Singapore-listed waste water treatment company, Citic Envirotech, raised $180 million after re-opening a recent perpetual bond on Tuesday, the first Asian issuer to access the international bond markets since Britain’s decision to leave the European Union last Thursday.
The deal attracted a subdued order book of just $340 million, although this probably had as much to do with aggressive pricing as the market’s ongoing Brexit hangover.
Bankers said final demand amounted to $340 million with participation from 22 accounts. Unusually, private banking demand was muted and accounted for just 22%, with funds and banks representing the bulk on 78%.
That was in sharp contrast with last November’s original $175 million 5.45% perpetual offering, which garnered more than $950 million in orders from yield-hungry buyers. Then private banking investors took 80%.
However, the new deal priced 9bp through secondary market levels after initially being marketed at the 4.45% level. The new unrated Reg S deal carries a 4.25% yield, 25bp inside initial guidance, or 363bp over two-year Treasuries.
The re-opening price was fixed at 102.694%, compared with an average mid-price of 102.51% or mid-yield of 4.34%, according to a term sheet seen by FinanceAsia.
The deal has an effective two-and-a-half-year maturity since it is callable in November 2018, with a cliff structure that will lead to a 500bp coupon step-up.
It has traded well and one reason why institutional investors may have been tempted to participate is because paper is hard to pick up in the secondary market.
One syndicate banker also commented that “private banking investors have become more nervous about market liquidity and turned risk-off after the Brexit vote last week.”
The banker added, “The new deal is predominantly driven by real money investors who know the company and its strategy very well."
Nevertheless, the absence of private banking investors does not send a particularly positive message to the market. As one Singapore-based fund manager told FinanceAsia, “Long-only investors are not normally very active in these instruments because they rank so low in a company’s capital structure. By contrast, private banking investors like them purely because of the yield.”
Citic Envirotech was taken over by Citic Ltd and KKR last year and plans to use proceeds to refinance an outstanding S$99 million ($73 million) 7.25% fixed rate note that matures this September 2 2016.
At the end of 2015, total debt to Ebitda stood at 4.7 times according to S&P Global Market Intelligence figures.
According to Dealogic data, companies from Asia ex-Japan region have raised $3.4 billion from eight perpetual bonds so far this year, compared with $10.15 billion from 14 deals over the whole of 2015.
Joint bookrunners for Citic Envirotech’s tap were Citic CLSA, DBS, China Securities International.
