The difficult outlook for Asian credits in the international bond markets recently led Telekom Malaysia, that country’s leading fixed-line telecom provider, to tap the Asian investor base with a $100 million floating rate note issue (FRN). The seven-year deal pays 225bp over six-month LIBOR and is callable after two years.

The deal was originally conceived as a $70 million issue designed to refinance short-term obligations. Investor enthusiasm saw the transaction upped to $100 million. The additional $30 million will be used for working capital. Telekom decided to go for a locally- targeted issue as it felt that the spreads on Yankee bonds were unattractive at current levels. In Asia, though, Telekom felt more assured. “Investors in Asia understand telecoms and they’re familiar with the company.”

Most of the issue was bought by Malaysian banks while the rest was divided among Chinese, French, Japanese and Singaporean banks. The company was also eager to act sooner rather than later. Telekom’s spokesman explains that as companies deal with the Y2K issue, the need for technological upgrades is increasing the competition for funds.

Hun-Liang Kuah, head of global markets, Deutsche Bank Malaysia, says the deal is attractive for investors because “they believe credit [conditions] will tighten over the next two years which increases the probability of it repaying in two years”.