Asian banks support Avic's $500 million dollar debut

Mainland aviation company Avic lands its debut bond but how liquid will they be?

Avic International, a Chinese importer and exporter of civil aviation products, late last week closed its $500 million debut bond, anchored by Asian banks.

The move adds to the growing number of Chinese dollar bonds that have been heavily taken up by banks and appear to be similar to clubbed loan transactions, except that they are sold in the public bond markets.

Guidance was given of a benchmark size for a five-year deal at Treasuries plus 310bp area, and the bonds printed at Treasuries plus 300bp with a $300 million size. A $200 million 10-year tranche was added on the back of reverse enquiries and priced to yield Treasuries plus 305.5bp. However, there was no breakdown on who took that tranche up.

The five-year tranche saw significant take up from Asian banks, which were allocated 44%. Fund managers were allocated 38% and private banks 18%. Given the high proportion of allocations to banks, one wonders how much liquidity such bonds would have in the secondary market.

However, a person close to the situation said it would not necessarily see less liquidity compared to other deals of a similar size sold in the Reg S market and pointed out that a total of 78 investors participated.

"The truth of the matter is that, aside from sovereign bonds, Asian bonds have little liquidity outside of the first few days of trading," he said. "I've seen deals where single funds take up big chunks of bonds as well, so having a higher proportion of bonds allocated to fund managers doesn't necessarily mean more liquidity," he added.

In secondary markets, the five-year bonds were quoted at Treasuries plus 297bp/295bp, slightly tighter than reoffer. The bonds were guaranteed by Avic International, a state owned enterprise.

BOC International and Royal Bank of Scotland were joint global coordinators and bookrunners. Credit Suisse, HSBC and ICBC Asia were also bookrunners.

Elsewhere, China Orient Asset Management International will start fixed-income meetings on September 9. BOC International, Credit Suisse and Standard Chartered are joint global coordinators and bookrunners for a potential US dollar bond. ABC International and UBS are joint bookrunners.

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