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Export-Import Bank of China (Chexim) priced a Rmb2 billion ($313 million) dual-tranche dim sum bond on Monday night, reflecting the continued investor appetite for exposure to long-dated offshore renminbi bonds.
Chexim is a policy bank, rated Aa3/AA-/A+, and viewed by investors as having sovereign status. Its bonds are also one of the few dim sum bonds that are eligible as repo collateral at Bank of China in Hong Kong — and, as a result, asset-liability managers that normally would not buy the bonds were able to participate.
The deal comprised a Rmb1 billion five-year bond and a Rmb1 billion 15-year bond, which attracted Rmb2.3 billion and Rmb2.5 billion of demand, respectively. The 15-year tranche, in particular, attracted strong demand from Taiwanese insurance funds. Although there was no breakdown on exactly how much they took, insurance funds were allocated 45% of the 15-year bond and a large part of that is said to have come from Taiwanese funds.
“There was strong demand from Taiwanese life insurance funds due to the lack of 15-year paper. At a 4% handle, we saw a lot of those accounts coming out of the woodwork,” said one banker.
The five-year bond priced to yield 3.35%, at the tight end of the 3.35% to 3.4% final guidance, and the 15-year bond priced to yield 4.15%, at the tight end of the 4.15% to 4.2% final guidance.
Some of the Chinese banks that were part of the arranger group also bought a small amount of the bonds, but otherwise the deal was distributed to a wide number of investors. The Hong Kong branches of Bank of China and Bank of Communications, Barclays, BNP Paribas, HSBC, ICBC International and Royal Bank of Scotland were joint bookrunners.
Although onshore yields have been falling and offshore dim sum yields rising, Chexim was still able to reap some savings from tapping the dim sum market, albeit much less than was on offer in the past.
According to a banker, Chexim’s onshore five-year bond was yielding 3.58%. Although it does not have a 15-year onshore bond outstanding, he suggested the yield would be around 4.2% to 4.3% — saving about 10bp for the long-dated bond and about 20bp for the five-year bond. The offshore renminbi-denominated Chexim 2017s straddled reoffer while the Chexim 2027s were slightly above reoffer in secondary on Tuesday.
In contrast to Chexim, Chinese state-owned enterprise China Datang hobbled over the finish line on Friday last week. The company had marketed a three- and five-year tranche to investors with guidance in the area of 4.5% for the three-year and 5% to 5.25% for the five-year, but ended up abandoning the five-year tranche.
The three-year bond priced at a yield of 4.5%, with pricing not budging much from initial guidance — an indication that investor interest wasn’t roaring. The Rmb1 billion ($157 million) three-year deal attracted an order book of Rmb1.3 billion from more than 35 accounts.
“Chexim is a policy bank that is rated Aa3/AA/A-, whereas Datang is an unrated SOE — and I think if it was rated, it would be triple-B,” said one banker.
Morgan Stanley was the sole global coordinator and bookrunner. Barclays and Deutsche Bank were joint bookrunners. Private banks were allocated 42%, banks 30% and funds 28%. Asian investors were allocated 99% and European investors took 1%.
