China Overseas Land issues 30-year bond without tapping US investors

China Overseas Land issues 30-year bond without tapping US investors
The Green: A China Overseas Land development in Hong Kong

China Overseas Land late Wednesday night tapped the market with a dual-tranche 10-year and 30-year bond. It is the first 30-year deal in Reg-S format, an indication that the investor base in Asia has developed to the extent that Asian borrowers no longer need to rely solely on US-based insurance funds to buy long-dated bonds.

“Three or four years ago, the argument was that if you wanted to raise more than $500 million and issue a tenor longer than 10-years, you had to tap the Reg-S/144a market,” said one banker. “But that argument no longer holds true. There is a home-grown investor base in Asia.”

While Asia’s investor base has developed, it is also true that US fixed income managers, such as Goldman Sachs Asset Management and Pimco have opened up shop in Asia, as many of them increase their allocation to the region.

China Overseas Land’s deal was also the first 30-year bond from a Chinese property company. The company, which started its business in Hong Kong and expanded to China after going public in Hong Kong in 1992, is viewed by many to be a leader within the property sector. It has strong parentage, being a subsidiary of China State Construction Engineering Corporation, the biggest state-owned construction company in China.

Its $700 million 10-year bond priced at Treasuries plus 235bp and the $300 million 30-year bond priced at Treasuries plus 255bp, at the tight end of the Treasuries plus 235bp to 240bp and Treasuries plus 255bp to 260bp final guidance respectively.

Although the 30-year tranche attracted far greater interest from investors who put in $7 billion of orders (compared to $5.4 billion of orders for the 10-year tranche), the company opted to keep the size for the 30-year tranche small. Unsurprisingly, given the overwhelming demand, China Overseas Land’s 30-year bonds tightened 10bp to Treasuries plus 244bp while the 10-year bonds were flat at Treasuries plus 235bp in secondary trading on Thursday morning.

For the 10-year tranche, Asian investors were allocated 79% and European investors 21%. Fund managers were allocated 52%, banks 15%, private banks 20%, insurers 12% and government, agency and corporates 1%. The coupon was fixed at 3.95% and the notes reoffered at 99.665 to yield 3.991%.

For the 30-year tranche, Asian investors were allocated 83% and European investors 17%. Fund managers were allocated 70%, private banks 9%, insurance 15%, banks 5% and government, agency and corporate 1%. BOC International, Citi, BNP Paribas, Goldman Sachs and UBS were joint bookrunners.

Otherwise, there is a busy pipeline building up for November. The Republic of Philippines was marketing its 10-year global peso note on Thursday, as was high-yield property company China Aoyuan. The former was marketing its deal at 4.1% while the latter was marketing a five-year bond callable after three years at mid to high 14%. BOC International and UBS were joint bookrunners for China Aoyuan.

Elsewhere, insurance company China Taiping Insurance kicked off roadshows to Singapore, Hong Kong and London this week. BOCI, Citi and J.P. Morgan are the arrangers. The company is planning a benchmark Reg-S deal. China Taiping has issued a dollar bond a long time ago and the proceeds will be used to partially refinance existing debt.

In high-yield, micro-chip tester Global A&T Electronics kicked off roadshows this week and concludes them in the US on November 19. Bank of America Merrill Lynch, BOC International, Credit Suisse, J.P. Morgan and UBS are the arrangers. It plans to raise $625 million through six-year bonds that are callable after the third year. Global A&T Electronics, a vehicle owned by Affinity and TPG, took over United Test Assembly Centre last year. The issue is expected to be rated B1/B.

Chinese residential property developer Gemdale held roadshows in Hong Kong on Wednesday, and Singapore today. It is likely to issue a five-year bond callable after three years. HSBC and J.P. Morgan are bookrunners. Its bonds are expected to be rated Ba3/BB-. Gemdale was founded in 1988 and listed in Shanghai in 2001.

Elsewhere, Vietnam-based real estate property developer Vingroup is also holding investor meetings that end in London on Friday. Citi is the sole arranger.

In Macau, Studio City, a subsidiary of Melco Crown Entertainment, kicked off roadshows for its planned dollar bond on Thursday. It is expected to issue $825 million through a eight non-call three-year bond. Deutsche Bank, ANZ, Bank of America Merrill Lynch, Citi, Credit Agricole and UBS are the arrangers.

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