Asia’s debt capital market continues to thrive, with Monday night seeing a combined total of $1.7 billion worth of dollar-denominated bonds solely from Chinese issuers.
Mainland travel agency China Travel Services sold a debut $1 billion dual-tranche offering, while state-owned trading company Tewoo raised an inaugural $400 million three-year bond backed by an ICBC Tianjin branch standby letter of credit.
Added to that list, Chinese aluminium producer Hongqiao priced a $300 million capped 3.5-year note also on the same night, all thanks to better market conditions, bankers said.
“The recent batch of US data ... are in line with our views that US economic growth is likely to remain above trend in the coming quarters,” said Kenneth Ho, credit analyst from Goldman Sachs. “This helped to improve sentiment for risk assets over the past week.”
Some of the concerns that have driven recent outflows began to ease as the week progressed last week. China reported still respectable 7.3% gross domestic product growth and some good third quarter numbers from US companies took the edge of fears about global economic growth.
Asia credit markets rallied, with high beta credits outperforming, as a result. Asia high-yield was 2bp tighter last week and investment grade was tighter, by around 5bp to 6bp, across the board, Ho added.
US data released late on Friday showed sales of new US homes rose to a six-year high in September. Investors also took heart in positive earnings results from blue chips Microsoft and Proctor & Gamble, which propped up US stocks to close out their best week in nearly two years on the same day.
Corporate China is the key drive of Asian credit markets so far this year — both investment-grade and high-yield — with 148 individual companies issuing $182 billion worth of dollar-denominated bonds and accounting for nearly 40% of market risk as of October 24.
China Travel Services
China Travel Services debut issuance — guaranteed by its Hong Kong-based parent — can be broken down into a $300 million five-year and $700 million 10-year tranche.
The huge order book in excess of $9 billion on Monday evening helped drive down the pricing of the offering, with the five- and 10-year bonds tightening by approximately 40bp and 30bp from their initial price guidance of 280bp and 375bp area respectively, according to a source familiar with the matter.
The proceeds will be used to refinance existing borrowings, replenish working capital and other general corporate purposes.
HSBC and UBS were the joint global coordinators and bookrunners of China Travel’s Baa3/BBB rated deal. Other bookrunners include CCB International, ABC International and JP Morgan.
Tewoo bond
Tewoo, Tianjin’s largest state-owned enterprise, priced its inaugural $400 million three-year at Treasuries plus 210bp, which is a 5bp tightening from its initial price guidance, according to a source close to the deal.
The Reg S-registered offering comes at a time when Tewoo is in the midst of expanding its operations. On October 15, Chinese steel company General Steel and Tewoo Group announced that they will work together to co-develop a bulk commodity e-commerce platform, reinforcing the trading company’s intention to invest into high-growth, high-margin industries.
The proceeds from the Reg S-registered offering will be used for general corporate and working capital purposes, added the source.
The nearest comparables for Tewoo’s bond included Chinese steel manufacturer Hebei Iron & Steel and equipment manufacturer China Metallurgical Group’s recent $500 million three-year note expiring in October and August 2017 respectively that were trading at a G-spread of 200bp and 172bp. Both of these transactions are back by SBLCs from Agricultural Bank of China.
ICBC Asia, BNP Paribas and HSBC were the joint lead managers of Tewoo’s issue.
China Hongqiao
Elsewhere, high-yield issuer China Hongqiao sold a debut dollar-denominated 3.5-year note at 6.875%, which is 50bp tighter than its initial price offering of 7.375% area.
The note is guaranteed by all of its existing offshore subsidiaries of the issuer other than the Indonesian subsidiary and certain of the issuer’s future offshore subsidiaries, according to a term sheet seen by FinanceAsia.
Proceeds will be used for refinancing certain level of indebtedness, as well as working capital and general corporate purposes.
The nearest comparables for China Hongqiao’s bond was its recent bond issued in June, when it raised a $400 million three-year note that priced at 7.625%. It was trading at a cash price of 104 or a yield of 5.97%, according to a source familiar with the matter.
Deutsche Bank was the joint global coordinator and bookrunner of China Hongqiao's bond. Other bookrunners include ANZ, Bank of America Merrill Lynch, Morgan Stanley and Bank of China International.
