ICBC Financial Leasing, the aircraft leasing unit of China’s largest commercial lender, returned to the international bond markets for the first time this year, raising $2 billion via a dual-tranche deal.
The A1/A/A rated group garnered more than $5.75 billion of orders from Reg S investors at peak level, before the order book closed at $4.9 billion, according to a syndicate banker running the deal. That attracted almost double the $2.6 billion order book ICBC Leasing achieved for its two-part sale in September last year, when it tapped 144A investors in the US as well.
The success of the Asia-focused deal, as opposed to one that also tapped US investors, underlines the systemic shift in purchasing power from West to East.
As one senior syndicate banker at an American bank put it, US investors have become less relevant to Asian G3 bond sales in the past few years, given many more decisions are now made in this region and investor demand from China and Southeast Asia is robust enough to cover billion-dollar deals.
“In many cases, we only take orders from US investors for the first hour during New York trading,” the person said. “Demand for dollar assets across the region has outstripped supply.”
In ICBC Leasing’s latest sale, the three-year note captured $2.4 billion of demand from 160 accounts, while the five-year note drew $2.5 billion from 160 accounts, underscoring that demand was equally robust for both tenors.
Initial guidance for the three-year and five-year bonds was set at 170bp and 175bp over US Treasuries, respectively. The leads narrowed guidance to 150bp for the shorter-dated tranche and 152.5bp for the five year.
Final pricing of the $1.15 billion April 2020 note was fixed at 99.952 with a coupon of 3% to yield 3.017%, or 150bp over the Treasuries. The $850 million April 2022 note was priced at 99.658 with a coupon of 3.375% to yield 3.45%, according to a term sheet seen by FinanceAsia.
In terms of fair value, banks used ICBC Leasing’s outstanding 3.25% September 2020 note as a reference for the three year. The existing bond was quoted with a G-spread of 142bp, implying a new-issue concession of 8bp.
For the five year, Bocom Leasing’s 3.5% March 2022 was used as a valuation yardstick, as both bonds hold the same rating. The Bocom Leasing note was quoted at a G-Spread of 149bp on Wednesday morning, suggesting the ICBC Leasing note was priced roughly in line with the secondary curve of Bocom.
“The market tone remains conducive to short-dated notes because of interest-rate risk,” the syndicate banker said.
In the secondary market, both bonds were hovering around the reoffer price on Thursday afternoon. The 2020 note was quoted 99.875/99.943, yielding 3.04/3.02%, while the 2022 note was trading at 99.775/99.919, yielding 3.42/3.29%.
According to the company's website, ICBC Leasing was founded in 2007 with leasing businesses ranging from offshore vessels to oil-rig drilling equipment. Its clients include Brazilian oil giant Petrobras and Vale, the world's largest iron ore mining company.
The bookrunners were ICBC, BNP Paribas, Bocom Hong Kong branch, Goldman Sachs, JP Morgan, Standard Chartered Bank, Bank of China and Wing Lung Bank.
