Yuzhou Properties demonstrated last night that the high-yield market is alive and kicking after pricing a $250 million deal.
The five-year non-call-three bond priced at 11.95%, at the tight end of the 12% (plus or minus 5bp) final guidance and a significant 55bp inside the initial guidance of 12.5%.
The deal attracted an order book of $9 billion — 35 times more than was on offer. Bankers away from the deal have commented that the inflated orders on recent deals have reached “ridiculous levels”, but deals were struggling to get any orders at all not so long ago.
China Hongqiao and Xac Bank were both forced to cancel deals around the end of September due to a lack of interest. Subsequently though, a few well-received high-yield deals made it to market, including Longfor Properties and Sunac China, which attracted books of $13 billion book and $2 billion respectively for $400 million deal sizes last week.
Admittedly though, others struggled. China South City, for example, limped across the finishing line last week, raising a much more modest $125 million after keeping the books open for a couple of days and attracting a final book of close to $200 million. But nonetheless it got done.
Fujian-based property developer Yuzhou Properties’ bond was driven by reverse enquiries and strong anchor orders. Asian investors were allocated 84% and European investors 16%. Fund managers were allocated 63%, private banks 34% and banks 3%.
The deal marks Yuzhou’s first comeback to the international capital markets since its debut 13.5% $200 million five-year non-call three-year bond in December 2010. The expected issue rating is B1 by Moody’s and B+ by Standard & Poor’s. The proceeds are to repay existing loans, fund the acquisition of land and for corporate purposes.
BOCI, HSBC, J.P. Morgan and UBS were joint bookrunners for Yuzhou Properties.
