In spite of difficult market conditions and an unfurling European debt crisis, a slew of issuers are pushing out bonds, keen to capture any window to tap investors for funds.
“We are seeing a rush to issue bonds, with many borrowers trying to get deals done ahead of the summer lull,” said Bryan Collins, portfolio manager at Fidelity. “Most of them are issuing opportunistically and seeking out the best cost of funding, so some issuers are turning to the dim sum market instead of dollars.”
Guoco Group was in the market last night with its $500 million debut five-year dollar bond. Credit Suisse, HSBC and UBS were joint bookrunners. Guoco Group is an investment holding company, which runs casinos, hospitality and property development. Malaysian billionaire Quek Leng Chan is the executive chairman of the group.
The bond is unrated but expected to bank on private banking investors’ familiarity with the name. The initial guidance was about 5% and the bonds priced at a yield of 4.75% — which worked out to a spread of 419bp over Treasuries. They were reoffered at par. A private banking rebate was offered.
On the investment-grade side, State Bank of India, acting through its London branch, was expected to price a five-year dollar benchmark early this morning. The bank went out with an initial guidance of Treasuries plus 400bp on Wednesday. Bank of America Merrill Lynch, Barclays, Citi, Deutsche Bank, J.P. Morgan and UBS were joint bookrunners. SBI is rated Baa2/BBB- by Moody’s and S&P.
Away from those two names, Mongolia’s Xac Bank is said to be looking to tap the market while Tianrui Cement and Sinotruk are said to be looking at the dim sum market. Other issuers such as Sri Lanka’s People’s Leasing and Sound Global are also eyeing the dollar market.
But market conditions are difficult and issuers have to pay up to get deals done and raise less than expected. Late Tuesday night, China Fishery crossed the line, raising $300 through a seven-year bond with a call option from the fourth year onwards.
The leads — HSBC, Bank of America Merrill Lynch, Standard Chartered, ANZ, Jefferies, Rabobank and Deutsche Bank — embarked on a two-team accelerated roadshow. This was done based on the view that high-yield markets might shut and the chance to tap the market could easily evaporate, as it did in the second half of last year.
The company had guided investors towards a $300 million to $350 million print and ended up tapping at the low end. The market backdrop was tough when the leads priced the deal with the crossover index gapping out by 55bp at one point.
“It was really volatile,” said one banker. “Could they have gotten a tighter coupon in other markets? Yes. But we took the view that the markets will worsen and the high-yield market could shut off.”
The deal attracted an order book of more than $800 million from 115 accounts. The bonds priced at a coupon of 9.75% and were reoffered at par. The company saw decent distribution into the US and Europe — which were allocated 30% and 22% of the deal respectively and the rest went to Asia. The issue is rated Ba3/BB-/BB. However, in secondary, the bonds traded lower and were quoted at 99.125/99.5. China Fishery has operations in diverse parts of the world, such as Peru, South Pacific and Russia.
