Hong Kong listed piped-gas distributor Xinao Gas made its debut in the high yield market on Friday (July 29) with an increased $200 million seven-year bond via sole lead Deutsche Bank. The Ba1/BB+ rated deal was priced at par with a semi-annual coupon of 7.375% to yield at 332bp over US Treasuries.
Fees were 2.75%.
The order book is said to have topped the $1 billion level by the time the deal closed on Friday afternoon - an oversubscription ratio of over five times. This represents a very strong showing and indeed key accounts were said to have been extremely interested in the deal even before it was officially launched early last week.
In a rare move, the lead also chose not advertise the book size during roadshows in order to keep investors focused on the fundamentals of the credit story. The deal was launched at the $150 million level with an initial guidance at 7.375% to 7.50%.
As the book continued to grow the lead increased the deal size by 33% to $200 million, but opted to keep guidance the same. Although some observers argue that with such a strong book, the lead could have pulled pricing in even tighter, it decided not to in order to preserve the quality of investors.
A total of 83 investors participated in the deal. By investor type fund managers took 58%, long-term investors such as insurers and pension funds took 13%, banks took 18%, and retail accounted for the remaining 13%. By geography, the deal split 33% Singapore, 25% Hong Kong, 20% UK, 14% offshore US and 4% Europe.
The most relevant comparable is Panva Gas, a direct competitor of Xinao, which sold a similar $200 million seven-year deal last September. Panva, also a Hong Kong listed Chinese gas operator, priced at par with a coupon of 8.25% to yield 446bp over Treasuries.
Since then the deal has come in over 100bp and was bid at 320bp over Treasuries at the time of Xinao's pricing. This means Xinao has priced at a 12bp premium to secure a one-year maturity extension over Panva, which has the same Ba1/BB+ rating.
Xinao's deal has clearly benefited from a resurgence in the Asian high-yield markets over the last couple of months. Last October, Deutsche also led a HK$550 million ($71 million) convertible bond for the company. It is now trading at 112% bid and has already hit its 25% conversion premium.
Xinao is a diversified piped-gas operator that operates 56 projects.