition of Indonesian oil and gas assets from Repsol-YPF, one of the largest international acquisition deals in China’s business history. The firm also advised CNOOC’s acquisition of an interest in the Tangguh LNG project in Indonesia.
CNOOC also announced that BP, another short listed supplier, whose bid to supply the Guangdong terminal was based on supply of LNG sourced from the Tangguh gas reserves in Indonesia, will be the LNG supplier to the second Chinese LNG import terminal proposed for Fujian province. The Fujian terminal will have a capacity of 2.5 million metric tonnes per annum and is scheduled to commence operations in 2006.
The US$600m Guangdong LNG Terminal and Trunkline Project is not likely to close until the third quarter of 2003. Central government has to approve the project but cannot do so until it receives the feasibility documents, which have not yet been sent.
Deliveries are expected to begin in late 2005 or 2006.
Bharti Tele-Ventures Limited's US$172M IPO
What makes it a 2002 Top 10 deal?
Bharti Tele-Ventures becomes the first Indian mobile phone company to list publicly. The telco IPO is also India’s largest public issue for six years.
Jones Day Reavis & Pogue, together with local counsel Pathak & Associates, advised the issuer on the first initial public offering of shares in an Indian domestic mobile telephone company and the largest public issue in India for six years. The deal ended up being 2.5 times oversubscribed, with considerable foreign investment. Shearman & Sterling (US counsel) and Little & Co (Indian counsel) advised the underwriters.
Bharti Tele-Ventures Limited issued US$172m worth of equity shares in an IPO and planned concurrent private placements in the US, Europe and Asia, managed by Morgan Stanley Private Ltd. and DSP Merrill Lynch Ltd. However, the placement was by no means straightforward, with the deal starting back in 2000 – at which time it was contemplated that the offering would be accomplished, in part, by means of a SEC-registered public offering in the US – but getting postponed on several occasions due to market conditions in the US. It eventually closed on February 14 2002.
In the end, and two years after work commenced on the issue, Bharti listed on the Delhi, Mumbai and National stock exchanges, becoming one of India’s top ten listed companies in terms of market capitalization. Concurrently with the India public offering, the company, via its private placement agents (Morgan Stanley, Merrill Lynch and ABM AMRO), sold shares to institutional investors in the US and to other investors in Europe and Asia.
The Jones Day/Pathak team included Kevin Cramer (Jones Day, Hong Kong), and Sandip Bhagat, Ritin Rai and Shivani Awasthy (Pathak & Associates, New Delhi).
With the recent introduction of the new book building rules, the Bharti deal was said to set a precedent, with future deals expected to use a similar structure. Jones Day followed up its role on this deal with the June 2002 US$43m IPO of Indian software company i-flex Solutions Limited. Like Bharti, i-flex Solutions concurrently offered shares to institutional investors in the US and to other investors in Europe and Asia, with Jones Day acting as US legal advisers to the investment banks.
In addition to the Bharti and i-flex offerings, Jones Day was involved in 2002 in two other offerings that were based on the 100% book build model. One of these transactions was cancelled due to market conditions and the other is in progress.
Bharti used the proceeds of this offer to finance the expansion of its telecommunication business in India. It proposed to achieve this by developing cellular, fixed-line and national long-distance networks into eight new markets, including Mumbai.
Bharti Tele-Ventures, a little over 51% of which is owned by the promoter of the company Bharti Telecom, had a subscriber base of 1.34 million as of November 30 2001, which included 1.04 million cellular subscribers. The cellular subscriber base in India has increased from around 1.2 million as of March 31 1999 to about 5.2 million as of November 30 2001. It is estimated that the base will grow to approximately 31 million subscribers by 2005.
US$2.7bn PRC ethylene cracker deal
What makes it a 2002 Top 10 deal?
The first PRC financing where domestic lenders comprised a majority on the US dollar side, the deal will have huge implications for the lending market in China. Allen & Overy advised the lead arrangers on a PRC deal that was heralded as a milestone in the development of the Chinese lending markets.
The UK firm acted for five PRC banks and two foreign banks on a bank debt financing of the development of a 900,000 tpa ethylene cracker and associated derivative plants at Caojing in Shanghai.
The full composition of banks included: Bank of China, Shanghai Pudong Development Bank, Bank of Communications, China Construction Bank, Industrial and Commercial Bank of China, HSBC, and the Beijing branch of The Industrial Bank of Japan.
This project was a landmark financing in that:
· This was the first of three major multi-billion dollar projects in the PRC to achieve financial closure in the face of competition from two rival projects and in difficult market conditions.
· It was a record time to completion of such a large and complex financing in China, which was achieved within the sponsors’ desired timetable of less than two months following initial mandating.
· It has the largest composition of PRC banks in a financing of this size and nature in China, and was the first financing in the PRC where domestic lenders comprised a majority on the US dollar side, with the PRC banks taking 80% of the US commitments and all of the considerable RMB commitments as well. The PRC banks taking the majority US dollar commitment was an important milestone in the development of the Chinese lending markets and signaled significant new challenges and opportunities for both borrowers and lenders in the development and structuring of PRC banking business.
· Settlement of complex intercreditor issues and issues regarding the interplay between guarantors was made all the more challenging given that many of the PRC banks and sponsors had not previously worked with foreign banks, foreign sponsors or foreign counsel in financing projects of this nature.
Asian Projects Group head Mitchell Silk led the A&O team. He said: "Five years ago, the thought of PRC banks taking the majority US dollar commitment would have been almost unthinkable."
The Bank of China's US$25bn IPO
What makes it a 2002 Top 10 deal?
In July 2002, Hong Kong’s second largest bank – Bank of China (Hong Kong) – launched an initial public offering of shares. The first major global offering by a Chinese state-owned bank went on to become the largest IPO in Hong Kong last year and the fourth largest IPO in the world in 2002.
As Bank of China (Hong Kong)’s shares began trading on the Hong Kong Stock Exchange on July 25 2002, the IPO transaction line-up of Bank of China representatives, investment bankers, accountants and lawyers, must have breathed a huge sigh of relief that the extreme volatility of the global equity markets had not sabotaged the deal.
They needn’t have worried. Despite poor equity markets and sentiment-souring scandals at its sister companies, BOCHK’s public offering was more than 26 times over-subscribed and indications of interest representing over five times the offer shares initially available in the international offering were received during the book-building period.
The shares, which were offered on a retail basis in Hong Kong and to institutions on a global basis, went on to raise approximately US$2.37bn.
One of the more interesting aspects was the fact that the IPO was built on a merger of 12 entities. One of the challenges for the law firms advising was to weld all of these entities together and develop a unified vision and strategy for all of them, not to mention a new internal governance mechanism and management system.
Another interesting aspect was that this was the first China related bank deal that has gone to the market. This generated some issues in terms of disclosure for the bank. Initially when the transaction commenced, it was with a view to a listing in the US. So the normal SEC-required financial and statistical disclosure for the banks was also applicable in this case. BOCHK was not used to giving this so it was a novel experience for it. Experienced managers operating at the bank were not experienced in terms of preparing a prospectus and dealing with the various regulatory authorities in Hong Kong and elsewhere.
The size of the deal was not really a factor. But the usual mega China deals end up being dual listed in New York and Hong Kong and this was an exception to that. BOCHK ended up not doing a registered transaction in New York, having to change course following the demise of Arthur Andersen. Additional disclosure under US accounting principles meant that there wasn’t enough time to do both the Hong Kong and US deals. However, counsel spent much of its time working on the transaction on the assumption that there would be a registered deal in the US.
Since conclusion of the listing, the legal advisers working on it have, not surprisingly, touted it as a benchmark for other state-owned banks in the PRC. Michael Liu, co-head of the Allen & Overy team advising the joint financial advisers and joint global coordinators, described the overseas listing of BOCHK as "a crucial step for the PRC banking industry as it readies its financial institutions for competition from foreign banks".
Stanley Chow, Liu’s fellow team co-head, added: "The successful listing will give BOCHK greater exposure to Hong Kong’s regulatory and financial infrastructure, the benefit of which may translate well to the operations of the bank in the mainland of the PRC."
BOC had a formal ‘beauty contest’ for the role of counsel to the issuer and counsel to the underwriters in Beijing in February 2001. It invited several law firms to present their credentials to the Bank and the underwriters before selecting counsel. In doing so, BOC was mainly looking for experience on similar deals such as other China privatizations and global capital markets transactions.
The six law firms that advised on the IPO were described by one lawyer as "among the pool of people you would expect to be working on a deal like this". Each firm offered BOC the experience it was seeking.
China Telecom's US$1.43bn global IPO
What makes it a 2002 Top 10 deal?
The IPO of China Telecom was the largest ever equity offering of shares outside the PRC and represents another important step in the reform of state-owned enterprises and the telecommunications industry in Mainland China and should boost liberalization of the sector and the privatization of other state firms.
China Telecom Corporation Limited, a subsidiary of China Telecommunications Corporation – the largest fixed line telecommunications operator in China – completed its US$1.43bn global offering of H Shares and ADSs on November 15.
With a dual listing on the New York Stock Exchange and the Stock Exchange of Hong Kong, the IPO represents another important step in the reform of state-owned enterprises and the telecommunications industry in Mainland China.
As part of the Chinese government’s continued efforts in the past decade to carry out the restructuring of the PRC telecommunications industry and to promote competition in this industry, China Telecommunications Corporation, the parent company of the issuer in the global offering, China Telecom, completed a major restructuring earlier in 2002. Its telecommunications businesses and assets in 10 northern provinces were split out and merged with China Netcom Corporation and Jitong Communications Co. Ltd. to form China Netcom Group, while retaining the telecommunications businesses ad assets in the remaining 21 provinces in Mainland China.
In anticipation of the IPO, China Telecom was incorporated in September 2002, as a subsidiary of China Telecommunications Corporation, to operate the telecommunication businesses and assets in Shanghai Municipality, Guangdong Province, Jiangsu Province, and Zhejiang Province.
In December 2000, Sullivan & Cromwell was selected as China Telecom’s US counsel after being invited to attend a formal ‘beauty contest’, along with two to three other US law firms, in Beijing. Other counsel for the issuer included Freshfields Bruckhaus Deringer, as Hong Kong counsel, and Jingtian & Gongcheng, as PRC counsel. Counsel for the underwriters included Shearman & Sterling, as US counsel, Slaughter and May, as Hong Kong counsel, and Haiwen & Partners, as PRC counsel.
China Telecom’s IPO involved a number of financial markets in the world and various jurisdictions, including the US, Hong Kong and Japan, among others. In particular, in connection with the global offering, China Telecom was seeking a listing on the New York Stock Exchange and a listing on the Stock Exchange of Hong Kong, while conducting a public offer without listing in Japan. This required the working group’s extensive interaction with the regulators and/or stock exchanges in the US, Hong Kong and Japan.
As a result, one of the many challenges for the lawyers involved was to coordinate closely and effectively in managing the regulatory review and approval process in various jurisdictions. This was particularly so dealing with comments from the regulators on, and amendments to, the prospectus and establishing a seamless coordination in many aspects of the transaction.
Like many other New York listings and US public offerings, China Telecom’s offering had to go through a review and approval process involving the US Securities and Exchange Commission (SEC) and the New York Stock Exchange. Not only the substance and form of the disclosure in the prospectus had to satisfy the requirements of the US securities law and regulations, but also careful consideration was required on a number of newly adopted or proposed law and/or regulations in the areas of disclosure, accounting and financial reporting, and corporate governance, among other things.
Further challenges resulted from difficulties encountered in connection with the downsizing of the transaction. On the day of the originally scheduled pricing date, after the US registration statement already became effective, insufficient market demand resulted in a decision to downsize the transaction by over 50% in terms of shares offered and to re-launch the deal within a week.
To get the deal done under these unusual circumstances required counsel’s coordination on a number of matters.
Such matters included the completion of a number of important steps in the US and Hong Kong to inform the investors of material facts concerning the downsizing. Within the time restraint of five business days, legal counsel had to prepare and file with the SEC post-effective amendments to the issuer’s registration statement on Form F-1, and prepare and re-circulate a new preliminary prospectus to investors. In this process, direct consultation and coordination by the issuer’s US and Hong Kong counsel with the US and Hong Kong regulators were crucial to the successful re-launching of the transaction as planned.
An additional challenge in the deal execution process was the tight transaction timetable. Work on the IPO was suspended in May 2001 after the organizational meeting in early January 2001, but started again in late May 2002 with an end of October closing schedule.
This meant that the working group planned to complete the transaction in about five months, together with the extensive changes that were required to be made to previous drafts of the disclosure document – in order to reflect the restructuring in the fixed line telecommunications sector since the work on the IPO was suspended in May 2001.
Sydney Airport's A$5.58bn (US$3.2bn) acquisition
What makes it a 2002 Top 10 deal?
The sale of Sydney Airport was one of the largest M&A deals in the Asia Pacific in 2002. It was also the world’s largest trade sale of an airport, the largest government sale in Australian history and the largest privatization in Australia since 1997.
Blake Dawson Waldron advised Southern Cross Corporation on its successful A$5.58bn bid to acquire Sydney Airport, one of the largest Asia Pacific M&A deals in 2002.
Corporate partners David Somervaille and Jeremy Kriewaldt, banking and finance partner Fred Pucci and projects partner Tony Hill were the key members of the Blakes team.
The sale, announced on June 26, was claimed as the world’s largest trade sale of an airport and the largest government sale in Australian history.
Macquarie Bank led the Southern Cross consortium, which also included the airports arm of German construction company Hochtief and the Commonwealth Bank of Australia, outbid rival groups involving Dutch bank ABN Amro and Westpac of Australia, Australian insurer AMP and UK airports group, BAA.
David Somervaille, Blake’s head of Infrastructure, said: "This transaction has involved a tremendous effort by all involved. It has had to suffer many twists and turns, including being halted by the tragic events of September 11. This result highlights the persistence and business acumen of our client, the Macquarie Bank-led Southern Cross Consortium, which faced fierce competition in its bid for this asset."
Blakes’ infrastructure team has been involved in a number of major projects, including advising the Asia Pacific Transport Consortium on the recent Alice Springs to Darwin rail link project and the Federal, New South Wales and Victorian government on the privatization of National Rail Corporation and FreightCorp.
Allens Arthur Robinson acted for Commonwealth Bank of Australia, Barclays Bank, RBS Australia (Royal Bank of Scotland) and SG Australia (Societe Generale) as providers of around A$4bn in senior facilities and related interest rate hedging facilities in connection with the acquisition. Also on the debt side, a separate team of AAR lawyers acted for HypoVereinsbank, who are funding a A$200m portion of the equity contributed by Hochtief in its role as airport operator and a shareholder in the Southern Cross Consortium.
Mallesons Stephen Jaques, meanwhile, was appointed in January 2001 as principal legal adviser to Sydney Airports Corporation Limited (SACL) on a scoping study to determine how the Sydney Basin Airport should be privatised. It subsequently advised in connection with the trade sale decided upon by the Commonwealth, with its appointment the result of a competitive tender process.
Mallesons also acted for SACL in connection with its successful application to the ACCC to substantially increase the aeronautical charges in relation to the use of facilities by airlines at Sydney Airport.
The Berlin office of Freshfields Bruckhaus Deringer and the Sydney office of Gilbert & Tobin acted for Hochtief Airport in its major investment in the successful consortium.
Samsung Life Insurance's cross-border MBS offering
What makes it a 2002 Top 10 deal?
Korea’s first cross-border mortgage-backed securities offering was also the first securitization by a Korean insurance company and the first full principal pass-through cross-border transaction in the country.
The first-ever cross-border mortgage-backed securities (MBS) offering was completed out of Korea in December and is expected to open the way for further deals of this type.
Samsung Life Insurance Co., Ltd., the largest insurance company in Korea, issued US$299.6m of guaranteed secured floating rate notes, due 2022, on a pool of residential mortgage loans in Korea.
The transaction structure followed the double SPV structure whereby Samsung Life sold a portfolio of mortgage loan assets to a Korean SPV, Bichumi Korea 1 Limited, and Bichumi Korea 1 Limited issued US$299.6m notes to Bichumi Global 1 Limited, the Cayman Islands SPV in order to fund the purchase of the portfolio. Bichumi Global 1 Limited in turn issued US$299.6m mortgage-backed notes (the Notes) guaranteed by Ambac Assurance Corporation. Standard & Poors and Moody’s have rated the Notes AAA and Aaa respectively.
The Notes were sold in the US by way of private placement in reliance of Rule 144A and outside the US pursuant to Regulation S. The deal closed December 10.
It is hoped that the Samsung Life MBS offering will open the way for other mortgage originators to follow their lead on this new asset class, although this may take some time.
Mortgage originators have not traditionally relied on securitization as a source of funding. However, a recent initiative by the country’s Financial Supervisory Service (FSS) may have an impact.
The government’s imposition of greater risk weighting on mortgage loans has meant that banks will now have to find new ways of increasing their capital adequacy ratios. Securitization would enable them to take mortgages off their books.
Advising Samsung Life on UK law was Simmons & Simmons. Sean Bulmer and Jae Chul (JC) Lee led the UK firm’s team. Shin & Kim advised on Korean law matters.
Securitization partner Paul Kruger led the Clifford Chance team advising Morgan Stanley as arranger of the issue on UK law matters. Kim Shin & Yu advised on Korean law matters.
Jones Day Reavis & Pogue lawyers Jeff Chen and Stephen Peepels advised Ambac Assurance Corporation, the monoline guarantor.
Chen says: "Samsung Life RMBS is the type of deal that often requires external credit enhancement by a monoline wrapper in order to get marketable ratings, it’s a ‘first-ever’ and thus unique to the market, involves complex or untested features, and originated from a jurisdiction in which there exists certain types of political, legal and currency risks."
Samsung Life RMBS is Ambac’s second asset-backed deal in Asia.
MobileOne IPO
What makes it a 2002 Top 10 deal?
Singapore’s largest IPO since 1999 and its third largest in history behind those of SingTel and Chartered Semiconductor.
Linklaters, Freshfields Bruckhaus Deringer and Allen & Overy have each worked with their joint law ventures in Singapore to act on the country’s largest IPO since 1999, and its third largest in history behind those of SingTel and Chartered Semiconductor.
Singapore’s second largest mobile communications provider MobileOne (M1) offered 600,500,000 shares and raised S$787.5m. The shares were offered entirely by M1’s shareholders, Great Eastern Telecommunications Ltd, Keppel Telecoms Pte Ltd and SPH Multimedia Private Limited, which originally held 30%, 35% and 35% respectively of M1’s issued share capital.
Linklaters Allen & Gledhill acted for M1, Keppel Telecoms Pte Ltd and SPH Multimedia Private Limited. Partner Kevin Wong led the Linklaters Allen & Gledhill team with Chris Grieves and Randy Wilbert assisting.
Andrew Roberts, Singapore based Asia managing partner, told ALB that publicity guidelines on securities offerings with a US component prevented the firm from discussing its role.
"We could not assist until mid-March," he says.
Freshfields Drew & Napier acted for both ABN AMRO Rothschild (the unincorporated equity capital markets joint venture between ABN AMRO Bank N.V., Singapore branch, and N.M. Rothschild & Sons (Singapore) Limited) and UBS AG (through its business group UBS Warburg), in their roles as joint global coordinators, joint book runners, joint lead managers and underwriters of the offering.
David Simpson, managing partner of Freshfields Drew & Napier, led the firm’s team, which included corporate associates Joan Janssen, Richard Lee, Simona Spazzini and Kate Strickland.
Simpson says: "In a competitive and difficult market for telecommunications companies, it was a tremendous effort from everyone involved in this IPO to bring M1 to market."
Allen & Overy Shook Lin & Bok acted for Great Eastern Telecoms Limited, a joint venture between Cable and Wireless plc and PCCW-HKT Limited, on the sale of part of its significant stakeholding in M1. Ban Leong Oo from A&O and U Kean Seng from Shook Lin & Bok led the team that advised on Singapore, UK and US law.
Ban Leong Oo says: "Given the difficulties seen elsewhere in getting IPOs away, we are particularly delighted at the strong response seen from both institutional and retail investors. It should pave the way for more deals of this type moving into next year."
At S$1.32 per share, M1 has priced on a P/E ratio of approximately 10 times 2003 earnings. The offering price is subject to an over-allotment option in respect of 90,075,000 ordinary shares of par value S$0.20 each in the capital of M1, granted to the joint global coordinators of the offering. Certain retail and other investors qualified for a S$0.07 discount.
Trading in shares of M1, which has captured 33% of Singapore’s mobile phone market, started on December 4.
Vietnam's Phu My 2.2 project
What makes it a 2002 Top 10 deal?
Vietnam’s largest project financing to date and an innovative financing first. This was the first project financing approved by the State Bank of Vietnam and the first to be registered at the new National Centre for Registration of Secured Transactions. Its financing includes the first hedging agreements approved by the State Bank of Vietnam.
Allen & Overy and Clifford Chance both had roles on Vietnam’s first build-operate-transfer (BOT) project financed on a limited recourse basis.
The Phu My 2, Phase 2 power project was for the construction, financing, operation and maintenance by Mekong Energy Company Ltd of a 715 MW gas-fired combined-cycle power plant in Ba Ria-Vung Tau Province near Ho Chi Minh City in southern Vietnam. The plant is part of the 3,600 MW power complex in the Phu My Power Generation Centre, some of the facilities within which are to be developed on a BOT basis.
Allen & Overy advised the sponsors, EDF International (EDFI), Sumitomo Corporation and Tokyo Electric Power Company International B.V. (TEPCI), as international counsel on the recently signed deal. Partner Grant Fuzi led the A&O team out of Hong Kong, while partners Noël Chahid-Nouraï and Rod Cork advised on French law matters.
The Hanoi office of Paris-based firm Gide Loyrette Nouel advised the sponsors on Vietnamese law matters.
Lawyers from Clifford Chance’s Hong Kong and Singapore offices advised a consortium of senior lenders (including co-ordinating lead arrangers and a number of multilateral and bilateral agencies) as international counsel on all aspects of the financing, including the gas supply, off take and construction-related issues. Partner Huw Jenkins, head of the firm’s Asia finance practice, led the CC team.
Vietnamese firm Vilaf, with whom CC has a strong relationship, advised the lenders on Vietnamese law.
Construction is due to start imminently on Vietnam’s largest project financing to date, with commercial operation to begin in 2004. It is hoped that the project may pave the way for further financing of this type in Vietnam, for the country’s power sector and other industries.
The financing was considered innovative as it included multi-sourced financing utilizing a variety of products. The commercial lenders, led by Australia and New Zealand Banking Group Limited, Société Générale Asia Limited and Sumitomo Mitsui Banking Corporation, benefited from a US$75m partial risk guarantee provided by the International Development Association (IDA), as well as a US$25m extended political risk insurance coverage provided by a private insurer, under a partial risk guarantee granted by the Asian Development Bank (ADB). The balance of the debt was financed by direct loans provided by Japan Bank for International Cooperation (JBIC), ADB and Société de Promotion et de Participation pour la Coopération Economique (PROPARCO).
Challenges for the lawyers included the settlement of issues on the provision of a Guarantee by the government of Vietnam, risk allocation on termination compensation, conversion of Vietnamese Dong into US dollars for remission, a Vietnamese law-compliant project finance insurance regime, a bankable security package and the application of Vietnamese foreign investment laws in the context of project finance.
China Mobile's US$10.34bn acquisition of China Mobile Hong Kong (BVI)
What makes it a 2002 Top 10 deal?
China Mobile’s US$10.34bn acquisition of China Mobile Hong Kong (BVI) was simply the largest announced and completed M&A transaction of the year. Upon conclusion of the acquisition, China Mobile (HK) became the largest mobile service provider in the world, with over 100 million subscribers and a network coverage of more than one billion people.
China is now officially undergoing a large restructuring of its domestic telecom industry. In January 2002, an announcement was made that China would allow its fixed line operators and mobile operators to compete by setting up four service providers engaged in fixed-line, mobile, data and other basic telecom services. Presently, domestic providers are generally limited to only segments of this spectrum of services.
Although China is the world’s largest mobile phone market, China Unicom and China Mobile are the only providers of mobile phone services in the country, with China Mobile being the larger of the two.
On May 16 2002, Hong Kong-listed China Mobile (HK) Limited entered into a conditional sale and purchase agreement to acquire from China Mobile Hong Kong (BVI) Limited, its immediate controlling shareholder, the entire interests in the mobile telecommunications companies indirectly owned by its parent company China Mobile Communications Corporation in Anhui, Jiangxi, Chongqing, Sichuan, Hunan, Hubei, Shaanxi and Shanxi.
Some of the same firms that acted in 2001 on China Mobile’s US$32bn acquisition of mobile networks in seven provinces in China – the PRC’s largest ever acquisition – came together again on this transaction.
Linklaters continued its good work for China Mobile (Hong Kong), after helping it to list in 1997 and acting on its US$32bn acquisition of seven mobile network operators. In fact, the UK firm used the same team this time as it did on that record breaking transaction, with both deals being part of the same programme of acquisitions.
Corporate finance partner Celia Lam, who was made head of the firm’s newly licensed Beijing office in July last year, led the Linklaters team. Lam advised on both the 1997 listing and the 2001 acquisition of seven mobile network operators.
Shearman & Sterling acted as US counsel to China Mobile on its acquisition of mainland assets from its PRC parent company. Partner Matthew Bersani led the Shearman team.
Sullivan & Cromwell followed up its role in 2001 on the US$32bn acquisition of seven mobile network operators with a lead role on this deal. It advised China International Capital (CICC) and Goldman Sachs on the US law aspects of the acquisition.
It was a good year all-round for the Wall Street firm. In the 10 largest M&A deals announced worldwide in 2002, the US firm acted in five of them, including the largest deals in Asia, Europe and the US.
Herbert Smith acted as Hong Kong counsel to the financial advisers, with Beijing managing partner Jeremy Xiao leading the UK firm’s team.