Sinopec issued a $2.75 billion multi-tranche bond and a €550 million ($743 million) seven-year note on Wednesday, in the face of weaker Asian markets as sentiment continues to be hit by the US government shutdown.
The dollar deal by Sinopec Group Overseas Development was split into three tranches of five-, 10- and 30-years – the first one since May – with volumes of $750 million, $1.5 billion and $500 million respectively, according to a term sheet.
Pricing of each tranche tightened substantially from the initial price guidance, indicating strong demand for Sinopec’s Aa3/A+ rated notes that are guaranteed by the parent company. The five-, 10- and 30-year tranches tightened by 30bp, 25bp and 35bp to price at Treasuries plus 120bp, Treasuries plus 180bp and Treasuries plus 165bp respectively.
Order books came to $4.9 billion, $6.8 billion and $4.6 billion for the five-, 10- and 30-year tranches respectively, with the number of accounts amounting to 230, 390 and 285.
“For good names there is definitely still demand in the longer tenors,” said a source close to the deal. “They were able to print through where their outstanding bonds were trading, albeit they were a little bit old.”
The closest comparable notes for the five-year tranche were Sinopec’s 2017s, which were trading at Treasuries plus 80bp at time of pricing, which translates into a G-spread of 131bp. For the 10-year tranche, it was the company’s 2022s, which were trading at 163bp above Treasuries and had a G-spread of 189bp. For the 30-year, it was the 2042s which traded at 160bp over Treasuries, with a G-spread of 166bp.
Sinopec’s seven-year euro note received similar investor appeal, although the breakdown is not yet available.
The euro bond priced 20bp tighter from an initial price guidance of euro mid swaps plus 125bp, which is tighter than the dollar notes, according to a source close to the deal. The closest comparable for this was Cnooc’s recently issued €500 million seven-year tranche, which was issued at mid-swaps plus 115bp on September 26.
“The dollar-euro dual-tranche option certainly has been working very well – there is an element of price tension for both tranches,” added the source.
In secondary markets, the five- and 10-year dollar notes are trading five above their reoffer prices of 99.413 and 99.312 respectively. The 30-year paper, meanwhile, is trading 5bp tighter than its launched price.
Sinopec’s latest jumbo offering pushed the value of bonds this year in Asia ex-Japan, in US dollars, euros or yen to $126.9 billion, inching its way closer to 2012’s total volume of $139.6 billion, according to Dealogic data. Syndicate bankers are confident that 2013’s total volume will exceed that of last year’s come year-end.
Hot on heels
Sinopec’s latest issuance comes hot on the heels of Cnooc’s $2 billion equivalent dual-tranche deal on September 26, which was the first ever from a Chinese company to make a debut in European markets.
The deal by Cnooc Curtis Funding No. 1 was split into a $1.3 billion 10-year tranche with a coupon of 4.5%, and a €500 million seven-year tranche with a coupon of 2.75%.
A source notes that Sinopec’s latest bond priced inside of Cnooc’s dollar 10-year tranche, which was priced at Treasuries plus 185bp, even though the former state-owned firm is rated one-notch lower than the latter by Standard & Poor’s.
This indicates continued strong demand for such structures notably from creditworthy and large-sized enterprises that are regular issuers, says the source.
The proceeds from Sinopec’s bond will be used for the refinancing of overseas businesses’ debt as well as for general corporate purposes.
Citi, HSBC, Goldman Sachs, JPMorgan and Société Générale are joint global coordinators and bookrunners of the deal. Other joint bookrunners include China Construction Bank International, Bank of America Merrill Lynch, Bank of China International, Mizuho Securities and ICBC International.
