Two Chinese state-owned enterprises executed international dollar bonds on Tuesday, adding to a market, which shows signs of struggling to digest the recent flood of paper.
Monday’s issue by Citic Ltd provided a particularly poor backdrop for a $500 million transaction by Tianjin Infrastructure Construction and Investment (TJII) and a $1 billion offering by China State Construction Engineering Corp (CSCEC).
Citic’s dual tranche five- and 10-year transaction widened by 5bp and 7bp during Asian hours on Tuesday after failing to offer a new issue premium. Of the two new deals, only TJII made any concession to the market.
Both deals came off the back a speech by Federal Reserve governor, Janet Yellen, who hinted she still wants to make gradual interest rates increases notwithstanding last Friday’s poor jobs data.
They also followed a Chinese government announcement that 21 companies have been shortlisted for a trial programme enabling them to issue offshore without prior approval.
Frequent borrowers such as China Development Bank, ICBC and CSCEC are among of the first batch to join the scheme the National Development Reform Commission, the country's top economic planner, said in a statement.
CSCEC
The country's largest construction company has come to market following its HK$4.8 billion ($619.4 million) acquisition of a grade-A commercial property in Hong Kong’s Wanchai district from property developer China Overseas Land & Investment (COLI) in May.
Initial price guidance for the Reg S deal was set at 165bp and 175bp over Treasuries respectively, before being tightened to 2.5bp either side of 145bp for a three-year tranche and 2.5bp either side of 155bp for a five-year.
The total value of the order book reached $3 billion as guidance was revised.
Final pricing of a $500 million June 2019 note was priced at 99.738% on a coupon of 2.25% to yield 2.34% or 142.5bp over Treasuries.
A $500 million June 2021 note was priced at 99.763% on a coupon of 2.7% to yield 2.751% or 152.5bp, according to a term sheet seen by FinanceAsia.
“Fair value is in line with secondary market levels," one syndicate banker commented.
The closet comparables are its existing 2.95% November 2020 $500 million bonds, which were trading on a G-spread of 154bp.
Syndicate bankers also said Guangzhou Metro's 2.875% 2018 bonds and 3.375% 2020 bonds were a good proxy for the new transaction, given their similar industry profile. They were trading on a G-spread of 149bp and 155bp, respectively.
A2/A/A-rated CSCEC is the parent company of Hong Kong-listed developer COLI and plans to use the proceeds for general corporate purposes including funding overseas projects.
Joint global coordinators for the transaction were HSBC, Citi, Goldman Sachs, CCB International, while UBS, BOCI, BNP Paribas, BofA Merrill Lynch, ICBC International were joint bookrunners.
Tianjin LGFV
Tianjin Infrastructure Construction & Investment (TJII), an A-/A-rated local-government financing vehicle (LGFV), priced its $500 million debut sale after attracting $1.8 billion of orders.
The North Eastern coastal city of Tianjin launched the Reg S deal at 210bp over Treasuries, before tightening pricing to 2.5bp either side of190bp over.
Final pricing of the three-year note was fixed at 99.854% on a coupon of 2.75% to yield 2.801% or 187.5bp over Treasuries, according to a term sheet seen by FinanceAsia.
The closest comparables are Beijing Infrastructure Investment's 2.625% 2017 bonds and 3.625% 2019 bonds, which were trading on G-spreads of 145bp and 169bp, respectively. The Beijing-based LGFV is rated A2/A/A+.
One syndicate banker pitched fair value at 180bp over Treasuries given TJII’s quasi-sovereign credit profile. "It’s almost like buying a government-guaranteed bond," the banker commented.
TJII is the largest China-based local government investment and financing platform by assets. It is primarily responsible for developing and operating major infrastructure projects and city redevelopment in Tianjin's central urban area.
TJII operates over 86% of the total length of toll roads in Tianjin, which accounted for more than 13% of its total assets. Standard & Poor's said the company dominant position in the city's toll road, rail and metro transit systems offset its low profitability, large capex and high leverage.
Joint global coordinators for the transaction were Bank of China, BNP Paribas, while CCB International, Haitong International, ICBC International and Wing Lung Bank were joint bookrunners.
