Hong Kong Telecom, controlled by billionaire Richard Li Tzar-kai, returned to the international bond markets on Thursday, with a $750 million ten-year deal.
The Reg S transaction comes just over a year after the Hong Kong-listed group sold a $500 million 10-year note in March 2015.
Then it garnered $4 billion in demand from more than 270 accounts. This time around, the Baa2/BBB rated company attracted a peak order book of $3 billion and final order book of $2.65 billion.
Markets remain in overall risk-off mode although sales desks reported 2bp to 4bp of tightening on Thursday following the Federal Reserve’s dovish statement.
However, HKT’s deal was a relatively straightforward deal to bring to market since the group’s existing 3.625% April 2025 deal provided a recent benchmark.
Bankers estimated the new deal offered a 5bp new issue premium and rarity value since pure Hong Kong corporates tend to be few and far between.
HKT’s existing deal was trading on a G-spread of 155bp on Thursday. The new deal was initially marketed at 185bp over Treasuries, before indicative pricing was narrowed to 5bp either side of 170bp.
Final pricing of a July 2026 transaction was fixed at 99.7% on a coupon of 3% to yield 3.035% or 165bp over Treasuries, according to a term sheet seen by FinanceAsia.
The new deal is issued under the name of HKT Capital No. 4 Ltd., a fully owned subsidiary of HKT.
"The new HKT deal was predominately driven by fund managers and insurance companies," one source commented.
A total of 170 accounts participated with a split which saw 82% placed in Asia and 18% in Europe. By investor type, fund managers too 60%, insurers 13%, public sector accounts 6% and private banks 7%.
Moody's said it expects the telecom group to return to a slower pace of growth this year following the $2.4 billion acquisition of CSL New World Mobility, another local mobile carrier.
Revenues are expected to grow 2% following a 20% increase in 2015 and 2014, Gloria Tsuen, a senior analyst at Moody’s, wrote in a note. She also said Ebitda margins will remain in 39% to 40% area.
HKT is 63% owned by PCCW, the flagship of Li, the younger son of Hong Kong’s richest man Li Ka-shing.
Joint global coordinators for the latest HKT transaction were HSBC, Goldman Sachs, Mizuho Securities, while Bank of America Merrill Lynch, ANZ, Morgan Stanley and Standard Chartered were joint bookrunners.
Another day another LGFV
Huai'an Development, a BB+ rated local-government financing vehicle, also sold its first US dollar denominated debt on Thursday, raising $300 million from a three-year deal.
The Jiangsu province-based city captured $600 million in demand before the company set final guidance, according to one source familiar with the deal, who added that final demand came in lower than this after some yield-sensitive accounts trimmed their orders.
Initial price guidance was set at the 5.3% area before being tightened to 5.1%. Final pricing of a July 2019 transaction was fixed at 99.038% on a coupon of 4.75% to yield 5.1%, according to a term sheet seen by FinanceAsia.
The nearest comparable is BB+-rated Jiangsu NewHeadLine Development's outstanding $200 million 6.2% note. This was trading on a cash price of 104% to yield 4.49%.
"On a technical perspective, Huai'an Development paid a new-issue premium of 50bp to 55bp over Jiangsu NewHeadline," one source said.
This fairly generous premium reflected investors’ growing differentiation between LGFV credits and the higher risk weighting assigned to a sub-provincial city.
Joint bookrunners for the transaction were Guotai Junan International, ANZ, Bank of Shanghai International.
Chongqing Grain dines on Singaporean dim sum
Chongqing Grain Group also made its debut in the offshore renminbi market on Thursday with a credit-enhanced deal guaranteed by the Agricultural Bank of China.
Unusually the deal was syndicated from Singapore not Hong Kong and pent-up demand for offshore Rmb debt meant it attracted a similarly strong order book to Bank of China’s Rmb1.5 billion green bond on Tuesday.
The A1/A/A rated LGFV raised Rmb1 billion ($150 million) via a three-year note. Pricing was fixed at par on a coupon of 4.02%.
This was 48bp tighter than initial price guidance in the 4.5% area and the tight end of financial guidance 3bp either side of 4.05% according to a term sheet seen by FinanceAsia.
Clifford Lee, head of fixed income at DBS Bank said: “We saw peak orders in excess of Rmb9 billion from more than 100 investors. This is a strong testament to the market’s reception of this transaction."
He said the issuer benefited from a Chongqing-Singapore initiative to provide offshore capital markets via Singapore.
"We look forward to leveraging our experience with this inaugural issue and help other Chongqing enterprises tap the international capital markets,” he added.
The closest comparables were Bank of China New York branch's 3.6% 2018 note and Bank of China Singapore branch's 4% 2019 bond. These were respectively trading at 3.5% and 3.8% on Wednesday.
DBS and Agricultural Bank of China Singapore branch were joint global co-ordinators of the new bond deal.
