Two of China’s largest financial companies chose the same day to launch their US dollar bond offerings. On Thursday, investors were offered a $3 billion four-tranche deal from China Cinda Asset Management and an $800 million debut issue from China Reinsurance Group, the country’s largest reinsurer.
The two deals were launched amid a relatively optimistic tone in the Asia credit market, despite US central bank officials suggesting an interest rate hike was imminent. The chance of a March rate hike now sits at 90%, according to market pricing, triggering a sell down in the US 10-year Treasury paper.
“Asian issuers in the dollar bond market have rushed to launch their deals before a rate hike, as the Fed is stepping up its pace of interest rate increases from the once-a-year pattern it has adopted since 2015,” a Singapore-based investor told FinanceAsia.
“The prospect of a tighter monetary policy has led to a sell-off in safe-haven assets such as gold and US Treasuries,” the investor said. “The focus now will be on next week’s US employment report to see whether the Fed can lift the short-term interest rate or not.”
China Cinda, the country’s largest bad assets manager, returned to the international bond market for the first time in almost two years, selling a $300 million three-year note, a $1.3 billion five-year note, a $700 million seven-year note and a $700 million 10-year note.
The Hong Kong-listed company — rated A3/A-/A by Moody’s, S&P Global and Fitch — garnered more than $19 billion of demand across all four tranches, building one of the largest order books this year, according to syndicate bankers.
Initial guidance for the three-year and five-year note was pitched at around 180bp and 195bp over the US Treasuries, before bankers slashed final guidance to between 150bp and 155bp for the 2020 note and between 165bp and 170bp for the 2022 note.
The company adopted a similar pricing strategy for the longer-dated tranches. The seven-year note was narrowed from initial guidance of the 210bp area to between 180bp and 185bp over the Treasuries, while the 10-year note was tightened from the 225bp area to between 195bp and 200bp.
Final pricing of all the four tranches were priced at their tight-end of marketing range. The March 2020 bond was fixed at 99.76 with a coupon of 3%, while the March 2022 bond was priced at 99.855 with a coupon of 3.65%; The March 2024 bond came at 99.807 with a 4.1% coupon. Finally, the March 2027 bullet was fixed at 99.648 and came with a coupon of 4.4%.
The bonds were issued by China Cinda Finance 2017, guaranteed by China Cinda Hong Kong Holdings and supported by a keepwell deed and equity interest purchase undertaking from China Cinda Asset Management, which is the 100% owner of both the issuer and the guarantor.
Syndicate bankers running the Reg-S deal said all four tranches were priced around fair value, leaving little to no new-issue premium on the table for investors. The relatively scarcity of the issue was a major factor in driving demand — and as a result this tight pricing, said a syndicate banker.
The proceeds of the debt sale will be used for working capital, investment and other general corporate purposes.
Meanwhile, China Reinsurance made its dollar bond debut with an unrated five-year deal, raising $800 million from investors.
The global coordinators — CICC HK Securities, HSBC, Bank of China and China Everbright Bank Hong Kong branch — went out with initial guidance of the 175bp area over five-year US Treasuries, before tightening the Reg-S deal to 150bp, telling investors it would price at that level while still leaving the book open.
The March 2022 issue was fixed at a price of 99.381 and came with a coupon of 3.375% to yield 3.511%, according to a term sheet seen by FinanceAsia.
Bankers said Ping An’s 2.875% $500 million January 2021 bonds and Tai Kang’s 3.5% $800 million January 2022 bonds were the best benchmarks to China Reinsurance. The former was trading on a G-spread of 125bp and the latter was yielding at G-spread of 142bp before China Reinsurance launched their offering.
In secondary trading on Friday, China Reinsurance’s 2022 bond traded wider — albeit only by a single basis point.
The final order book reached $2.3 billion from 112 accounts. Investors in Asia took 96% of the deal, while the remaining 4% went into accounts in Europe, the Middle East and Africa. Banks bought 47% of the deal, fund managers 33%, sovereign wealth funds and insurance companies 16%, private banks 2%, and corporations another 2%.
“The peak order book was about $2.8 billion before the issuer gave out the final price guidance, which was pretty similar to what we have at the end of the bookbuilding process,” a syndicate banker said.
The bookrunners were China Galaxy International Securities Hong Kong, CCB International and China Merchants Securities Hong Kong.
The company plans to use the new proceeds for offshore investments.