Goldman hired to sell first ever Kerry offshore bond deal

Hong Kong's Kerry Properties hopes to tap into Asia's investment grade risk appetite with new 10 year benchmark deal.
Goldman Sachs has been mandated to sell a benchmark sized deal for Hong KongÆs Kerry Properties. The deal will be issued via the wholly owned subsidiary Gain Silver Finance.

This will mark the very first time Kerry has tapped the offshore debt capital market. The deal will carry a Reg-S only senior unsecured structure, with a 10 year maturity.

As such, Standard & PoorÆs is the only rating agency to give the new deal a rating, having assigned the proposed deal a BBB- evaluation.

The deal was launched yesterday (August 15) with very limited investor meetings in Hong Kong.

Officially, roadshows kick-off in Singapore today (August 16), before moving back to Hong Kong on Thursday. No doubt Goldman will have meetings with European investors throughout the week.

It has been a difficult period for the regionÆs debt markets of late as it has been burdened with investor apathy in the face of lackluster data emanating from the US, suspected terrorist plots in London and escalating violence in the Middle East.

The investment grade space usually active at this time of year has been relatively quiet. Recently, only KoreaÆs GS Caltex and Posco have tested the market. Aside from that the market has been subject to bank capital deals from India and Malaysia.

KerryÆs deal offers a very interesting opportunity for investors. On the one hand as a Hong Kong-based investment grade credit it should be highly sought after in the local market as well as Singapore. However, as a lower investment grade deal with superior underlying assets it should also be very attractive to European fund mangers.

Typically European funds have sought diversification through emerging market credit, particularly via the more fashionable Asian credit story. With most of these funds selling their riskier assets in the light of the weakening throughout the EM space, a lower rated investment grade credit - with strong underlying assets - and which offers a solid yield pick-up, will undoubtedly be very attractive.

The market is estimating a fair market value for the new deal around the 90bp over Libor area.

In terms of comparables, most bankers have quoted Hong Kong LandÆs 2014s. That deal, rated at A3/BBB+, is trading at 55bp over Libor. Most estimated that a new Kong Land 10 year would price in the 60bp to 65bp range. Given the fact that Kerry is two notches lower, a new Kerry 10 year would be expected to come with a 30bp or so premium.

However the rarity value that a new Kerry deal offers could push any offering somewhat tighter than expectations.

That said the secondary market has laboured in recent weeks, meaning investors could look for a range that is softer than the marketÆs assessment.
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