Shun Tak re-opens unrated market with debut bond

Macau conglomerate Shun Tak issued a $400 million seven-year debut bond late last week, helping to re-open the market for unrated paper after the lunar new year break.

Stanley Ho and his family own a majority stake in the company, which enjoys strong name recognition among investors despite being unrated. Much of the Macau dollar paper outstanding is from the gaming sector, and Shun Tak was also the first Macau conglomerate to issue a US dollar bond.

The initial price talk was in the 6% area, and this was revised to a final guidance of 5.7% to 5.8%, with the bonds pricing at the tight end. The deal attracted $5.25 billion of orders from 150 investors. Asian investors were allocated 92% and European investors 8%. Fund managers were allocated 47%, private banks 37%, banks 8% and insurance 8%.

Citic Telecom had also priced a $450 million unrated debut bond arranged by Citic Securities, Deutsche Bank, Standard Chartered and UBS last week. However, there were questions over who bought those bonds as no distribution details were released. One source said that one large anchor order took a big chunk of the Citic Telecom deal, and there was also participation from private banks. A total of more than 30 accounts were said to have participated.

Shun Tak had set up a medium-term-note programme last week and met with investors in Hong Kong and Singapore. Its closest comparable is Regal Hotels, which has an outstanding bond with a maturity of four-and-a-half years. This was yielding about 5.36% and, including the tenor extension, the fair value of a new seven-year Regal Hotels bond was about 6%. Shun Tak priced inside of this and its bonds went on to trade higher at 101 on Friday.

There was some speculation from analysts that the company’s bond issue signals a greater level of confidence from the company that the Macau government could grant approval to develop its luxury residential project Harbour Mile soon.

Harbour Mile accounts for about 27% of the company’s gross asset value. Since buying the site in 2008, Shun Tak has been unable to start construction as the land is under government review.

The company said it would use the proceeds to finance new investment opportunities and for general working capital purposes.

Shun Tak is a conglomerate with businesses in ferry services, property, hospitality and investments. It is the only provider of 24-hour ferry services between Hong Kong and Macau, operating under the TurboJet brand name.

Credit Agricole and HSBC were joint bookrunners.