Li Ka-shing’s Hongkong Electric Finance returned to the market yesterday with a quick $250 million tap on its December 2020 bonds, bringing the total issue size to $750 million. The company was the first investment-grade issuer to tap the dollar market with a benchmark.
The $250 million tap was launched yesterday at a price guidance of 10-year Treasuries plus 137.5bp and priced at Treasuries plus 135bp after a few hours of bookbuilding. The deal was more than 3.75 times subscribed with orders from over 80 investors. The bonds were reoffered at 96.289 to yield 4.723%. The coupon was fixed at 4.25%.
HSBC, Royal Bank of Scotland and Standard Chartered Bank were joint bookrunners.
Asian investors took up 85% and European accounts 15%. By investor type, funds took 42%, banks 23%, insurance companies 26% and private banks 9%.
The new issue offered a 6bp concession to investors over the outstanding HK Electric 2020s, which were bid at Treasuries plus 129bp in the morning.
The company sold $500 million of 10-year Reg-S bonds at Treasuries plus 137.5bp in early December last year. It had earlier attempted to issue a benchmark in November but decided not to go ahead amid volatile markets. When it printed the deal successfully in December, there was speculation the company would return to the market again soon as the size fell short of expectations.
The new Reg-S bonds will be fungible on settlement and will be issued off the company's MTN programme. The bonds mature on December 14, 2020 and the settlement date is January 19, 2011. Hongkong Electric is rated A+ (stable) by S&P.
Meanwhile, new issues are cropping up. The first Korean issuer to tap the dollar market is expected to be Hyundai Capital. The company has mandated ING, J.P. Morgan, Morgan Stanley, Royal Bank of Scotland and Standard Chartered Bank for a proposed senior US dollar bond. There will be two teams going on roadshows starting tomorrow. The roadshows will cover London, Asia and the US.
Elsewhere, West China Cement plans to issue a $300 million to $400 million five-year non-call-three bond. The company will start a global roadshow today that will last until next Wednesday. A Reg-S/144a bond is expected to follow. Deutsche Bank and ICBC International are joint bookrunners.
The proceeds raised will go towards an $85.9 million debt refinancing and general working capital. West China Cement is rated Ba3/BB-/BB (Moody’s/S&P/Fitch).
Texhong Textile
Cotton and spandex supplier Texhong Textile on Tuesday night priced its debut $200 million five-year non-call-three bond. Texhong Textile is a new name in an industry that is also new to investors, with no textile comparables in the Asian bond market.
Perhaps due to its rarity value, the company drew rousing interest from investors. The bonds priced at a yield of 7.625%, at the tight end of the 7.625% to 7.75% guidance. The deal drew a robust order book of over $1.4 billion from 109 investors.
While there are apparel companies in the US, such as Levi’s, Jones Group and Hanes, these companies are mostly big retailers operating downstream. Texhong Textile is a much smaller company operating upstream. The issue was rated Ba2/BB.
Amid a lack of comps, investors referenced the issue to closely rated China names such as coal miner Hidili (B1/BB-), China Forestry (Ba3/B+) and steel maker China Oriental (Ba1/BB+). All three companies have bonds that mature in 2015 that were trading at yields of 8.68%, 7.43% and 7.15% respectively on Tuesday morning. China Oriental's 2017s, another comp, were yielding 7.47%.
Despite being a Chinese name, Texhong Textile also offers investors exposure to Vietnam, where it has manufacturing operations.
Texhong Textile is using part of the funds raised to expand its production in Vietnam, a country which offers the company cost savings in terms of labour and material compared to China. About 90% of the goods it produces in Vietnam are shipped back to China.
“If an investor wants exposure to Vietnam, aside from buying the Vietnam sovereign, there isn’t a lot in the market. But the company offers exposure to Vietnam, and the management was able to present its credit well to investors, which made for a compelling story,” said one banker.
The bonds performed solidly in the secondary market, rising as much as 1.5 points to 101.5, above the par issue price, before settling at a bid of 101.375.
In terms of geography, Asia took 62%, Europe 28% and the US 10%. By investor type, fund managers/hedge funds bought 80%, banks 6%, private banks 13% and others 1%. Deutsche Bank was the sole bookrunner.
