Gansu Provincial Highway Aviation Tourism Investment Group, a BBB-/BBB- rated local government financing vehicle (LGFV), raised $500 million from a maiden international bond sale on Thursday, braving uncertain bond markets in the wake of Donald Trump's surprise victory over Hillary Clinton in the US presidential election.
The Reg S three-year bullet trade came to market in the wake of a sharp drop in US Treasury yields, which sent 10-year yields above 2% for the first time in nine months on expectations the president-elect will significantly increase the fiscal deficit and debt burden in coming years.
"It was a fear trade in the global markets, prompting investors to flock into safe-haven assets from Treasuries to gold to Japanese yen," one syndicate banker said. "The underlying tone remained cautious with a Trump victory."
Despite Wednesday's slide in global markets, the issuer was able to build a meaningful $2 billion peak order book, as Asian investment grade credits were supported by technical factors and buying by private banks, the person said.
The group went out with initial price guidance around the 215bp area, before tightening it to a range of 195bp to 200bp over. Final pricing of the November 2019 bond was fixed at 99.713% on a coupon of 3% to yield 3.101%, or 195bp over Treasuries, according to a term sheet seen by FinanceAsia.
The final order book closed at $1.9 billion from 93 accounts. By region, Asia took 94% with the remaining 6% being allocated to Europe. By investor type, asset managers/fund managers took 52%, banks 36%, sovereigns/agencies 10%. The remaining 2% went to others.
Syndicate bankers said the closest comparable was a $300 million issue by Guangxi Communications Investment Group in late October. This bond was trading on a cash price of 100.278% and a G-spread of 182bp on Thursday.
Guangxi LGFV raised $300 million via a three-year note, paying a coupon of 3%. It captured $2.7 billion in orders across 106 accounts. Banks, insurance companies and funds were the major buyers of the deal, representing 88% of the entire allocation at that time.
Analysts pitched the fair value of Gansu LGFV note at 10bp to 15bp wider than Guangxi LGFV, which is rated one notch higher. On this basis, pricing of the new deal was relatively tight.
Joint global coordinators were Bank of China and Barclays, while joint bookrunners were CCB International and CMB International.
The story has been updated from first publication with final stats.
