China Merchants, K Wah, Bank of Ceylon raise $1.2 billion

China Merchants and Bank of Ceylon each raise $500 million in the dollar bond markets, while K Wah closes a $200 million deal.

Asia’s dollar bond markets continued to bang out deals on Thursday night, with a mixed bag of borrowers wading in. Hong Kong-listed China Merchants Holdings (International) and K Wah collectively raised $700 million, while Sri Lanka’s Bank of Ceylon launched a $500 million bond and Indonesia oil giant Pertamina was also expected to price a dual-tranche bond this morning.

Bankers are advising clients to take money off the table whenever they can. “Markets have been volatile and are expected to stay choppy. Greece is not going away and we’ve seen some headlines about the European crisis spreading from the periphery to the core — to the Netherlands and France. In these markets, issuers have to be nimble and grab the chance when they can,” said one debt banker.

Among the first to launch was port operator China Merchants, which priced its $500 million 10-year dollar bond on Thursday night. The bond priced at Treasuries plus 320bp, at the mid-point of the Treasuries plus 315bp to 325bp final guidance. The initial price guidance was Treasuries plus 325bp to 337.5bp.

There have been a number of state-owned Chinese companies tapping the market — including Beijing Enterprises and China Resources Gas — which both priced 10-year bonds this month. Similarly, China Merchants is ultimately owned by the state council of China, though it is less highly rated (Baa2 by Moody’s and BBB by S&P). In contrast, Beijing Enterprises is rated Baa1 by Moody’s and A- by S&P, while CR Gas is rated Baa1 by Moody’s and BBB+ by Fitch.

The Beijing Enterprises 2022s were at Treasuries plus 268bp/263bp while the China Resources Gas 2022s were at Treasuries plus 270bp/272bp. One trader felt that the fair value of China Merchants bonds was around Treasuries plus 335bp.

“China Merchants is one notch below Beijing Enterprises and China Resources Gas and I think that one notch is worth 50bp plus it’s a Reg-S issue (and only offered to European and Asian investors) which is probably worth another 10bp,” said the trader. 

The bonds pay a 5% coupon and were reoffered at 98.877 to yield 5.145%. The proceeds will go towards general corporate purposes including repaying debt. Bank of America Merrill Lynch was the sole global coordinator and bookrunner. Deutsche Bank and Standard Chartered were joint bookrunners. ING and Mitsubishi UFJ Securities are co-managers.

Meanwhile, on Thursday night, property developer K Wah also priced a $200 million five-year bond. The initial guidance was at the 5.625% area and the bonds priced at a yield of 5.375%, at the tight end of the final guidance of 5.375% to 5.5%.

Bank of America Merrill Lynch, DBS and HSBC were joint bookrunners. K Wah’s major shareholder is Che Woo Lui, who has a stake of about 60.2%.

The deal was unrated and drew limited participation from fund managers, which were allocated only 7%. Private banks were allocated 53% and banks 40%. The company attracted $580 million of demand from over 70 accounts. Asian investors were allocated 95% and European investors 5%.

As it was unrated, it was not clear what its closest comparable was and some felt the pricing should have been much wider. “It’s a tiny construction company and I think the pricing for it is way off. Maybe New World Development is a comparable, but you can buy New World Development’s dim sum more cheaply in secondary,” the trader added.

Sri Lanka’s Bank of Ceylon early this morning also launched a $500 million five-year dollar bond. The bonds priced at a yield of 6.875%, at the tight end of the 6.875% to 7% final guidance. The initial guidance was at the area of 7.125%. Bank of America Merrill Lynch, Citi and HSBC were joint bookrunners.

The issue is rated B1 by Moody’s and BB- by Fitch. The deal was a test of investor appetite for more esoteric bank credits — and the fact that it went ahead is an encouraging sign. Two Mongolian banks Golomt Bank and Xac Bank recently failed to muster support from investors and did not price deals despite concluding roadshows.

Finally, Indonesian oil giant Pertamina was in the market with its dual-tranche dollar bond, which is expected to price this morning. Barclays, Citi and HSBC are joint bookrunners.

¬ Haymarket Media Limited. All rights reserved.
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