Dim sum flurry

Dim sum flurry: Hainan Airlines, Air Liquide, BP price bonds

Hainan Airlines, Air Liquide and BP price dim sum bonds this week, but their differing reception indicates that investors prefer safe names.
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An advert for dim sum bonds in Hong Kong, where investors are starting to become more picky
<div style="text-align: left;"> An advert for dim sum bonds in Hong Kong, where investors are starting to become more picky </div>

A flurry of foreign borrowers came to the dim sum bond market this week, and their experience suggests that investors are becoming increasingly choosy and focusing on names with strong brand recognition.

Mainland carrier Hainan Airlines yesterday priced its Rmb1 billion ($156 million) dim sum bond at a yield of 6%. Deutsche Bank, J.P. Morgan and Wing Lung Bank were joint bookrunners. Hong Kong International Securities was a co-lead manager. Wing Lung Bank was added as a bookrunner late in the process and is said to have put in a sizeable order.

The deal gathered an order book of Rmb1.3 billion from Asian accounts. Private banks were allocated 45% of the deal, banks 25%, fund managers 13% and corporates and others 17%.

The leads started marketing the deal to investors at 6% last Friday, so it was in the market for close to a week. One person familiar with the deal pointed out that this was similar to China Eastern Airlines, which took a few weeks to close its dim sum bond.

Hainan Airlines is unrated and, as a result, investors took more time to complete the credit work. Aside from that, it is a mainland airline carrier in a cyclical industry, which probably added to the caution among investors. The bonds were issued via Hainan Airlines (Hong Kong).

In contrast, BP Capital Markets, the funding arm of the British oil and gas company, priced a Rmb700 million ($110 million) dim sum bond through HSBC and Standard Chartered on Wednesday night. The investment-grade deal attracted a decent response from investors, who were already familiar with the name. The expected issue rating is A2 by Moody’s and A by S&P.

The bonds were priced to yield 1.7%, at the tight end of the 1.7% to 1.75% guidance. The order book was Rmb2.5 billion from 73 orders. Hong Kong investors were allocated 48%, Singapore investors 33% and European investors 19%. Fund managers were allocated 58%, private banks 23%, banks 16% and corporates 3%.

“A name like BP was always expected to fly in these markets. However, the same is not true for other borrowers,” said one banker.

BP’s dim sum bonds priced 5bp inside of British retailer Tesco, which had earlier tapped the market with a Rmb725 million bond that paid a yield of 1.75%, despite BP’s bonds trading 20bp to 25bp wide of Tesco in the dollar market. Tesco’s senior dim sum bond is rated A- by S&P.

French company Air Liquide last night also priced its Rmb1.75 billion five-year dim sum bond. The guidance was in the area of 3% and the bonds priced at a yield of 3%. BOC, HSBC, ICBC and Standard Chartered were joint bookrunners.

The deal gathered an order book of Rmb3 billion from 68 orders. Hong Kong investors were allocated 52%, Singapore investors were allocated 33%, European investors 12% and others 3%. Fund managers were allocated 74%, banks 10%, private banks 12% and others 4%.

Air Liquide supplies industrial gases and services to the medical and chemical industries and it was the first dim sum bond from a French borrower. The proceeds will be used for Air Liquide's activities in mainland China.

Elsewhere, Anstock, a wholly owned subsidiary of Taiwan’s Advanced Semiconductor Engineering (ASE), is planning to issue a five-year dim sum bond to raise up to Rmb650 million. Citi is a sole bookrunner. Grand Cathay Securities is the co-manager. The bonds are guaranteed by ASE, which is the world’s biggest independent provider of semiconductor packaging and testing services based on 2010 revenues.

The issuer is unrated and guidance was released at 4.125% to 4.25% yesterday. There is a change-of-control put at 101. The deal was said to be “quietly” in the market for some time and is expected to price today (September 9).

Finally, BSH Bosch & Siemens Hausgerate, a joint venture between Siemens and Robert Bosch, is planning to issue an offshore renminbi bond. Deutsche Bank and HSBC are the arrangers. They will hold investor meetings in Singapore next Wednesday and Hong Kong next Thursday.

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