Hong Kong stock exchange-listed Wheelock & Co last night priced its $500 million five-year bond, attracting strong interest from fund managers.
Wheelock & Co is unrated but is perceived to be an investment-grade name. It was founded in Shanghai in 1857 and is headquartered in Hong Kong.
Wheelock holds a 51% stake in Hong Kong-listed Wharf Holdings, a major Hong Kong landlord whose assets include prime retail real estate landmarks Times Square and Harbour City. Wharf is rated, but its rating has been coming under pressure.
Wheelock issued its debut dollar bond in February 2012 and followed up with a tap later in the year, so this is the third time it is approaching international debt investors. Its latest bond saw strong demand. The order books were covered within 30 minutes of opening and the final demand amounted to $3.2 billion, according to a source.
The initial guidance was at the Treasuries plus 240bp area. This was revised to a final guidance of Treasuries plus 225bp to 230bp, with the bonds pricing at the tight end.
Most unrated paper ends up in the hands of private banks, but this was not the case for Wheelock as private banks were only allocated 16% of the deal. Fund managers received 55%, banks 26% and the remaining 3% went to insurers.
“We have seen a lot of demand, driven mainly by institutional investors, not private banks, which is a healthy trend,” said one source.
Amid concerns over rising rates, a shorter duration bond proved to be the right tenor. And despite the fact that it isn't rated, investors took the view that Wheelock is a high-grade credit, which also helped the deal.
“The five-year is the sweet spot. Yes, we have seen selling in secondary, but mostly [of] Chinese high-yield property companies. There is demand for strong credits,” the source added.
The deal was almost entirely allocated to Asian investors, which took up 97%. The remainder went to European accounts.
The initial guidance offered a pick up of about 20bp over secondaries. The Wheelock 2017s were quoted at Treasuries plus 197bp, which on a curve-adjusted basis worked out at Treasuries plus 222bp, so effectively the final price translated into a new issue concession of about 3bp.
Aside from directly-owned Wheelock Properties, Wharf Holdings is the group’s main subsidiary with HK$334.4 billion ($43 billion) of consolidated assets. Harbour City and Times Square form the backbone of Wharf's prime real estate assets in Hong Kong, representing half of the conglomerate's total business assets and 44% of operating profit. Wharf's other businesses include hotels, container terminals, and the provision of telecom and pay-TV services.
DBS, HSBC and Standard Chartered were joint bookrunners for the bond offering.
