CNBM and Hanjin placements raise $431 million

Chinese National Building Material issues new shares, while Hanjin Shipping's second largest investor cashes out. Both deals find healthy demand at discounts of 8.5%-9.5%.

Two equity placements raised a combined $431 million on Thursday night. China National Building Material Company (CNBM) raised HK$2.34 billion ($300 million) by selling new shares into the market, while Australian investment fund Wallsend Holdings raised W181 billion ($131 million) by cashing out of its investment in Korea's Hanjin Shipping Company.

The CNBM trade consisted of 298.5 million H-shares, of which 272 million were new shares, the remaining 25 million were secondary shares sold by China's National Social Security Fund Council. The shares represented 33.1% of the company's H-shares and 13.5% of the total share capital.

The deal was launched with a price range of between HK$7.45 and HK$7.85, which was equal to a discount of between 9.5% and 14.1% to the price at the close of trading. The deal was priced at the top, HK$7.85, giving the tightest discount. The good result was further emphasised as the share price gained 4% the following day.

The order book was said to be covered multiple times, with around 60% of the demand coming from Asia and the rest split between US and Europe. Investors were described as a mix of long-only funds, hedge funds and private wealth money.

The money raised will be used to pay off debt and to fund acquisitions and investments. The balance will be used as working capital.

As a company involved in businesses that include a range of building materials, CNBM is seen as well placed to take advantage of the Chinese stimulus package that has at its centre the construction of infrastructure. This is reflected in the share price: since the measures were introduced on November 10, CNBM's shares have risen by 36%, compared with a 7.3% decline in the Hang Seng Index in the same period. The placement also caused analysts to view the stock more favourably on account of CNBM's improved debt-to-equity ratio.

The block trade in Korean shipping line Hanjin went out with a price range of W19,750 to W20,300 per share. The deal priced at the bottom, but still at a tighter discount than on the CNBM trade since the range represented a discount of 6% to 8.5% versus the day's closing price. A total of 9.1 million shares were sold by Wallsend Holdings, Hanjin's second-largest shareholder, which was cashing out its entire 10.3% stake in the company. Korean Air is Hanjin's largest shareholder with a 26.6% stake.

Hanjin Shipping was created in 1988 by a merger of Hanjin Container Lines and Korea Shipping Corporation. It transports more than 100 million tonnes of cargo annually with a fleet of 200 ships consisting of container, bulk, and liquefied natural gas vessels. Hanjin derives more than 80% of its revenue from the container business and the rest from the bulk business. Some analysts have become cautious on the outlook for Hanjin due to a slowdown in global consumption and deteriorating margins in the container industry.

But such concerns did not deter investors with a source close to the deal saying that the book was multiple times covered with around 40 orders. The main concentration of demand was from Asia with a significant level of interest coming from Korea.

The day after the deal, Hanjin's share price dipped by just 0.9%, bringing a healthy profit for investors who participated in the placement.

The two placements corroborate that firms with sound fundamentals which are willing to go out with reasonable discounts can find pockets of demand.

Goldman Sachs and UBS arranged the Hanjin deal, while CICC and Morgan Stanley were on CNBM.

¬ Haymarket Media Limited. All rights reserved.
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