The B+/B1-rated, Reg S-bond priced at par at 9.125%, attracting just under $1.5 billion of demand, 85% of which came in at the tight end of the 9.125%-9.375% guidance range. In a similar strategy to the Korean Development Bank and Kexim, Lai Fung assured investors the bond would price within that range. ôThis is a pretty punchy strategy for a debut issuer, which takes encouragement and understanding,ö comments one source.
For comparison, Shanghai Real EstateÆs 2013 seven-year issue is currently yielding 8.94%. Lai Fung arguably priced just inside the implied yield of a new Shanghai Real Estate seven-year issue, calculated at 9.25%-9.375%.
ôCapitaLandÆs 20% strategic shareholding in the group, and Lai SunÆs sound management experience in the Hong Kong market, played a key role in the success of the bond,ö says a source. CapitaLand, one of the largest real estate companies in Asia, is 40%-owned by Temasek Holdings, the Singapore government's investment fund.
Moreover, Lai Fung owns two flagship investment properties (the Hong Kong Plaza in Shanghai and the Mayflower Plaza in Guangzhou), a recurring income generating roughly 22% of its revenues.
ôThe challenge with this company was its size. Lai Fung only owns 1.3 million sqm of landbank, compared to Shanghai Real EstateÆs 2.3 million, and Hopson, Agile and GreentownÆs 8-12 million. However, Lai Fung has proven that it is as good as any domestic company in terms of its access to a good, fairly-priced landbank, and appropriate regulatory approvals for its activities.ö
The property developerÆs debt-to-capital ratio (36% compared to Shanghai Real EstateÆs 56%) offset its relatively high gearing ratio. Covenants include a fixed-charge coverage ratio of two times, stepping up to 3.25 times after three years.
The deal attracted 133 investors. 65% of the bonds were sold to Asia (37% to Singapore, and 17% to Hong Kong), 27% to the UK, 13% to CEMEA and 6% to the US. 58% of the bonds were allocated to funds, 17% to banks, 14% to retail, and 13% to insurance and pension funds.
Initially scheduled this week, the deal looked in good enough shape to price on Friday. After 25 meetings in Hong Kong and Singapore, Lai Fung accelerated the roadshow by pitching to London through video conference and one-to-one calls.
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