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Regional syndicate bankers must have heaved a collective sigh of relief when last week drew to a close. Even on Friday — usually a day when deal prints take a pause — there were two bonds being marketed to investors, namely Nan Fung and CapitaLand, which collectively raised $700 million on Friday evening.
“It’s a momentum play,” said one Singapore-based investor on Friday. “We’ve seen some of the tail risk being removed with the German court decision. It’s tough to say how long this issuance will last; some people think it will only be two to three weeks, but I think it could continue until Christmas.”
There was still plenty of pent-up demand for strong credits, judging by the enthusiastic response to Singapore property developer CapitaLand’s $400 million 10-year bond. The deal attracted a whopping order book in excess of $7 billion and priced at Treasuries plus 225bp, about 25bp inside of initial guidance.
Although CapitaLand’s bond was not rated, it is nonetheless a household name in Singapore and, unsurprisingly, was heavily allocated to Singapore investors — which took 44%. Hong Kong investors took 39%, European investors 13%, Malaysian investors 3%, and Taiwanese and Korean investors 1%. DBS, HSBC, J.P. Morgan and Morgan Stanley were joint bookrunners.
Meanwhile, Hong Kong luxury property developer Nan Fung, raised $300 million through its 10-year bond. The initial guidance was Treasuries plus 300bp to 310bp and, by 2pm, the deal had attracted a book of $2.4 billion, leading the arrangers to revise guidance to Treasuries plus 285bp. At that level, some investors thought valuations looked stretched, but were still keen to buy into the deal.
“We think some of these bonds such as Nan Fung are coming quite tight — we see fair value at about Treasuries plus 290bp, and guidance is Treasuries plus 285bp currently, but we probably will participate,” said the Singapore-based investor.
The bonds eventually printed at Treasuries plus 280bp. Agriculture Bank of China (Hong Kong), Bank of China (Hong Kong), Bank of China International, Citi, DBS, HSBC and Morgan Stanley were joint bookrunners.
Olam International and TDB Mongolia
The market for high-yield names continues to remain open — with Olam International and Trade and Development Bank of Mongolia both closing deals late last week. The former priced its $500 million 10-year bond, which represented its largest bond deal ever, and attracted $1.6 billion worth of orders. The commodities company offered a coupon of 5.75%, which was its lowest. In comparison, back in 2010, Olam had printed debut $250 million 10-year bond which paid a 7.5% coupon
All this is a reflection of market conditions: rates are at all time lows and investor appetite for bonds aplenty. Olam’s bonds priced at the tight end of guidance 5.75% to 5.875% final guidance. The company is unrated but is considered a crossover credit.
The deal launch came a couple of weeks after Olam International had posted its financial year ended June results. For its fourth quarter ended June, excluding biological asset gains and goodwill, the company’s core profit fell by 45% year-on-year, which was significantly below expectations, according to a DBS Vickers research report on August 29.
However, the results did not seem to affect demand particularly from private banks, which drove the trade and were allocated 70%. Fund managers were allocated 25%, companies 3% and banks 2%. The bonds went on to trade firmer in at 100.25/100.5 in secondary markets on Friday. Credit Suisse, HSBC, J.P. Morgan and UBS were joint bookrunners
Elsewhere, Trade and Development Bank of Mongolia also closed a $300 million three-year bond on Thursday, after attracting over $1.2 billion worth of orders. The bonds priced at a coupon of 8.50% and the notes were reoffered at 99.676 to yield 8.625%. Bank of America Merrill Lynch and ING were joint bookrunners.
