The bond, rated below investment grade or ``junk'' by international ratings companies, was priced to yield 12 percent and only took off after sole manager Morgan Stanley tailored provisions of the bond to suit a small group of 20 investors. The company had originally planned to sell US$235 million of 10-year bonds.

About 100 investors, by contrast, participated in the sale by Indonesian electricity distributor Tenaga Nasional Berhad of US$350 million in bonds at the end of April. That was the last international bond sale in the worst market in years.

Buyers of the Mandra bond received warrants giving them the right to buy shares in the company effective immediately for 10 US cents a share. If all were exercised, they would collectively own a 20 percent stake. In addition, they will be able to draw on an escrow account containing monies raised from the bond sale should the company fail to acquire 140,000 hectares of a planned 270,000-hectare purchase of mainland timberland over the next two years.

Mandra, which currently has no timber operations, has provisional agreements to buy commercial tree plantations in mountainous Anhui province, a center of paper making in China. The acquisitions have yet to be approved by government authorities. Mandra has the option to call, or buy back the bonds beginning at US$106 after five years, then gradually declining to US$100, or par, by the eighth year. Bondholders can put or sell the bonds back to Mandra beginning in 2007 for US$102 on a pro rata basis.

The sweeteners Morgan Stanley added to make the Mandra deal fly underscore how the deteriorating junk-bond market has altered the balance of power between sellers and investors.

``In this kind of environment the buyers have more leverage and are trying to exercise that,'' a Hong Kong-based bond trader said.

Asia's international bond market came to a standstill in March as fears mounted that the US Federal Reserve would pick up the pace of interest-rate rises in the face of accelerating inflation and worries about corporate creditworthiness.

A slew of planned bond sales, by such outfits as Thai Military Bank, Korean Internet and telecom company Dacom and Indonesian telecom Indosat, were postponed - and have yet to come to market. The government of Indonesia sold US$1 billion in bonds when the market appeared to stabilize last month but then saw its bonds plunge in secondary trading, scaring off other would-be bond sellers.

Mandra's sale is only the second since Indonesia's, and observers remain uncertain when the market will recover and a steady flow of deals resume.

Both Moody's Investor Services, with a ``B1'' rating - four notches below investment grade - and Standard & Poor's, with a lower ``B'' rating, or five notches below investment grade, maintained their original ratings on the smaller bond.

Mandra Forestry Holdings, with no previous experience in the wood products business, is 75 percent owned by Mandra Capital, which holds unidentified, formerly state-owned industrial assets in Anhui province. Mandra Capital's controlling shareholder is Zhang Songyi, a former managing director of mergers and acquisitions for Morgan Stanley. tim.leemaster@singtaonewscorp.com