There was a flurry of activity in Asia’s primary bond markets late last week as NWS Holdings and Busan Bank raised $800 million amid robust investor sentiment. The strong demand also prompted Wharf Holdings and Maybank to enter the market on Friday, the former with a tap of its recent $600 million bonds and the latter with a new five-year bond.
The bond bonanza is driven by the strong performance that recent deals have enjoyed in the secondary market, with some tightening more than 50bp. This has drawn out investors who were previously sitting on cash.
“Investors have a lot of cash to deploy and they’re not paid money to do nothing with it,” said one regional debt syndicate banker. “As markets have rallied, nobody wants to be short on bonds.”
This was echoed by another banker. “The macro backdrop has also stabilised and we’ve seen a lot of deals tighten,” he said. “For instance, we’ve seen the Hutch bonds rally 65bp, so it’s going gangbusters. I think NWS was caught out on supply the last time, and some of the deals had not traded well, whereas this time most of them have.”
NWS, a subsidiary of New World Development, had previously attempted to price an unrated debut bond before Chinese New Year but, in the face of muted demand, decided to revisit the market after the break.
It received robust demand this time around, enabling the deal to be upsized from the targeted $300 million to $500 million. Its five-year bond attracted $3 billion worth of demand from more than 150 accounts within just four hours. Meanwhile, Korean lender Busan Bank raised $300 million with a staggering $5 billion order book from more than 200 accounts.
Both sets of bonds printed well inside of initial guidance and then went on to tighten sharply in secondary market trading — suggesting that they offered juicy new issue premiums.
Before Chinese New Year, NWS had marketed the deal at an initial guidance of Treasuries plus 550bp area. The leads — Deutsche Bank, HSBC, J.P. Morgan and Standard Chartered — returned on Thursday with an initial guidance of 6.8% area and this was revised to 6.55% to 6.65%, with the bond pricing at the tight end, at 6.55%, which translated into a spread of 583.9bp over Treasuries, about 30bp wide of the initial spread it had offered investors previously. On Friday, the NWS 2017s had tightened about 30bp in secondary trading to Treasuries plus 550bp/545bp.
Meanwhile, for Korean lender Busan Bank’s $300 million bond, the leads — Citi, Credit Agricole and UBS — marketed the deal at an initial guidance of Treasuries plus 385bp. This was revised to Treasuries plus 360bp and the final guidance was at 355bp (where the bonds priced), 30bp inside the initial guidance. The bonds went on to trade 25bp tighter at Treasuries plus 329bp/326bp in secondary markets.
Asian investors were important buyers in both trades. For NWS, Asian investors were allocated 89% and European investors 11%. Private banks were allocated 48%, fund managers 34%, banks 14% and companies 4%. The coupon was fixed at 6.5% and the notes reoffered at 99.79 to yield 6.55%.
For Busan Bank, Asian investors were allocated 88% and European investors the rest. Fund managers were allocated 45%, banks 21%, insurers 17%, private banks 12%, companies and others 5%. The coupon was fixed at 4.125% and the notes reoffered at 99.331 to yield 4.275%.
