CCB Leasing and Beijing Energy made bond market debuts on Tuesday as the Asian capital debt markets continued to return to normal following the Chinese stock market meltdown and the resolution (temporary or otherwise) of the Greek debt crisis.
China's second largest bank leasing company by assets executed its inaugural offshore bond deal, while the capital's largest energy company issued its debut euro-denominated transaction.
However, the two deals were very different since Beijing Energy's €300 million ($328.3 million) offering was in essence a club deal, while CCB Leasing's $500 million issue built up considerable momentum closing with a $4.1 billion order book and 280 accounts.
Bankers attributed investor enthusiasm to the improving market tone as well as the attractive pick-up between the Chinese state-owned banks' senior debt and that of their leasing company subsidiaries.
Having gone out with an initial range around 215bp over Treasuries, CCB Leasing's syndicate were able to tighten indicative pricing to 195bp to 190bp over before fixing it at the tightest end. The A3/A rated 2020 deal was issued in the name of CCBL (Cayman) Corp with a keepwell and liquidity support deed from A2/A/A rated CCB Leasing International.
Pricing was set at 98.331 with a coupon of 3.25% to yield 3.618%. There is also a change of control put at 101%.
Joint global co-ordinators were CCB International, HSBC, Morgan Stanley and Standard Chartered. Joint bookrunners were ANZ, Citi, DBS and UBS.
The main benchmark was ICBC Leasing, which has a 3.25% March 2020 bond outstanding. At Tuesday's Asian close this was trading at 175p/165bp over Treasuries.
On a G spread basis, bankers said this level equated to about 182bp over and 167bp over on a Z spread basis.
The bank's equivalent 2.625% 2020 senior debt was trading about 42bp to 47bp wider on a Treasury spread of 132bp/124bp and Z spread of 120bp.
CCB's own 3.125% 2020 senior debt was trading at 128bp/118bp over Treasuries, or a Z spread of 124bp over, some 2bp tighter than where it had been on Monday.
Bankers said that an 8bp differential to ICBC Leasing's G spread was about right taking into account a four-month maturity extension and new issue premium.
In terms of allocations 89% went to Asia and 11% to Europe, with fund mangers taking 53%, banks 29%, private banks 8%, insurance and sovereign wealth funds 7% and other 3%.
CCB Leasing is China's second largest bank-owned leasing company by assets but it is much smaller than ICBC Leasing. The former had assets of Rmb77.1 billion ($12.42 billion) at the end of 2014 compared to the latter's Rmb150 billion.
However, there has been a big jump from the Rmb40.3 billion it recorded in 2012 and earlier this year its parent injected Rmb3.5 billion in capital boosting the overall level to Rmb8 billion. ICBC Leasing has registered capital of Rmb11 billion.
In its marketing presentation, CCB Leasing flagged that it has the lowest NPL ratio of all the leasing companies — 0.14% in 2014 compared to a national average of 0.68%. Like its parent it has a competitive edge over infrastructure related projects and concentrates on roads, rail, utilities and aviation.
Beijing Energy
The second Asian bond deal of the day was a far more muted affair with a capped issue size of €300 million that had largely been pre-placed with affiliates of the lead banks back in Asia.
Pricing of a 2018 deal was fixed at 99.907 on a coupon of 1.5% to yield 1.532% or 135bp over mid-swaps. The A3/A+ rated deal had initially been marketed at 145bp over.
This level was the same that Beijing Infrastructure Investment (BII) — rated one notch higher — achieved on Monday for a one-year longer deal. However, BII's new 2019 bond traded wide on Tuesday despite the relatively steep 42bp pick-up it had offered over an outstanding bond 15-months shorter in duration.
At Asia's close, BII's new July 2019 deal was bid 4bp wider of its re-offer, with one analyst noting that the new deal had clearly been "not steep enough in the current market."
Moody's currently has Beijing Energy's rating on negative outlook following its merger with coal supplier Beijing Jingmei at the turn of the year. The Beijing municipal government, its ultimate owner, brokered the merger to try to make the capital's energy development and distribution more efficient.
However, Moody's said that Beijing Jingmei's weaker credit profile drags down Beijing Energy, which has a baseline rating of Baa3.
The agency noted its strong governmental support but also flagged sizeable capex needs and the lack of an automatic cost pass through mechanism.
It concluded that the rating will be upgraded to stable if Beijing Energy can bring its FFO/interest coverage to four times, reduce its debt-to-capitalization below 50% and boost its retained cash flow to debt to twelve times.
Joint global co-ordinators for the bond deal were Citi, China Merchants (Hong Kong), Deutsche Bank and UBS. Joint lead managers were ABC Hong Kong, ABC International, BOC, BNP Paribas, CCB Asia, ICBC Asia and Wing Lung Bank.
