Shanghai-listed Industrial Bank, China’s seventh-largest lender by assets, priced a well-received debut dollar-denominated deal on Tuesday in a quiet day for the region’s G3 bond markets.
The Baa2 rated lender issued a $1 billion combined three-year and five-year transaction, with both tranches pricing at the tight end of revised guidance.
The Reg S offering attracted a peak order book of $8.5 billion with a slight tilt to the shorter-dated bonds according to one syndicate banker.
This was roughly double the demand that similarly rated Everbright Bank attracted last week when it also executed a maiden offshore bond offering.
Everbright's $500 million three-year note has performed extremely well since it was priced at 120bp over Treasuries on Thursday. It was trading on a G-spread of 109bp on Tuesday.
Bankers attributed its success to scarcity value and Industrial Bank has the same calling card, which means it could perform well in the secondary market. However, final guidance was narrowed aggressively and syndicate bankers acknowledge that final pricing came through fair value.
The bank’s $700 million September 2019 tranche was initially pitched at 145bp over three-year US Treasuries before being tightened to 2bp either side of 115bp.
Final pricing was set at 99.875% on a coupon of 2% to yield 2.043%, or 113bp over Treasuries, according to a term sheet seen by FinanceAsia. This represented a 32bp tightening from initial guidance.
The Chinese lender originally marketed the five-year tranche at 155bp over Treasuries, before revising it to 125bp.
Final pricing was fixed at 99.644% on a coupon of 2.375% to yield 2.451%, the term sheet shows. This equated to a 30bp tightening.
The final order book for the three-year note closed at $4.3 billion with 84 accounts. By region, Asia took 91% and EMEA 9%. By investor type, banks accounted for 81%, fund managers/asset managers 17%, insurers 1% and private banks/others 1%.
For the five-year bond, a total of 67 accounts participated, leading to a final order book of $3.5 billion. By region, Asia took 96% and EMEA represented 4%. By investor type, banks accounted for 77%, fund managers/asset managers 17%, insurers 5% and private banks/others 1%.
Aside from China Everbright, bankers cited A1 rated Bank of China's as a second comparable. Its outstanding $1 billion July 2021 note was trading on a G-spread of 110bp on Tuesday.
Syndicate bankers said Industrial Bank was able to price through fair value thanks to a clear primary market and a secondary market, which has stabilised following Monday’s sell-off.
“The overall market tone feels relatively constructive for credit," one syndicate banker commented. "We’re seeing more money being put to work again following’s Monday's market tumble."
One non-syndicate credit analyst pitched fair value for the three-year and five-year note at 120bp and 135bp over Treasuries respectively. This is 7bp and 10bp wider than where the deal actually priced.
The credit analyst concluded that Industrial Bank should trade about 10bp wide of Everbright because the latter is majority state-owned.
Joint global coordinators for Industrial Bank’s issue were Citi, Standard Chartered, Bank of America Merrill Lynch, and BOC International, while HSBC, Goldman Sachs, Bocom Hong Kong branch, Shanghai Pudong Development Bank Hong Kong branch, Agricultural Bank of China Hong Kong branch and China Construction Bank Asia were joint bookrunners.
The story has been updated with final stats from first publication.
