ChemChina took advantage of a lull in recent market turbulence on Wednesday to execute its first euro-denominated bond.
The state-owned chemical giant issued a €700 million ($743.3 million) five-year Reg S bond, paying a yield of 1.871%, a week after the Export-Import Bank of China issued the largest euro-denominated bond out of China, raising €2 billion through a dual-tranche structure.
The deal was a further sign of the strong impression ChemChina has made in Europe, where it has grown its profile with two blockbuster M&A deals, a $7.7 billion takeover of famed Italian tyre manufacturer Pirelli in 2015 and its February announcement that it had agreed to acquire rival Syngenta for $43 billion.
"European investors are less affected by the recent selloff in the emerging markets," a syndicate banker commented. "They are very familiar with ChemChina's credit profile after the issuer made two sizeable acquisitions."
The deal for Swiss-based Syngenta, which employs 28,000 people in more than 90 countries, is proving a challenge to get over the finish line. While US regulators cleared the deal in August, the bid has hit new hurdles from Europe to Australia as national security and competition concerns dampen western enthusiasm for Chinese takeovers.
The completion date was pushed back in September, but if it does go through it will be China's biggest overseas acquisition ever.
Having initially marketed the five-year transaction at 200bp over mid-swaps, the Baa2/BBB/BBB+ rated group tightened the deal by 20bp to 180bp over mid-swaps, which a syndicate banker said was a huge compression in the euro market.
The final pricing on the December 2021 note was fixed at par to yield 1.871%, according to a term sheet seen by FinanceAsia. In the secondary market on Thursday, the paper was trading slightly above par at a cash price of 100.81/100.77, according to a syndicate banker.
"Compressing the initial guidance by 20bp is a very heavy tightening in the euro market, where most deals could narrow by only 7bp to 10bp," the person said. "ChemChina was able to achieve that because of some sizeable orders from a group of sovereign wealth and long-only investors"
The final order book fell only slightly to €1.4 billion from a peak of €1.5 billion, a mark of investors' confidence in the company after it went out with aggressive pricing.
By region, Asian was allocted 30%, Germay 23%, UK 22%, Italy 10%, Switzerland 9%. The remaining 6% went elsewhere in Europe. By investor type, fund managers took 65%; official institutions, insurers and pension funds 25%; and banks, private banks and others the remaining 10%.
The company plans to use the proceeds to fund existing debt and for general corporate purposes.
According to Dealogic, ChemChina and its subsidiaries have raised $8.7 billion from bond issuance since 2015, helping the company build a war chest for foreign acquisitions. The chemicals giant accumulated debt of $37.5 billion in the first six months of this year, including two bridge loans worth almost $33 billion to help fund the Syngenta takeover.
The active bookrunners were JP Morgan, BNP Paribas, BOCI, HSBC, Morgan Stanley, Natixis and Scotiabank. CCB International and China Securities International were passive bookrunners.
