Ping An adds to growing dim sum market

Hong Kong’s dim sum bond issuance continues to grow despite volatile markets, with Ping An Insurance becoming the latest borrower to raise renminbi funding in the city after closing its debut bond on Tuesday.

Its parent Ping An Group is China’s leading financial services company, serving insurance, banking and investment needs. The group is 16.13% owned by HSBC, which acted as a sole bookrunner on the bond. The Shenzhen government owns 6.3%.

The bonds were issued by Value Success International and guaranteed by China Ping An Insurance Overseas (Holdings), which is a Hong Kong entity. It is difficult for onshore borrowers to guarantee or directly issue offshore bonds due to the onerous red tape — so they have typically issued through a Hong Kong entity.

Ping An priced the debut Rmb2 billion ($308 million) three-year bond at a yield of 2.075%, at the tight end of final guidance, which was 2.075% to 2.175%. The deal was announced on Monday with guidance at the area of 2.25%. The deal gathered a book in excess of Rmb6 billion from more than 80 accounts.

Fund managers bought 50%, private banks 31%, banks 18% and others 1%. Hong Kong investors bought 66%, Singapore investors bought 29% and European investors bought 5%.

Ping An Insurance provided a letter of support to the guarantor. There is a change-of-control put at 101 if Ping An Insurance owns less than 100% of China Ping An Insurance Overseas or Value Success International; or when China Ping An Insurance Overseas owns less than 100% of Value Success International.

Investors had some time to look at the change-of-control put and letter of support before the deal closed on Tuesday. The funds raised will be kept offshore and used for general corporate purposes and the refinancing of offshore debt.

Ping An’s bonds traded firmly in the secondary market at 100.1/100.5 yesterday morning, above the par issue price. It continued to stay above par at 100.30/100.45 in the afternoon.

The dim sum bond market is slowly growing in size, but increasing resistance from investors on pricing has led to some borrowers scaling back their deals.

Cofco, a state-owned enterprise and China’s largest food processing, manufacturing and trading company, last week issued a Rmb3 billion dim sum bond that was guaranteed by its Hong Kong arm. The company was rumoured to be eyeing a larger deal size of Rmb4 to Rmb 6 billion.

The three-year bonds paid a yield of 1.85%. The deal was rumoured to be marketed at 1.6% to 1.8% — flat to the 1.6% yield that the Sinochem (Hong Kong) bonds were offering at that time. BOCI, Citic and Goldman Sachs were joint bookrunners.

“We are seeing deals from reputable state-owned enterprises,” said one Hong Kong-based banker. “The market was horrendous last week, but at least some deals are getting done.”

Frozen seafood company Pacific Andes also had to pay up when it returned to the market last week with a Rmb600 million ($92 million) three-year dim sum bond that paid a yield of 6.5%. It had originally marketed the deal in January with a guidance of 5.50% to 5.75% for a three-year bond, but ended up pulling the deal. At that time, the company was expected to raise about Rmb1 billion.

HSBC and Standard Chartered, the two original bookrunners, stayed on the deal while DBS Bank replaced Bank of America Merrill Lynch.

There is chatter that a Hong Kong quasi-sovereign issuer could announce a deal next week and investors are more receptive to investment-grade borrowers at the moment, said one banker.