China Insurance International Holdings (CIIH) priced its debut $175 million bond on Monday. With UBS as bookrunner and HSBC as joint lead, the BBB- rated group completed a 10-year deal on an issue price of 99.251% and a coupon of 5.8% to yield 5.9%.
This equated to a launch spread of 152bp over Treasuries or 114bp over Libor.
Books are said to have closed three-and-a-half times covered with participation by 55 accounts. By geography, the book split 47% Singapore, 39% Greater China and 14% Europe. By investor type, asset managers accounted for 48%, banks 29%, retail 18% and insurance companies 5%.
Aside from its China credentials, CIIH's bond offered investors great rarity value as there has not been an issue from the Asian insurance sector since pre-financial crisis. Bankers also say there is little from international insurance groups in the 10-year sector either since most tend to issuer longer-dated bonds.
The best pricing comparable is probably Cosco Pacific, which is unrated but has a mid-triple B implied rating. The shipping group's 5.875% October 2013 bond was trading at about 150bp over Treasuries at the time of pricing.
Like Cosco before it, CIIH added a new name to the Greater China credit pool. The company derives most of its revenues from Hong Kong, but future growth is tied to its ability to exploit the opportunities offered by its Mainland Joint ventures.
It has one life insurance JV with Belgium's Fortis based in Shanghai and one general insurance JV with ICBC Asia based in Shenzhen. The company is also well placed to increase its gearing levels given that it ran a comfortable net cash position at the end of 2002. According to analysts' estimates, the group had about HK$5 billion ($641 million) in cash and cash equivalents compared to only HK$2.9 billion in debt.
Its wholly owned reinsurance vehicle, China International Reinsurance (CIRe) has a local currency rating of A-/stable from Standard & Poor's and is the main revenue generator of the group.