It is the largest Asian non-financial corporate bond to be launched in the past 12 months, and only the second triple-B rated bond to be issued from Asia during the same period.
The $300 million five-year tranche has a coupon of 6.125% and was priced at $99.521 to yield 6.238%, 200bp over mid-swaps and 288.9bp over five-year US Treasuries. The $200 million 10-year tranche has a coupon of 7.125% and was priced at $99.073 to yield 7.257%, 250bp over mid-swaps and 321.9bp over 10-year US Treasuries.
A year ago, investment grade issuers would not expect to pay more than a double-digit yield spread over swaps, so clearly investors are still demanding a significant premium. This was true in the China Merchants deal, even though people involved in the transaction say investors were impressed by the companyÆs management and the security of its credit.
The issuing vehicle is CMHI (BVI) Co, which is guaranteed by China Merchants Holdings (International), and the senior fixed rate notes are Reg-S only and rated Baa2 by MoodyÆs.
The company is a leading port operator in China and is indirectly owned by the Chinese government. It is a familiar name to credit investors, having issued in the syndicated loan market. It also has an outstanding, but illiquid, US dollar bond issued three years ago, which matures in 2015.
Merrill Lynch was bookrunner and ING acted as joint-lead manager. According to sources close to the deal, 85 orders were received, totalling $725 million, following roadshows in Hong Kong, London and Singapore. Banks provided a strong bid for the five-year bonds, taking 45% of the tranche, while asset managers, insurance companies and pension funds bought 85% of the 10-year tranche. Geographically, Asian accounts took up 85% of the issue, with the balance going to European investors.
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