DCM dollar floodgates open wide

Baidu, China Overseas Land, Shui On Land and SM Investments raised $2.4 billion in new bonds on Wednesday, taking advantage of an issuance window.

Issuers such as Baidu, China Overseas Land, Shui On Land and SM Investments have been determined to capture a favourable issuance window before the release of market-moving data on Thursday, raising a total of $2.4 billion in new bonds on Wednesday.

Key data points this week such as the European Central Bank’s expected interest rate cut and the release of the US’ non-farm payrolls — due Thursday and Friday respectively — have been on market participants’ radar, experts said.

“With sentiment and US Treasuries yields being quite good, issuers might have fast forwarded their funding plans to get ahead of any potential market moving data,” said a Hong Kong-based syndicate banker to FinanceAsia.

The European Central Bank is poised to impose negative interest rates on its depositors, seeking to cajole banks into lending instead and to prevent the eurozone falling into Japan-like deflation. The eurozone economy grew just 0.2% in the first quarter, and annual inflation unexpectedly slowed to 0.5% in May, official data showed this week, piling additional pressure on the central bank to step in.

Also, economists expect the May non-farm payroll report to be a much less volatile affair than the previous month, when shock news of 288,000 new jobs topped even the most optimistic views.

In anticipation of such data points, the US 10-year yield fell 2bp to 2.59%, after having increased from a low of 2.44% last Thursday, according to Bloomberg data.

Asia ex-Japan dollar volume has reached $51.7 billion in the second quarter so far, which is 29% more than the previous quarter’s $40 billion, according to Dealogic data.


Beijing-based Chinese web services company Baidu raised a $1 billion five-year bond on Wednesday, pricing the SEC-registered transaction much tighter than its existing notes that were used as comparables, according to a source close to the deal.

Baidu went out with an initial price guidance of Treasuries plus 150bp during Asia morning hours but ended up pricing the transaction in US time at Treasuries plus 125bp. The company’s existing paper expiring in 2018 were trading at a G-spread of 131bp, resulting in a negative new issue premium, added the source.

“Investors gave the company a lot of leverage on the price and the issuer was a bit lucky given that US Treasuries have come off in the last week,” the source said.

While Baidu has sufficient cash to fund its operations and potential acquisitions, it is more tax efficient for the company to raise offshore funding through the notes issuance to fund offshore payments for its acquisitions, according to Moody’s in a note on Wednesday.

“The proposed notes will further enhance Baidu's strong liquidity… and will support its A3 issuer rating,” said Lina Choi, a Moody's senior analyst.

Aside from Baidu, China Overseas Land, one of the top homebuilders from the mainland, sold a $500 million 20-year note and opened two $250 million taps from its existing five- and 10-year bonds, which are due to mature in 2019 and 2024 respectively, according to a term sheet seen by FinanceAsia. The offerings have coupons of 6.45%, 4.25% and 5.95% respectively.

“China Overseas Land has been a different animal to other Chinese high-yield developers in the sense that it’s a large state-owned enterprise,” said a source close to the transaction. “As a result, we were able to do another $1 billion for the issuer and in the 20-year space too.”

Elsewhere, Shui On Land raised a $550 million five-year note while SM Investments, the holding company of retail tycoon Henry Sy, sold a $350 million 10-year bond at coupons of 9.625% and 4.875% respectively.

Goldman Sachs and JPMorgan were the joint global coordinators of Baidu’s transaction. Other co-managers were Bank of China, Deutsche Bank and Morgan Stanley.

Citi, Goldman Sachs and JPMorgan were the joint global coordinators and bookrunners of China Overseas Land’s deal. Other bookrunners included HSBC, Bank of China International and Deutsche Bank.

BNP Paribas, Deutsche Bank, JP Morgan, Standard Chartered and UBS were the joint bookrunners of Shui On’s bond while Citi and Standard Chartered Bank were on SM Investments’ new offering.


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