Bocom Financial Leasing, which leases aircraft and ships, returned to the US dollar bond market for the second time this year, raising $1.5 billion via a dual-tranche offer.
Chinese leasing companies have been major borrowers of dollars this year. BoC Aviation, ICBC Leasing, CCB Leasing and ABC Leasing together have raised over $5 billion of US dollar debt this year.
Bocom Leasing issued bonds through its wholly owned subsidiary, Azure Nova International Finance. Bocom Leasing made its debut in the international capital markets in March when it raised $1 billion.
Foreign investors piled into the new deal, driven by scarcity of Chinese investment-grade credit and renewed weakness in the renminbi (down 4.4% against the dollar year to date). The sale drew an order book of $5 billion.
The Reg S deal comprised of a three-year and a five-year note. The former drew $1.7 billion from 101 accounts, while the latter garnered more than $2.8 billion from 140 accounts.
"Investors’ demand skewed towards the longer-dated note as the five-year provided a healthy pickup over its secondary curve," a syndicate banker commented.
Another sign of demand: the issuer went to market for the first time without any guarantee from its parent, Bank of Communications, China’s fifth-largest lender by assets. This is in contrast to Bocom Leasing’s March bond issue, which came with a guarantee from the parent bank’s Hong Kong branch.
Bocom Leasing initially pitched its three-year note at Treasury yields plus 150bp, before tightening its target to a spread of 130bps, with a 2.5bp range either way. Final pricing of the $500 million November 2019 note was fixed at 99.905 on a coupon of 2.25%, to yield 2.283%, according to the term sheet.
Fund managers took the majority of securities, buying 53% of the deal, while banks took 34%, other institutions (such as sovereign wealth funds or insurers) took 12% and the final 1% went to private banks.
The five-year bond, meanwhile, was marketed at a spread over US Treasuries of 160bps, before narrowing it to 2.5bp each side of 140bps. Final pricing of the $1 billion November 2021 bond was priced at 99.586 on a coupon of 2.625%, to yield 2.714%.
Banks proved bigger buyers of the five-year, taking 65%, while fund managers bought 31%, other institutions took 3% and private banks 2%.
The closest benchmark was ICBC Leasing, according to syndicate bankers. Its $500 million May 2019 note was trading at 128bps over Treasuries, and its $500 million May 2021 bond traded at 134bps over.
This means Bocom Leasing priced its three-year note without giving away any new-issuer premium – again a sign of investor demand – but was more generous to investors in the longer-dated note.
Joint bookrunners for the bond deal were Bocom (Hong Kong), Bocom International, ANZ, CICC Hong Kong Securities, HSBC, JP Morgan and Standard Chartered.
