China Resources Enterprise launches CB

China Resources Enterprise becomes the latest entrant to the sizzling Asian CB market.
China Resources Enterprise has sold a $220 million convertible bond through lead manager Morgan Stanley. The bought deal has a zero coupon and a five-year maturity. The conversion premium is 18.11%, which gives a 3.98% yield-to-maturity.

The issuer has agreed to a three-year call but thereafter the bond is subject to a130% hurdle. This implies that the bond would have a credit spread assumption of 230bp over the relevant Treasury. Investors have been further tempted by a dividend yield of 1.2%, The issue has a theoretical value of 101.2% and a bond floor 82.7%. Standard & Poor’s - the credit rating agency - has assigned the issue a rating of BBB-.

Analysts commenting on the deal believe that it has been rather aggressively priced, but given the rarity of a Chinese convertible, the deal should have gone well. China Resources Enterprise is the Hong Kong-listed arm of China’s foreign trade ministry. The convertible represents nearly 6% of the company’s issued share capital. Proceeds from the issue will be used to buy various businesses from its parent. 
Share our publication on social media
Share our publication on social media