Chinese bond issuers out in force

A trio of benchmark issues are expected this week as falling US Treasury yields underpin credit spreads.

A trio of Chinese issuers are preparing to launch benchmark offshore bond offerings this week, hoping to take advantage of a risk rally in US Treasuries that is pushing credit spreads tighter.

Benchmark 10-year US Treasuries were trading around the 1.75% level during New York hours on Monday, down almost 19bp since a recent 1.94% high on April 26.

However, Asian sales desk said secondary trading activity was fairly muted as investors await deals by State Grid Corporation, China International Capital Corporation (CICC) and ICBC Leasing.

State Grid

The Aa3/AA/A+ rated state-owned entity is preparing to issue its first dual-currency bond, with expected tranches in dollars and euros. One banker said the company is likely to launch the deal on Tuesday after wrapping up roadshows in Boston and Paris on Monday.

The Aa3/AA-/A+ rated parent company, which distributes power to 1.3 billion people across nearly 90% of China, was last in the international bond markets in January 2015. It raised €1billion ($1.2 billion) via a 1.5% 2022 maturity and 2.45% 2027 maturity. 

The Beijing-based company will issue its new bond through wholly owned subsidiary, State Grid Overseas Development (2016).

In an note Moody’s said, "the Aa3 ratings are underpinned by State Grid's monopoly market position and stable financial profile, as well as expected very high level of support from the Chinese government.”

The agency added, "We expect its credit profile and projected metrics to remain consistent with its current rating level on a standalone basis over the next three years. The proposed bond issuance will strengthen its offshore financing channels to meet its capex and overseas investments.”

According to data provider Dealogic, the highly acquisitive company has been involved in almost $10 billion worth of acquisitions over the past three years, excluding debt.

This includes a $2.8 billion investment in a 35% stake in Italy's energy grid holding company CDP Reti. It is also reported to be among a group of bidders for a 16% stake in Brazilian renewable energy firm Renova Energia.

Joint global co-ordinators for the new bond offering are BOC International, Goldman Sachs, HSBCICBC International and Morgan Stanley, while CCB International, CitiJP MorganMizuho Securities, Santander and UBS are joint bookrunners.

ICBC Leasing

The aircraft leasing affiliate of ICBC, China's largest bank by assets, is also preparing to return to the international bond markets for the first time in just over six months, having raised $1.5 billion via a three-tranche offering in November.

The sale also follows hard on the heels of deals from BOC Aviation and China Aircraft Leasing Group (CALC).

The former sold a $750million 3.875% 10-year bond in mid-April, which is still trading around the re-offer, while the latter, backed by state-owned conglomerate China Everbright Group, issued a $300 million 5.9% 2019 note at the end of April.

One banker said ICBC Leasing is still debating whether to launch this week after conducting roadshows from May 6 to 11.

Joint bookrunners are ICBC, Morgan Stanley, Goldman Sachs, HSBC and ANZ.


China International Capital Corp, the country's first joint-venture investment bank, is also looking to issue its maiden international bond as it continues to expand overseas.

A source close to the company said the company is likely to raising $500 to $800 million.

In a statement to the Hong Kong stock exchange on Monday, the company said it has established a $2 billion medium-term note programme to fund the working capital and general corporate purposes for its offshore units.

CICC HK Securities, Citi, and Standard Chartered are bookrunners.

In the meantime, Agricultural Bank of China raised $1.25 billion via its New York branch on Monday. The A1/A rated Reg S deal had two tranches.

A $850 million three-year FRN was priced at 98bp over Libor and a $400 million three-year fixed rate tranche was priced at 99.814% on a coupon of 1.875% to yield 1.937% or 107.5bp over Treasuries. 

Joint global co-ordinators were ABCI, Bank of America Merrill Lynch, Citi, Morgan Stanley and Wells Fargo. Co-managers were Credit Agricole and Standard Chartered. 


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