BoCom HK rides wave of bond issuance

Bank of Communications Hong Kong branch raises a $700 million three-year senior unsecured note, becoming the first Asian financial institution to issue in 2014. But it has been a busy week for debt markets.

Bank of Communications (BoCom) Hong Kong branch raised a $700 million three-year senior unsecured note on Wednesday, smartly riding the wave of other bond issuance that has hit the debt markets in the first week of the new year.

The bank’s debut Reg S-registered paper had an initial guidance of 170bp over Treasuries and ended up pricing 25bp tighter at 145bp over Treasuries, according to a term sheet.

Sources note that BoCom’s note priced much tighter than its comparables, including Agricultural Bank of China’s (ABC) $500 million three-year bond that got issued in December, and which was trading at Treasuries plus 159bp or a G-spread of 164bp at time of pricing.

This is a significant achievement based on the fact that BoCom is rated two notches lower by Moody’s and one notch lower by Standard & Poor’s (S&P) – A3 and A- respectively – versus ABC’s notes.

“Is the first time that BoCom has issued directly, so it is very important for them to establish themselves directly and they really did it in style,” said a source close to the deal. “Given the very well known nature of the name, they were able to issue very nimbly without the need for a road show.”

Prior to Wednesday’s issuance, BoCom normally issued debt through subsidiary Bank of Communications Financial Leasing, which normally obtains guarantees from its parent and is a regular in the offshore renminbi space.  

BoCom’s latest bond obtained an order book of more than $2 billion from 130 accounts. The majority of the papers were allocated to Asian investors – 93% – while the rest went to Europe. Banks purchased 75% of the notes, followed by fund managers with 14%, the public sector with 5%, insurance companies with 4% and private banks with 2%.

It has been a good start to the year for Asia’s G3 debt capital markets. There has already been a flurry of deals supported by improved market sentiment after the Federal Reserve (Fed) decided to cut its monthly bond purchases to $75 billion from $85 billion in December. The decision from the Fed suggests that headwinds which have held back the US economy may be abating.

Asia ex-Japan G3 markets have already seen a total volume of $9.8 billion with 11 deals year-to-date, which exceeds 2013’s volume of $4.5 billion with the same number of deals over the same period, according to Dealogic data.

In secondary markets, BoCom’s bond is trading at 99.641 at a yield of 2.25%, slightly above the reoffer price of 99.608 and yield of 2.261%, according to Bloomberg data.

BoCom Hong Kong and HSBC were the global coordinators and joint bookrunners of the deal. Other bookrunners include ANZ, BNP Paribas, BoCom International, China Construction Bank International, JPMorgan and UBS.

¬ Haymarket Media Limited. All rights reserved.
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