China Orient Asset Management benefited from pent-up investor demand for yield on Tuesday as it tapped international bond markets for the first time in almost two years with an upsized $650 million five-year issue.
The group was flooded with more than $6.5 billion of orders, according to two bankers familiar with the transaction, underlining just how hungry investors are for income-paying investments even as sleepy market conditions prevail and US interest rate hike worries nag.
The deal was increased from an initial target of $500 million, the two bankers added.
Strong investor interest in China Orient's dollar bond sale comes ahead of a widely anticipated US monetary policy update later this week, with Federal Reserve chair Janet Yellen due to give a key speech on Friday at Jackson Hole.
Initial guidance for China Orient, which was established in 1999 by the government to clean up the troubled loans of the Chinese banking system, was set at five-year US Treasuries plus 170 basis points area, before tightening to 2bp each side of 140bp. Final pricing on the August 2021 China Orient bonds was fixed at 99.248 on a coupon of 2.375% to yield 2.536%, according to a term sheet seen by FinanceAsia.
According to a sales note from a non-syndicate bank, fair value of the new issue should be at Treasuries plus 145bp as the bonds traditionally trade 5bp inside Huarong, reflecting its relative scarcity value.
The Reg-S note issued by Charming Light Investments is guaranteed by China Orient Asset Management International Holding and supported by a keepwell deed and equity interest purchase undertaking from the parent, which is 100% owner of both the issuer and guarantor.
The Beijing-based company plans to use the funds raised to shore up its working capital and for general corporate purposes.
In 2015, China Orient posted a 22% year-on-year increase to Rmb60.9 billion ($9.2 billion) in its operating revenues, while net profit after tax increased 19% year on year to Rmb 8.4 billion, thanks to strong growth in asset management and securities business.
Joint global coordinators were BOCI and Standard Chartered, while BoCom Hong Kong branch, CCBI, China Citic bank International, China Securities International, CICC Hong Kong Securities, Commerzbank, Dongxing Securities Hong Kong, ICBC Asia, Morgan Stanley, and UBS were joint bookrunners.
