CDB prices new $1 billion benchmark

Huge order book helps equally huge arranger group price CDB at tight end of target.

In an attempt to disprove the adage that too many chefs in one kitchen make a poor stew, the eight strong arranger group for China Development Bank (CDB) have priced the government-owned bank's $1 billion 10-year bond at the aggressive end of revised price guidance.

Initially marketed to investors at around 90bp over 10-year Treasuries, the arrangers - Barclays, BNP Paribas, Citigroup, Goldman Sachs, HSBC, JPMorgan, Merrill Lynch and UBS - tightened guidance to 86bp to 89bp over after gathering strong momentum early on in the roadshow schedule. The leads finalized guidance at 86bp over as the book size edge toward the $6 billion mark.

Pricing was fixed at New York's open yesterday (September 29). The A-/A2 rated deal has an issue price of 98.86% on a 5% coupon to yield at 5.147%, equivalent to 86bp over Treasuries or 40.5bp over Libor. Fees were 15bp, equating to roughly $188,000 for each bank.

CDB had a very clear benchmark to price off given that it raised $600 million last September from a 10-year dollar deal with a coupon of 4.75%. This was trading at 77bp over Treasuries yesterday compared to 99bp over at pricing.

Bankers estimate the one-year curve is worth about 7bp and believe the new deal offers a fair pick up of 2bp.

Relative to Chexim's 4.875% July 2015 deal, CDB has come through about 3bp on a like-for-like basis. Chexim was trading around the 89bp over range late Thursday.

Despite the thrice-revised guidance the leads were still taking orders late into the book build. The book was finally closed at around $6.25 billion with 250 accounts allocated paper.

Around 44% were Asian based, 30% European and 26% American. In terms of investor type, banks took 52%, fund managers took 35, insurers 7%, with retail accounting for the remaining 6%.

The stability of the CDB 2014 bond in the year since launch was a said to be a strong selling point among investors where the new deal was concerned. Bankers also believe it benefited from a scarcity of quality Chinese issuance.

Within an hour of breaking syndicate in New York, the deal was said to have traded in on an 85bp to 83bp bid offer spread.

BNP Paribas and Merrill Lynch were the global coordinators on the deal.