ECM Exchange » fees

AIA’s jumbo IPO fee slips away

fionalsh — Tue, 02 Mar 2010 04:15:46 +0000

AIA’s nine IPO bookrunners – Deutsche Bank, Morgan Stanley, Goldman Sachs, UBS, Bank of America Merrill Lynch, Credit Suisse, CCB International, ICBC International and Citigroup, except CS, perhaps are the most unhappy ones on AIG’s decision to scrap AIA’s listing plan and sell the Asia insurance unit to Prudential instead. The decision has ripped off the nine banks’ chance to earn a potential US$450m–$600m mega fee from AIA’s IPO. AIA originally planned to raise US$15bn–$20bn from a Hong Kong IPO in April.

To acquire AIA, Prudential has launched a US$21bn (£13.9bn) rights issue arranged by Credit Suisse, HSBC and JP Morgan Cazenove. Among the three banks, CS is the only one which was also mandated as AIA’s IPO bookrunner. Rumours earlier had it that JPM was originally offered the bookrunner role for AIA’s IPO but the bank preferred to be a senior bookrunner and hence it got nothing in the end. Goldman Sachs and UBS were picked as senior bookrunners.

Charitable banks in India

shanks — Fri, 19 Feb 2010 08:20:01 +0000

Banks with lead roles in the recent government disinvestments are more charitable than you would think. Rural Electrification Corp is rumoured to be paying about 0.1% in fees for its up to Rs34bn (US$754m) follow-on offering. So rough back-of-the-pad calculations is that the five books – Bank of America Merrill Lynch, ICICI, JM Financial, Kotak Mahindra and RBS – are making a total Rs34m in fees or about Rs6.8m each or US$146,000 each. The last Indian government divestment done in NTPC saw the leads – Citi, JP Morgan, Kotak and ICICI Securities – getting paid 0.075–0.08% or about US$400,000 each. Great charity work indeed by the banks all for the name in the league table and profile. “Banks are just being responsible corporate citizens who are working for the well-being of the people by doing government deals for free,” said one banker tongue-in-cheek.

Fears expressed over CB future

owenwild — Wed, 27 Jan 2010 16:16:05 +0000

“The convertible bond market is combining the worst characteristics of ECM and DCM,” said a head of ECM. “I’m not sure what we are going to do.”

The concern is that more banks are chasing convertible bond business and are looking at it as an extension of their debt business. The issue is that some new entrants are apparently bidding fees more appropriate to straight debt (as low as 40bp is reported) rather than the 200bp typically seen on the sub-US$1bn deals that have become standard.

Morgan Stanley and BNP Paribas dominated issuance in EMEA last year yet had league table credit (where deal volume is split equally across bookrunners) of US$4.9bn and US$4.1bn, respectively.

The back of an envelope calculation shows at an average fee of 200bp Morgan Stanley would have earned fees of US$98m. But just US$19.6m at 40bp.

Clearly fees vary depending on the size of the deal, structuring involved and relationship with the issuer, but some bankers are worrying about how to maintain CB teams if fees do slide.