BOC, Hana, UBI kick off roadshows amid grim conditions

Bankers' hopes of a revival in dollar bond markets in September look less optimistic after yesterday's sell-off.

Undeterred by yesterday’s grim market conditions, Bank of China (Hong Kong), Hana Bank and Union Bank of India have forged ahead with fixed-income investor meetings this week.

However, perhaps because of the parlous state of markets, bankers arranging the meetings have emphasised that they are “non-deal roadshows” and that the borrowers are not in urgent need of funds. 

It was a rocky start to the week, to say the least. The US released dismal payroll data last Friday, reflecting that hiring stagnated during August, which led Asian credit markets to open substantially wider this week. The iTraxx Asia investment-grade index, which reflects the cost of insuring credits in the region, moved 11bp wider yesterday morning to 160bp/162bp.

In lockstep, Asian indices also dropped into the red, with the Kospi closing 4.39% lower, the Hang Seng retreating 2.95% and the Nikkei declining 1.86% yesterday evening. The US markets were closed yesterday due to the Labour Day public holiday, but market participants will be watching to see how it trades after re-opening today.

August has been a quiet month for the debt markets and bankers were hoping that September would show a pick-up in primary issuance, but those hopes looked all but dashed yesterday.

“If it’s a day like today, no one will go out to market. I think the earliest we could see these banks issuing is next week or the week after,” said one banker who is part of the arranger group.

All three banks conclude their non-deal roadshows this week. Guidelines from the International Capital Market Association, a London-based global capital markets industry association, suggest that companies should have a cooling-off period before issuing a deal if they are conducting a “non-deal roadshow” but, according to bankers, it is subjective as to how long that cooling period should be.

Bank of China (Hong Kong) is kicking off its roadshow with two teams in Hong Kong today. It will take in New York tomorrow, Singapore and Boston on Thursday, and London and Los Angeles on Friday. The meetings will discuss “the bank’s latest developments”, according to one person arranging the meetings.

BOC International, Citi and Deutsche Bank are the arrangers. The issuer is rated Aa3/A-/A by Moody’s/Standard & Poor’s and Fitch, with stable outlooks by the three rating agencies. A Nomura report yesterday suggested that the bank is looking at a senior bond issue.

It also noted that despite the recent widening of Bank of China (Hong Kong)’s lower tier-2 issue maturing in 2020 and the Zijin Mining senior bonds due in 2016 (which are backed by a letter of credit from BOC), the bank “could issue at relatively tight levels, given support from Chinese investors and the much lower beta of a BOC HK senior bond”.

Elsewhere, Union Bank of India (UBI) has kicked off investor meetings in London today. It will move on to Singapore on Wednesday and Thursday, and Hong Kong on Friday. Unlike the other two borrowers, UBI has said that a US dollar bond might follow subject to market conditions, though a banker on the deal still said it was a “non-deal roadshow”.

Bank of America Merrill Lynch, Barclays Capital, Citigroup, Deutsche Bank, HSBC and Standard Chartered are arranging the meetings. If it goes ahead with a deal, Union Bank of India is expected to issue a senior bond.

South Korean lender Hana Bank yesterday kicked off investor meetings in Hong Kong. The roadshows move onto Singapore and New York on Tuesday, Boston on Wednesday, and London and Los Angeles on Thursday. Barclays Capital, Bank of America Merrill Lynch, Citi, HSBC and Hana Daetoo Securities are arranging the meetings.

Hana Bank tapped the bond market earlier this year, in April, raising $500 million through a five-and-a-half year bond. According to one of the arrangers, the bank has not yet decided if it plans to issue a senior or subordinated bond, and will be watching the levels at which its outstanding bonds are trading. The bank has a $400 million lower tier-2 bond outstanding that matures in 2016 and is callable in September 2011, and speculation is that it plans to refinance this.

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