The Chinese government is to start roadshows on Monday for its latest bond deal. The bond will comprise $1 billion of 10-year paper and $500 million equivalent of 10-year, euro-denominated paper. The lead managers of the deal are Goldman Sachs, JPMorgan and Morgan Stanley. Sources say that the deal will be heavily targeted at European investors. Bankers feel that the current high tensions between the US and China could have adversely affected a US centred deal. So the structure and tenor of this issue is likely to be more European in style than anything the Chinese issuer has ever done.
China last issued an international bond over two years ago which was priced at 287.5bp over Treasuries. That 10-year bond is now trading at the 110bp level due to scarcity and China's consistently good economic performance.
For the new issue, the lead managers are thought to be going out with an indicative price of around 140bp over Treasuries for the A3 rated borrower, in order to attract as wide a book as possible. This will be the first time that the Chinese government has sold euro-denominated bonds and its shift away from traditional dollar finance must be seen in the political context of the time. With pricing at these levels and the scarcity of good quality Chinese paper, analysts predict that this deal will be a huge success.
Another issuer set to come to the market next week is SK Corporation, the holding company of the Korean SK chaebol. The company is seeking to raise $200 million-$300 million via lead managers CSFB and Lehman Brothers. It is unclear what the indicative tenor or price range might be. Roadshows are due to start in the middle of next week.
