Guorui Properties, a Guangdong-based property developer, sold a tightly-priced three put two-year bond on Tuesday, raising $300 million from its debut in the US dollar market.
The Reg-S deal was launched ahead of the US Federal Reserve’s two-day monetary policy meetings, which investors are closely watching in an anticipation of a near-certain rate hike — as well as for crucial clues about how quickly US interest rates will go up in the future. The futures market is now pricing in a more than 90% chance of a 25bp hike.
The single B-rated company defied what could have been a difficult period, generating more than $1.4 billion of orders at peak level before the order book settled at $800 million from 75 accounts in the end, according to two syndicate bankers familiar with the deal.
“After meeting investors in Hong Kong and Singapore, the company had secured a significant amount of anchor orders before launching the deal,” according to one of the bankers, who said the increasing certainty about the rate hike has made it start to feel like 'a non-event'.
Guorui, rated B/B by S&P/Fitch, launched the deal with pricing around the 7.375% area, before tightening guidance to 7%. The $300 million March bond ended up being fixed at par with a 7% coupon, which bankers said was an impressive level for a debut property company.
Demand for the deal was certainly helped by the structure. “It is virtually a two-year bond because investors have the right to sell their holdings back to the company at the end of year two at par,” a syndicate banker said.
The syndicate banks did not provide official comparables, but investors turned to Ronshine China’s $400 million 6.95% December 2019 bond and Xinyuan Real Estate’s $300 million 8.125% August 2019 as their key references. Hong Kong-listed Ronshine is rated B+/B by S&P/Fitch, while New York-traded Xinyuan is rated B/B by the two rating agencies.
The company plans to use the proceeds from the debt sale to refinance some of its outstanding debt, as well as for general corporate purposes.
Asian investors took 95% of the bond, with the remaining 5% going into Europe, the Middle East and Africa. By investor type, fund managers took 43%, private banks 37% and banks the remaining 20%.
The global coordinators were Credit Suisse and Morgan Stanley, while BOCI, China Merchants Securities Hong Kong, China Securities International, Haitong International and VTB Capital were bookrunners alongside them.