CNPC dim sum

CNPC dim sum bond reflects new pricing levels

China National Petroleum Corp has to pay up to print a Rmb3 billion debut dim sum bond as pricing in the market favours investors.
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CNPC's headquarters in Beijing
<div style="text-align: left;"> CNPC's headquarters in Beijing </div>

State-owned fuel producer China National Petroleum Corp (CNPC) had to pay up to attract investors early yesterday morning when it tapped the market with a debut Rmb3 billion ($470 million) dual-tranche offshore renminbi bond.

The Rmb2.5 billion two-year bonds pay a 2.55% coupon and were reoffered at 99.903 to yield 2.60% to October 26, 2013, while the Rmb500 million three-year bonds pay a 2.95% coupon and were reoffered at 99.857 to yield 3% to October 26, 2014. The deal gathered an Rmb8.7 billion order book from 93 investors.

Rivals were surprised that CNPC, which is a strong credit and enjoys good name recognition, had to pay a 3% yield for a three-year bond. Although the dim sum market has fared relatively well compared to the dollar market amid the market rout, pricing is clearly in favour of investors.

Just a month ago, Yum Brands (rated BBB) and BSH Bosch (rated A) both priced three-year bonds at 2.375%, which demonstrates how far yields have moved since then.

“It’s a different market today,” said one person familiar with the deal. “Yields in the dim sum market have moved 100bp to 150bp back of where they were a few weeks ago. If those names were to tap the market today, there is no way they could have achieved those yields.”

Khazanah Nasional, which closed an inaugural Rmb500 million three-year dim sum sukuk on October 13, also had to pay up. It offered investors a yield of 2.9%, compared to an initial price whisper of around 2% when the state investment agency was first marketing the bonds back in September.

Even so, CNPC’s dim sum bonds performed in secondary trading despite sentiment turning weaker yesterday. The CNPC 2013s were quoted at 100.20 and the CNPC 2014s were quoted at 100.50.

The company was also able to achieve a relatively large benchmark size. “CNPC was keen to issue a Rmb3 billion bond,” said another person familiar with the deal. “They had issued a dollar bond earlier this year and weren’t too happy with the size they got.” Back in April, CNPC had tapped the dollar market with a triple-tranche $1.85 billion bond, which fell short of the $3 billion expected.

The CNPC bonds were issued through CNPC Golden Autumn and guaranteed by CNPC Finance (HK). CNPC is a strong credit, rated A1/A+/AA- by Moody’s/S&P/Fitch.

HSBC and Bank of China were joint global coordinators and bookrunners. Deutsche Bank and ICBC were also joint bookrunners.

For the two-year tranche, Hong Kong and China investors were allocated 76%, Singapore investors 10% and European investors/others 14%. Fund managers and insurers were allocated 45%, banks 23%, private banks 21%, sovereigns 9% and corporates 2%.

For the three-year tranche, Hong Kong and China investors were allocated 78%, Singapore investors 18% and European investors/others 4%. Fund managers and insurers were allocated 37%, banks 35%, private banks 24%, sovereigns 2% and corporates 2%.

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