Shanghai-headquartered Shui On Land last night priced Rmb3.5 billion ($531 million) of four-year synthetic offshore renminbi bonds.
The deal is the property developer’s second visit to the market in just over a month. It priced its inaugural Rmb3 billion three-year renminbi-denominated, US dollar-settled bond -- the very first deal in that format -- in mid-December last year.
As with the first trade, Deutsche Bank, Standard Chartered and UBS were joint bookrunners.
This latest four-year Reg-S bond was priced at a yield of 7.625%, at the tight end of the 7.625% to 7.75% final guidance. The initial guidance was in the area of 7.875%.
The size was increased slightly from the Rmb3 billion to Rmb3.3 billion range the leads had telegraphed to the market after the deal attracted a strong order book of over Rmb17 billion from more than 150 accounts.
As was the case with its first bond, private banks drove the trade. This time they took up an even bigger chunk with 64%, followed by funds with 30% and banks with 6%. In the previous deal, private banks accounted for roughly half of the deal.
This was testament, no doubt, to the strong brand recognition the company enjoys despite being unrated. Shui On Land was founded by Hong Kong tycoon Vincent Lo and both the company and its founder are names that investors are familiar with.
The new bonds, which mature on January 26, 2015, came about 100bp back from Shui On Land’s December 2013s, which were yielding approximately 6.5% at the time of pricing. According to a banker on the trade, the leads took reference from Evergrande Real Estate's recent dual-tranche synthetic offshore renminbi bond, whose January 2016 tranche offered 175bp to 200bp for a two-year extension over the January 2014 tranche. This worked out to be about 100bp per annum.
Shui On Land’s pricing was deemed to be attractive by one trader, particularly since the Shui On Land 2013s have been sold off during the past week.
The bonds have fallen from a cash price of 104.5/105 at one point to 101 yesterday evening. Shui On Land's 2013s weakened after Evergrande hit the market with its giant Rmb9.25 billion ($1.4 billion) synthetic offshore renminbi bond at the end of last week and after Shui On Land announced its plans to issue a second renminbi-denominated bond earlier this week.
