Chinese duo raise $780m in euro debt

Chinese state-owned firms Beijing Enterprises and Yuexiu Transport successfully raised €700 million by selling euro-denominated bonds to yield-starved eurozone investors.
Beijing Enterprises is in the solid waste treatment business
Beijing Enterprises is in the solid waste treatment business

State-owned Beijing Enterprises Holdings and Yuexiu Transport collectively sold €700 million ($780 million) in euro-denominated bonds late on Wednesday, meeting with strong investor demand as eurozone interest rates continued to hover around historic lows.

Beijing Enterprises — a Hong Kong-listed Chinese company engaged in gas transmission and distribution, brewing beer, and waste water treatment — raised a maiden €500 million five-year bond, according to a term sheet seen by FinanceAsia. Rated A3/BBB+, the Reg S-only offering priced at mid-swaps plus 120 basis points, which is 15bp tighter than its initial price guidance area.

Yuexiu Transport Infrastructure, which principally operates and invests in expressways in China's southeastern Guangdong province, sold a debut €200 million three-year instrument, with order books already exceeding $600 million by the time London markets opened.

Yuexiu’s offering, raised via an entity called Famous Kind International, is guaranteed by the parent company and comes after its global investor roadshow ended on April 13. Rated Baa2/BBB-/BBB-, the Reg S-only paper priced at mid-swaps plus 158bp, which is 17bp tighter than its initial price guidance area.

The two Chinese issuers join the wave of US firms that have already taken advantage of rock-bottom euro borrowing costs after the European Central Bank last month initiated a massive programme of quantitative easing to stave off deflation. The ECB has pledged to buy up to €60 billion a month in top-quality debt instruments until September 2016.

That is expected to fuel economic growth by pumping money into the region’s financial system but has also seen domestic yields compress, even turn negative in the case of some European sovereign bonds.

As a result, European investors are increasingly craving higher-yielding instruments

On the Asian flip side, euro-denominated bond issuance can also help to finance outbound deal making or improve currency management since the euro is the worst performer among 10 developed-market peers this year.

There has been $5.5 billion worth of euro-denominated bonds from Asia ex-Japan issuers year-to-date, which is almost double the $2.4 billion seen during the same period of 2014, according to Dealogic data.

Six of the nine Asian euro debt instruments sold this year are by Chinese issuers, including China Petrochemical Corp (Sinopec) and State Grid Corp of China.

Money raised from Beijing Enterprises’s latest note — which was issued by a firm called Talent Yield and guaranteed by the parent — will be used for refinancing, working capital and general corporate purposes.

Deutsche Bank and UBS are the joint global coordinators and book runners of Beijing Enterprises’s transaction. Other book runners include ANZ, Bank of China and DBS.

Bank of China, Bank of China Hong Kong, Bank of China International, HSBC, JP Morgan and Nomura were the joint book runners of Yuexiu’s deal.

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