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Asia’s debt markets sprung to life on Thursday as four Asian borrowers — PCCW, Shenzhen International, CNPC and Hong Leong Bank — rushed out to sell US dollar bonds to investors. This burst of activity came as the market had stabilised after a bout of selling on Wednesday.
However, debt bankers note that little has changed to the market’s underlying fundamentals, and that companies were probably keen to lock in funding as US Treasury yields have fallen sharply since the start of the month.
“The market rose 1%, so it feels like there’s some stability. We’ve also seen 10-year US Treasury yields fall from 2.30% in early April to 2.03% today. It also feels like Greece’s worries may be coming back so everybody is just taking advantage of stable markets. But nothing’s really changed,” said one debt syndicate banker.
There is also uncertainty about how long markets will stay open. “Last year, markets were very strong around this time, but then they closed off from July onwards, so people are wondering if the same thing will happen this year,” said one market participant.
PCCW’s bond was one of the more interesting deals. The company, whose controlling shareholder is Richard Li, the youngest son of Hong Kong billionaire Li Ka-shing, on Thursday night closed a $300 million 10-year bond, which was unrated.
Morgan Stanley and Royal Bank of Scotland (RBS) were the arrangers. The initial price talk was Treasuries plus high 300s and the bonds priced at Treasuries plus 387.5bp, at the final guidance. According to a source, there was good participation from asset managers, hedge funds and insurers.
This was the first time PCCW was issuing a dollar bond without a Hong Kong Telecom (HKT) guarantee, and this led to some concern — as HKT is the operating company, whereas PCCW is the holding company. HKT Trust was spun off from PCCW last year and listed on the Hong Kong stock exchange. It continues to be majority owned by PCCW and holds the telco-related assets.
“Unlike previous deals, it is not guaranteed by HKT — the entity which holds all the operating assets — and it would probably be a crossover credit if rated, so I think it needs to offer a higher premium,” said one trader.
In the end, the deal raised $300 million — in line with what investors had been told to expect. The deal also offered a $0.25 private banking rebate. The PCCW 2016s were at Treasuries plus 250bp or a g-spread of 275bp, implying that the new bonds came about 100bp or so back of the 2016s on a g-spread basis.
Malaysia’s Hong Leong Bank also closed its $300 million five-year bond on Thursday night. The initial price guidance was Treasuries plus 255bp and this was revised to a final guidance of Treasuries plus 238bp to 242bp, with the bonds pricing at the tight end.
Citi, Mitsubishi-UFJ and RBS were joint bookrunners. Hong Leong Bank, acting through its Singapore branch, HL Bank, was also a joint bookrunner. The notes were issued off its EMTN programme. The bonds are expected to be rated A3 by Moody’s and BBB+ by Fitch.
Chinese company Shenzhen International was also marketing its five-year inaugural dollar benchmark to investors at Treasuries plus 375bp on Thursday. UBS and Standard Chartered were global coordinators and bookrunners. DBS, ING, J.P. Morgan and Bank of China International were bookrunners.
According to a source, the deal was still roadshowing in London on Thursday and is expected to price this week. It will be interesting to see how Shenzhen International is received by investors as other recent Chinese issuers such as Zoomlion have underperformed in the secondary markets.
Finally, CNPC Finance (HK) was also marketing a dual-tranche five and 10-year bond, with guidance at Treasuries plus 205bp and 210bp respectively. Bank of China International, Citi, Deutsche Bank, HSBC, ICBC International, Morgan Stanley and Standard Chartered are the bookrunners.
