China property developer Yanlord Land last night priced a $400 million seven-year non-call-four Reg-S/144a bond. The bonds priced at a yield of 10.625%, at the tight end of the 10.625% to 10.75% final guidance. The notes were offered at par.
The initial guidance was in the area of 10.75% and the whisper was at 11%. Both were released on Monday, but the leads held off pricing the deal to give investors more time to look at the credit.
The leads guided investors towards a deal size of $300 million to $400 million, though initial talk was of a $300 million to $500 million print. HSBC, J.P. Morgan and Royal Bank of Scotland were joint bookrunners.
Roadshows were completed last week but the issuer held off a launch immediately after the roadshows due to volatile markets. Last night, Yanlord took advantage of firmer credit market conditions and secured a $2 billion order book that was comfortably subscribed.
Despite that, a banker on the deal was circumspect about proclaiming any recovery in the market for China property names, particularly those lower down the credit curve. “I wouldn’t describe it as a difficult transaction to do, but I wouldn’t say the market for high-yield PRC property is back either,” he said.
The deal gathered strong support from fund managers, which took up 70% of the deal. Private banks took up 23%, banks 5% and others 2%. By geography, Asia took up 53%, US 32% and Europe 15%.
For a China property company, the deal generated a lot of interest from US investors who were familiar with the company’s name and had bought 24% of the company’s previous $300 million seven-year non-call-four done in April 2010, arranged by HSBC and RBS.
“The company has a following among US investors from the last deal,” said a banker.
The new bonds pay about 80bp more than its existing secondary bonds, which mature in May 2017 and were trading at a yield of 9.7%.
Yanlord’s issue is rated Ba2 by Moody’s and BB by Standard & Poor’s, putting it at the higher end of the China property spectrum. Comparable credits for the Singapore-listed developer include bigger rivals such as Shimao, Agile and Country Garden.
According to Nomura analyst Annisa Lee, the proceeds will be used to repay a $400 million syndicated loan that matures in December 2012. She notes that the bond will lengthen Yanlord’s debt maturity profile and deemed the fair pricing to be 11% to 11.2%.
Yanlord focuses on large-scale residential developments in China targeting the mid- to high-end market. It has a total landbank of 5.2 million square metres in nine cities in China.
