Mandra Forestry makes concessions in tapping weak market Mandra Forestry Holdings, a mainland start-up plantation company, has defied a weak market and raised US$195 million from the sale of high-yield bonds, showing investors are still willing to cough up as long as they get sufficient compensation for their risk. According to people familiar with the transaction, the Mandra offer was priced with a coupon of 12 per cent after first being restructured from a US$235 million 10-year bond into a less risky US$195 million eight-year offer. After negotiations with investors, the company and its book runner, Morgan Stanley, also decided to attach warrants for 20 per cent of the firm. The warrants, which can be sold separately, allow the bond holders to get a share of any equity upside, thus increasing the possible return above the annual 12 per cent. 'Although the markets were very soft, we worked closely with investors and the company and were able to structure a transaction that works for all parties,' said Sheldon Trainor, managing director of Morgan Stanley. The American investment bank owns 10 per cent of Mandra, Toronto-based Sino-Forest, which manages plantations in China, holds 15 per cent, and privately owned Mandra Capital controls the rest. Some observers said the added concessions to investors were an indication all was not well in the non-investment-grade market, which has seen yields and volatility rise sharply in the past month on concern about potential rating downgrades for General Motors and Ford Motor and a weak debut of an Indonesian sovereign bond. Since the end of last week, there has been a bit of rebound, but lower-quality names, including Hong Kong-listed Titan Petrochemicals Group and Chaoda Modern Agriculture, are still far below their month-ago price levels. 'If it were bull market galore, [Mandra] would have been able to do a much bigger transaction, they would have been able to do it in the public market, they would have got a better price and wouldn't have needed to have any warrants attached. The outcome shows the market is very thin,' said the head of syndicate at a European bank. The Mandra sale was preceded by a global roadshow, but the bonds eventually ended up being sold in the private placement market. The sources said the issue was split between about 20 fund managers and banks, with around 50 per cent going to the United States and the rest staying in Asia. One source said the Mandra Forestry deal may have opened the door for other privately owned Chinese companies that were not yet listed and found it difficult to raise funds in the domestic market. Investment banks are likely to be keen supporters of this trend, given the higher fees involved in arranging international bonds for first-time issuers whose names are unfamiliar. Morgan Stanley is said to have pocketed a 3.5 per cent fee for its work on the Mandra issue, compared with an average 0.37 per cent for investment-grade and high-yield bonds combined in Asia-Pacific ex-Japan so far this year, according to Bloomberg Data.