Link mandates its HK dollar bond, but leaves banks wondering about a potential dollar deal

Hong KongÆs Link Real Estate Investment Trust (Link REIT) has mandated BNP Paribas, HSBC and Standard Chartered to lead manage a three tranche HK$2.4 billion ($308 million) bond offering.

HSBC has been awarded the role of sole lead manager and bookrunner on a HK$800 million ($100 million) three-year, fixed-rate tranche. BNP Paribas and Standard Chartered have been mandated as joint lead managers and bookrunners on a HK$800 million ($100 million) two-year, fixed-rate tranche as well as a HK$800 million ($100 million) two-year FRN.

This transaction accounts for less that half of the total amount Link REIT was planning to raise via multi-currency bond offerings to partly refinance a HK$12.5 billion ($1.6 billion) bridging loan that it drew down last year.

Link REIT, which operates a portfolio of shopping malls and car parks formerly owned by the Hong Kong Housing Authority, completed the bridging loan last November via Hang Seng Bank and HSBC. That loan matures in November of this year.

It has mandated Bank of China, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Calyon, DBS Bank, HSBC and Standard Chartered to arrange a loan, which has recently been upsized to HK$5.5 billion ($700 million) to refinance the remainder of the bridge not taken out by the bond offering.

Earlier this month Link Reit sent out request for proposals (RFPs) for a deal that would raise up to $750 million by selling bonds denominated in both Hong Kong dollars and US dollars. Most expected the deal to consist of a HK$2 billion ($257 million) and a $350 million bond.

However Link Reit has, at this time, postponed making any decision on a future US dollar-denominated offering.

Although no explicit reason was given for the postponement, some observers believe that the borrower is apprehensive to tap the international debt markets because of the current volatile environment. However, whether it will push back any such offerings until the market environment is more suitable or will opt for an alternative means of funding is unclear.

Indeed, with emerging market debt spreads pushing out, it is likely that Link REIT will be able to get better pricing in the domestic markets than if it were to tap the dollar market.

The Notes will be issued via wholly-owned Link Finance (Cayman) 2006 Ltd. and will be fully guaranteed by Link Holdings and Link Properties Ltd. They all carry A3/A ratings from MoodyÆs and S&P, respectively. Roadshows will be conducted in Hong Kong later today (July 18).

The Link REIT, which listed in Hong Kong last November, holds Hong Kong's largest portfolio of retail properties of approximately 960,000 sqm, or 9.1% of the territory's total retail space. It also own 180 carparks with over 79,000 spaces, or 13.7% of Hong Kong's commercial parking facilities.

At the end of June, in its first earnings report, Link REIT announced HK$467 million ($67 million) in distributable income û meaning its dividend will be 10% higher than the forecasts in its listing document suggested.