Asian debt markets got off to a blazing start this year with four borrowers — Shimao Property, Sun Hung Kai Properties, Lippo Karawaci and India Eximbank — marketing dollar bonds to investors on Monday night. On top of this, a slew of investor meetings for potential deals were also announced.
In past years issuance has been kicked off by seasoned borrowers such as the Philippines or Hutchison, but it was the Chinese high-yield sector that set the ball rolling this year — with Country Garden and Kaisa Group raising $750 million and $500 million, respectively, last week.
According to one senior debt capital markets banker, the Asian dollar bond supply in January could reach about $20 billion, assuming market conditions remain conducive.
“The deals are coming thick and fast,” said Tim Jagger, Asia fixed-income portfolio manager at Aviva Investors, on Monday. “There were about 10 deals announced today and we are hearing of a huge supply coming in January.”
“The supply has been broad-based — including high-yield and unrated paper,” he added. “At the moment, there is enough demand to absorb the paper and in the absence of a backup in US Treasury yields or a rally in equity markets, it should get taken up. However, valuations are not as attractive as 2012 and investors will be selective.”
Among the companies that are meeting investors this week are Asia Standard International, a subsidiary of Hong Kong-listed Asia Orient Holdings, which develops and manages property in Hong Kong and China. The company starts investor meetings on Wednesday and continues until Friday. Morgan Stanley and UBS are the arrangers.
Singapore-listed Biosensors will be meeting investors this week and, if a deal materialises, it is likely to be a Singapore dollar bond. Credit Suisse and Standard Chartered are the arrangers. Hong Kong Broadband Network is also meeting investors, arranged by J.P. Morgan, Standard Chartered and UBS. Elsewhere, India’s Power Grid Corp is also meeting with investors this week.
Sun Hung Kai Properties
Major Hong Kong property developer Sun Hung Kai Properties last night priced a $500 million 10-year bond. This was its first bond deal after negative headlines surrounding the arrest of co-chairmen Thomas and Raymond Kwok in March last year.
Some of the dust seems to have settled since then and Sun Hung Kai’s latest bond, which was also the first from the high-grade sector this year, attracted $4.5 billion worth of orders from 270 investors.
The deal was swiftly executed within nine hours and aggressively priced on the back of a high quality book, printing inside its outstanding curve. The initial guidance was Treasuries plus 195bp, and this was revised to Treasuries plus 180bp to 185bp with the bonds pricing at the tight end.
The closest comparable was the Sun Hung Kai 2022s which were at Treasuries plus 185bp pre-announcement of the deal. This translated to a g-spread out 200bp, so the new Sun Hung Kai bonds came 20bp inside of their curve.
Funds were allocated 51% of the bonds, insurance 18%, banks 11%, public sector 10%, private 8% and companies and other investors took the remaining 2%. Asian investors were allocated 80% of the bonds and European investors took the remaining 20%. Deutsche Bank, HSBC and Standard Chartered were joint bookrunners.
Shimao Property
Chinese real estate developer Shimao Property last night also priced an $800 million seven-year non-call-four bond. There was huge demand for the bonds — with the orders amassing to $16 billion when the final guidance went out.
The bonds priced at 6.625%, at the tight end of the final 6.625% to 6.875% final guidance. The initial guidance was in the area of 7.25%, so there was a tightening of 62.5bp from initial guidance to final pricing.
The closest comparable for Shimao was the outstanding Shimao 2018s which are callable in 2015. Those bonds were trading at a cash price of 115.375 or a yield to maturity of 7.36%. On a yield-to-call basis, the bonds were trading at 5.75% which put fair value of a new seven-year bond at 7%, and the new bonds priced 37.5bp inside of that.
The proceeds from the bonds will be used for refinancing and to fund existing and new projects. The company also recently tapped the loan market so its liquidity has improved.
“The proposed bonds, which come after the company’s $670 million club loans concluded in December 2012, will enhance Shimao’s liquidity and will also improve its funding stability through lengthening its debt maturity profile,” said Franco Leung, a Moody’s analyst in a report. Shimao’s notes are rated B1/B+/BB
HSBC, Standard Chartered, UBS, Goldman Sachs and J.P. Morgan were joint bookrunners.
