RHB Bank finally emerges with $300 million dollar debut

Malaysian lender RHB Bank on Tuesday night priced a $300 million five-year debut dollar bond — finally crossing the line after mandating banks more than a year ago. The initial guidance was Treasuries plus 270bp and this was tightened to Treasuries plus 255bp to 265bp with the bond pricing at the tight end — at Treasuries plus 255bp.

RHB Bank had been eyeing a dollar bond as early as March 2011 and, at that time, it had mandated Bank of America Merrill Lynch and Goldman Sachs. However, the deal never made it to market and Citi has since replaced Goldman Sachs while BoA Merrill was retained by the company as a bookrunner. RHB Investment Bank was also a bookrunner on the deal.

The deal attracted an order book of $1.7 billion from 103 accounts. It was predominantly allocated to Asia (92%) with the rest going to Europe. There was no breakdown on how much was allocated to onshore accounts, but rivals speculated that Malaysian accounts took a big chunk. Asset managers were allocated 41%, banks 39%, insurance 13% and private banks 7%.

Based on the initial guidance, according to one rival banker, the deal looked “cheap” but given that the bonds finally priced 15bp inside of initial guidance, that took some cheapness out of it. The size of the deal was capped at $300 million.

“There are clear reference points. Hong Leong Bank and Maybank have both issued bonds earlier this year. They’ve gone out with a wide initial guidance. It’s a small deal and it will get done but the question is if this is the best timing for the deal,” said one person away from the deal.

The bonds came about 10bp wide of the Hong Leong Bank 2017s and about 55bp wide of the Maybank 2017s, which were quoted at Treasuries plus 199bp. RHB’s issue is expected to be rated A3 by Moody’s and BBB+ by Standard & Poor’s. Hong Leong Bank’s issue is rated A3 by Moody’s and BBB+ by Fitch.

RHB issued at a wider spread than Hong Leong Bank, which tapped the market in April with a $300 million five-year bond that priced at Treasuries plus 238bp. It also came wider compared to Maybank, which issued a $400 million five-year bond at Treasuries plus 230bp in February.

The coupon was fixed at 3.25% and the notes were reoffered at 99.675 to yield 3.321%. In comparison, Hong Leong Bank paid a coupon of 3.125% and the notes were reoffered at 99.341 to yield 3.269%.

Meanwhile a few other borrowers including Yanzhou Coal and China Zhengtong Auto were said to be marketing deals or in talks to do so. “Markets are definitely in better shape. I think people over reacted to the unemployment data out of the US on Friday and with the bounce in market today, people have started to market deals,” said one syndicate banker.

Yanzhou Coal is expected to price as early as today while China Zhengtong is expected to price sometime this week. However, the latter seems to be struggling to gather interest from investors particularly since Baoxin Auto, which is similarly rated Ba3/BB- is also expected to tap the market this week. China Zhengtong Auto was said to be out with initial price thoughts in the high-11% area and interest was about $100 million on Monday.

“At 11%, they are having a laugh as their onshore bridge loan is 10%,” said one investor. “Baoxin is a significantly better company than China Zhengtong Auto. I can’t understand how the ratings agencies can possibly rate them the same. China Zhengtong has a lot of goodwill and intangibles on its balance sheet,” the investor added.

As of end December 2011, China Zhengtong Auto’s noncurrent assets amounted to $1.2 billion, of which $678 million was intangible assets and $306 million was goodwill. Its current assets amounted to $1.3 billion which mostly came from inventories and trade receivables.

J.P. Morgan is sole global coordinator and bookrunner. CCB International is a lead manager.

Yanzhou Coal also started marketing its dual-tranche five and 10-year bond on Tuesday afternoon at Treasuries plus 370bp for the five-year tranche and Treasuries plus 390bp for the 10-year tranche. Comparables include the Beijing Enterprises 2022s, which were at Treasuries plus 270bp; China Merchant Bank’s 2022s, which were at Treasuries plus 320bp; and the China Resources Power 2020s, which were at Treasuries plus 335bp. Deutsche Bank and UBS are joint bookrunners. Both China Zhengtong Auto and Yanzhou Coal will be sold to professional US investors.