Malaysia International Shipping Corporation (MISC) has completed an inaugural two tranche bond issue raising US$1.1bn from and a five and 10-year 144a transaction.

Under the lead management of Barclays and Citigroup, the Baa1/BBB+ rated credit raised US$400mn via the five-year tranche and US$700mn via the 10-year deal after seeing order books close at respectively US$1.3bn and US$1.1bn.

The five-year tranche was priced at 99.834% to yield 5.038%, equating to120bp over Treasuries, or 67bp over Libor. This tranche came through indicative price guidance of 125bp to 135bp. Fees were 30bp.

The 10-year was priced at 99.506% to yield 6.192%, equating to155bp over Treasuries or 103bp over Libor. This represented the mid-point of 150bp to 160bp range. Fees were 40bp.

The most relevant pricing comparable is state-owned company Petroliam Nasional Berhad (Petronas), which owns 62% of MISC. The main difference between the two is that MISC is rated one notch below the sovereign by Standard & Poor’s, whereas the three sovereign proxies – Petronas, Tenaga and Telekom all have the sovereign’s Baa1/A- rating. MISC also operates in a highly cyclical industry, which is currently out-of-favour with equity investors.

Taking into account the need for a roughly 10bp new issue premium, specialists estimate that MISC priced at a 10bp premium to Petronas and 10bp through Tenaga on a like-for-like basis. Investors, therefore, appear to have accorded the deal a “Petronas kicker” despite the slightly weaker rating.

At the time of pricing, Petronas had a 2015 bond trading at 145bp over Treasuries or 92bp over Libor. The Libor curve between a 2014 and 2015 bond is said to be worth 10bp.

Similarly Tenaga has a 2011 bond outstanding that is trading at 86bp over Libor. The curve between a 2011 and a 2009 bond is said to be worth about 18bp.

Observers estimate there was about 30% of overlap between the two order books. A total of 96 accounts participated, with 69 in the five-year and 59 in the 10-year.

By geography, the five-year book split 37% Asia, 51% US and 12% Europe. This book is said to have seen a lot heavier asset swap demand than recent deals, particularly from Malaysia. Observers believe this may hold spreads steady during secondary market trading.

The 10-year book is said to have a split of 29% Asia, 61% US and 10% Europe. Again specialists believe the deal will hold steady, this time because of the strength of US demand.

Proceeds from the issue are being used to re-finance the US$830mn bridging loan used to fund the AET purchase, which doubled MISC’s debt to M$9.3bn (US$2.45bn).