Two unrated Hong Kong companies executed international dollar bonds on Monday taking advantage of a market, which still shows no signs of any fatigue digesting new issues.
Short-haul carrier Hong Kong Airlines priced a $250 million re-opening of its existing January 2019 bond, while Hong Kong-listed property developer CSI Properties also raised $250 million from a five-year deal.
Bankers said market conditions have significantly improved over the past few weeks as Brexit fears recede. In addition, disappointing second quarter US GDP figures have further dampened expectations the Federal Reserve will raise interest rates.
‘Sentiment remains strong in the Asian market," one syndicate banker stated. “However, investors will be paying close attention to the US labour report on Friday.”
Third time lucky for Hong Kong Airlines
The tap by Hong Kong Airlines deal represented the HNA owned group’s third deal of the year and its second tap.
The original $180 million 6.9% 2019 deal struggled after attracting an order book of just $360 million in January and a $120 million tap in March was also deemed hard work.
This time round, a second tap of the 2019 deal achieved a $1.3 billion peak order book just before final guidance was released. The final order book closed at the $1 billion level with participation from 57 accounts.
By geography the book split 97% Asia and 3% Europe. By investor trype funds took 52%, private banks 36%, corporates and others 3%.
"Investors have been moving money into Asia," one banker commented. It’s the least affected region by Brexit and the search for yield still dominates the investment landscape."
"More unrated and high-yield companies including property companies are seeking to take advantage of favourable market conditions to issue bonds," the banker added.
The deal was driven by reverse enquiry and initial guidance was pitched at the 6% area before being tightened to 5.65%.
The Reg S re-opening was issued in the name of Blue Sky Fliers Company and priced at 102.831% to yield 5.65%, according to a term sheet seen by FinanceAsia.
This represented a 35bp spread over its existing January 2019 bond, which was trading on a mid cash price of 103.625% to yield 5.3% at the time of pricing.
In March, Hong Kong Airlines re-opened the deal at 100.83% and in January it priced at 99.07%
Joint bookrunners for Hong Kong Airlines new deal were Guotai Junan International, BOCI, and Bank of China.
CSI investigates dollars
Hong Kong listed developer, CSI Properties, also completed a five-year deal on Monday, its first international bond offering in just over three-and-a-half years.
The Reg S deal attracted a higher level of interest to Hong Kong Airlines, generating a final order book of $1.7 billion according to syndicate bankers. A total of 105 accounts participated of which 97% were from Asia and 3% from Europe.
By investor type private banks took 31%, family offices 34%, funds 34% and others 1%.
Initial guidance for the August 2021 bond was indicated around the 5.125% level before being tightened by 25bp to 4.875%.
Final pricing for the deal, issued in the name of Estate Sky Ltd, was fixed at par to yield 4.875%, according to a term sheet seen by FinanceAsia.
"There's very little trading in the group's outstanding 2018 bond so we didn't calculate fair value based on it,” one banker explained. "This is a deal where the primary market is setting the price for the secondary market.”
The existing 6.5% January 2018 deal was trading on a mid-cash price of 103.175% to yield 4.263%. It has fairly consistently traded up from a low around the 98.75% level last October.
The next closest comparable was Regal Hotel's unrated 3.875% July 2021 bond. This was trading on a mid cash price of 100.35%% to yield 3.797% during Asian trading on Monday.
In a Hong Kong stock exchange statement, CSI said the new issue will boost its funding for future property investments. However, during its roadshow presentation the group indicated that it might use proceeds to re-finance its $150 million 6.5% January 2018 notes.
Analysts flagged that the company has very good debt metrics compared to many of its peers, with net debt to Ebitda standing at 2.9 times at the end of March, equating to an Ebitda/interest coverage ratio of 7.2 times.
Joint global coordinators for the bond deal were HSBC, UBS and DBS, while Bank of America Merrill Lynch and Sun Hung Kai Financial were joint bookrunners.
The story has been updated from first publication with final distribution stats.
