Bank of China (Hong Kong) sold $2 billion through a multi-tranche Reg S offering on Tuesday, the first Chinese lender to raise offshore funds since turbulence in Chinese financial markets and the Lunar New Year holiday kept the primary market largely shut.
Chinese banks' high demand for dollar-denominated assets at a time of renminbi weakness meant Bank of China could get away with pricing through its secondary curve and still retain a healthy order book, which closed around the $7 billion level.
Rated A1/A/A, the nation’s fourth largest lender by assets, priced three bonds via its Hong Kong branch.
A $900 million three-year FRN was priced at 105bp over Libor.
A $600 million three-year fixed rate note was priced at 99.741% on a coupon of 1.875% and yield of 1.964% equating to 107.5bp over Treasuries.
This compares to initial guidance at 135bp over Treasuries
A $500 million five-year was settled at 99.831% on a coupon of 2.375% and yield of 2.411%, equating to 120bp over Treasuries.
Initial guidance had been pitched at 145bp over Treasuries.
The nearest comparables include: Bank of China's 2.125% 2018 bond, its 3.125% 2019 bond and its 2.875% 2020 bonds. These were trading at respective G-spreads of 107bp, 115bp and 125bp on Tuesday.
With Bank of China's curve worth about 8bp to 10bp per annum on a G-spread basis, this means the new three-year has priced about 7bp through its secondary market curve and the new five-year about 5bp through.
“Bank of China captured the market window in between bouts of volatility,” said one banker. “I think more issuers will speed up their fundraising plans in the face of an improving market conditions.”
“In volatile times, investors want to buy simple and solid high-grade credits,” the source added.
The three-part deal, which is part of the company’s $20 billion medium-term note programme, was launched amid signs that US Treasury yields have ticked up over the past week after falling sharply since the start of the year.
The proceeds from the debt sale will be used for Bank of China’s overseas asset growth.
Despite being a household name in China, the lender’s net profit for the three months to September fell 1.5% from a year earlier, the first drop in quarterly profit since 2009, according to its latest financial statement.
Bank of China, Citi and Standard Chartered were joint bookrunners of the transaction.
* FinanceAsia's 7th Annual Borrowers and Investors Forum takes place in Hong Kong on March 2. For registration and more details click here.