Bangkok Bank wows with $1 billion bond sale

Volumes equally divided between two five- and 10-year tranches, with the 10-year tranche achieving a whopping $2.5 billion book from more than 200 accounts.

Bangkok Bank raised $1 billion from a stunning bond sale on Wednesday, with volumes equally divided between two five- and 10-year tranches, according to sources.

Despite some initial market uncertainty as investors scaled back on duration, the 10-year tranche drew a book totalling $2.5 billion from more than 200 accounts. At an initial price guidance of 250bp above Treasuries, the tranche tightened by 15bp and only offered a new issuance premium of 6bp.

Prior to last week’s unexpected decision by the Federal Open Market Committee to stick with the current rate of US monetary stimulus, Bangkok Bank had been aiming to issue the majority of its planned $1 billion bond in the five-year bracket. It had also been eyeing the three-year space, given increased investor appetite for shorter-duration paper, sources note.

“This deal, which was a well-timed deal, reopened the 10-year part of the curve,” said a source. “The feedback from most investors in Asia, excluding the insurers, was that the five-year was very much preferred. But the change in rate-market outlook, based on the recent Fed’s decision, altered the sentiment amongst asset managers and some of the hedge funds in Asia.”

Asia’s credit markets have been volatile since Federal Reserve (Fed) chairman Ben Bernanke hinted that the central bank would reduce its vast purchases of US Treasuries in May, spelling an end to low interest rates. However, the Fed reaffirmed last Wednesday that it will not do so for the time being, boosting market confidence once again.

Fund houses took up the bulk – 60% – of Bangkok Bank’s 10-year tranche, with half of the investors coming from Asia and the rest split between Europe and the US. The five-year tranche also received a positive response from investors and was oversubscribed by more than four times, with pricing tightening by 15bp to 190bp over Treasuries.

The market’s general acceptance of Bangkok Bank’s 10-year tranche could now pave the way for more longer-duration deals. However, investors would remain selective in the types of credits that issue in this space.

“I think the 10-year type of curve right now will be restricted to credits that investors are comfortable with,” said the source. “These tend to be top-tier credits or top-tier companies in their country or sector.”

China National Offshore Oil Corporation (CNOOC), the largest offshore oil and gas producer from the People’s Republic of China, is currently marketing a dollar-denominated 10-year bond, in addition to a euro-denominated seven-year note, according to sources. The initial price guidance for the former is 210bp over Treasuries while the latter is 140bp above the equivalent benchmark.

Bank of China International, Goldman Sachs, JPMorgan and UBS are the joint global coordinators for the deal, which will likely be priced during New York time today.

Morgan Stanley was the sole bookrunner for Bangkok Bank’s deal. 

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