Unrated NWS Holdings struggles to print debut bond

Hong Kong company NWS Holdings decided to delay its debut dollar bond late last week after efforts to market the bond failed to gain traction among investors. NWS Holdings is the infrastructure and services flagship of New World Development, which owns 59.8%. New World’s chairman is well-known Hong Kong tycoon Cheng Yu Tung.

The leads — Deutsche Bank, HSBC, J.P. Morgan and Standard Chartered — started marketing a five-year dollar bond to investors at Treasuries plus 550bp last Wednesday. After that initial guidance was released, there was “radio silence” on the deal, according to one rival. The leads did not release any updates on the size of the order book and did not tighten the guidance (the usual approach to building an order book), which may indicate weak demand from investors.

The leads kept the books open on Wednesday and Thursday, but still there was no deal print. Finally, on Friday, they told investors: “In light of the upcoming holiday, NWS Holdings has decided to revisit the capital markets after the lunar new year. The management of NWS Holdings wishes to thank investors for the time devoted to the company and the transaction.”

Some suggest that NWS struggled to generate demand because it is not a familiar name among bond investors. “NWS may be a household name in the loan markets but it is a new name to the dollar bond market and people are not very familiar with its business or credit,” said one investor. “Most people know New World Development better,” he added.

This may become a more common problem as European banks constrain or even close down lending operations in Asia, leaving some borrowers with little choice but to tap bond markets for the first time.

Hong Kong’s luxury property developer Nan Fung Holdings and department store operator Lifestyle International, for example, both made bond debuts last week. Their success was no doubt helped by the fact that both companies are rated, while NWS is not — which made the deal more challenging for investors.

There was also the issue of timing. Amid tricky markets, windows of opportunity to tap the bond market are brief. There was an onslaught of investment-grade paper, including Shinhan Bank’s dollar bond and Standard Chartered’s subordinated bond, also competing when NWS was in the market. As the lunar new year approached, the window to tap the market vanished. However, the leads were presumably aware before they went ahead that there were other deals in the market and that the lunar new year holidays were approaching.

If past experience is anything to go by, NWS’s parent company and Cheng Yu Tung’s wide network of friends may lend a hand when it revisits the market.

In June last year, NWS unit Newton Resources raised HK$1.75 billion ($225 million) through an IPO. At that time, it was said that the book was only covered after Bocom International, one of the four bookrunners, agreed to buy a portion of the deal. Friends of the New World group were also said to have taken part.

The proceeds of the bond are to be used for working capital and to refinance existing bank facilities used to fund the company’s acquisition of a stake in Hangzhou Ring Road.