CIMB Bank, Malaysia's second-biggest lender by assets, returned to the international bond market on Wednesday, selling a $500 million three-year floating-rate note and a $500 million five-year fixed-rate bond.
The Reg-S deal was launched on the heels of a slight sell-off in the region's bond market, as energy companies dragged down prices on the back of rising US crude oil inventories and expectations among investors that the US Federal Reserve will raise interest rates next week.
“The market is generally softer this week and we see credits across the region trading at least 1bp or 2bp wider,” said a syndicate banker. “The tone has turned cautious ahead of the Fed meeting next week.”
In this context, CIMB did an impressive job. The two tranches generated a total of $1.7 billion of orders from more than 60 accounts, according to syndicate bankers.
Initial guidance for the March 2020 floater was set at three-month Libor plus "the 105bp area", before bankers tightened that to between 80bp and 85bp over Libor. Final pricing was fixed at par to yield 80bp over Libor, equivalent to a yield of 1.89%, according to a term sheet seen by FinanceAsia.
Bankers pitched the March 2022 note at 140bp over five-year US Treasuries, before narrowing guidance to between 115bp and 120bp over Treasuries. The deal ended up pricing at the tight end, being fixed at par with a 3.263% coupon.
According to a sales note from a non-syndicate bank, fair value of the new three-year floater was around 82bp over Libor, while the five-year note should have come with a spread of 120bp. This view was based on the outstanding curves of CIMB's smaller rival RHB, which is rated A3 by Moody’s and BBB+ by S&P.
Asian investors bought 89% of the three-year floating rate note, and the remaining 11% was sold into Europe, the Middle East and Africa (EMEA). Banks, including private banks, took 47% of the deal, fund managers and asset managers 34%, insurers and central banks 14% and corporations and other investors the remaining 5%.
Asian investors took an even larger share of the five-year note, being allocated 92%. The rest was sold into EMEA. Banks and private banks took 49%, fund managers and asset managers 32%, insurers and central banks 17%, and corporations and others the last 2%.
CIMB says it plans to use the new proceeds for general corporate purposes. According to Dealogic, the group has a $350 million 2.505% bond due for repayment in July 2017.
Besides CIMB itself, the bookrunners of the new deal were Citi, JP Morgan and Standard Chartered.
