Henderson Land joins dollar bond rush with $400 million print

But investors worry that the bond rally is over.
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Henderson's World Financial Centre in Beijing
<div style="text-align: left;"> Henderson's World Financial Centre in Beijing </div>

Henderson Land jumped on the funding bandwagon last night, joining a growing crowd of Hong Kong companies that have tapped the market this year. The property developer priced a $400 million five-year bond at Treasuries plus 415bp, about 10bp inside the initial guidance, which was in the area of Treasuries plus 425bp.

DBS, HSBC, J.P. Morgan, Morgan Stanley and Standard Chartered were joint bookrunners. The coupon for the bonds, which mature on February 14, 2017, was fixed at 4.75% and the notes were reoffered at 99.215 to yield 4.929%.

Henderson Land was founded in 1976 by its current chairman Lee Shau Kee and is one of the largest property developers in Hong Kong. In addition to property development, it also holds stakes in three listed companies, including The Hong Kong and China Gas Company, Hong Kong Ferry Holdings and Miramar Hotel and Investment Company.

It is just the latest addition to a swathe of investment-grade borrowers that have decided to take advantage of low rates and lock in funding. In the space of just six weeks this year, borrowers from non- Japan Asia have raised a whopping $16.9 billion from dollar bonds, according to Dealogic data. About a third of that issuance has come from Hong Kong companies.

“The underlying risk-free rates are near all-time lows, so from an absolute yield perspective, funding levels are attractive,” said one debt banker. “We’ve also seen a good amount of spread compression and there is the perception that this is a conducive environment to print deals, with plenty of liquidity,” he added.

However, faced with an overwhelming supply of new bonds, some investors are already turning bearish. “I think we might be coming to the end of this bond rally,” said Scott Bennett, head of Asian credit at Aberdeen Asset Management. “The market looks a bit toppish at the moment. We’ve seen more new bonds, including an inaugural high-yield, a perpetual and some of the recent new issues have also started to trade wider. It looks like companies will keep tapping the market until there is no money left,” he added.

Earlier this week, two other Hong Kong companies — Sun Hung Kai Properties and Nan Fung International — closed deals. The former priced a $500 million 10-year bond at Treasuries plus 270bp after attracting a $3 billion order book from more than 150 accounts. HSBC was the sole bookrunner.

According to one person familiar with the deal, Sun Hung Kai Properties achieved a flatter yield curve between its five- and 10-year bonds compared to the recent Hutchison Whampoa deal, despite the latter enjoying strong support from US investors.

The Sun Hung Kai Properties 2016s were at Treasuries plus 260bp, which put fair value of a new five-year bond at Treasuries plus 265bp. Meanwhile, the Hutch 2017s were at Treasuries plus 240bp, while the Hutch 2022s were at Treasuries plus 275bp. This meant that the 5s/10s spread for Sun Hung Kai Properties was about 5bp versus the 35bp seen for Hutch.

On Monday night, Nan Fung International Holdings, a property development and textile manufacturing company, also priced a $250 million tap of its outstanding $350 million bonds at Treasuries plus 440bp. This brought the total issue size up to $600 million.

The deal attracted an overwhelming order book of $2 billion, allowing the deal to be upsized from $150 million to $250 million. The deal was priced aggressively, with Nan Fung beating its previous yield by 23bp and Treasury spread by 20bp. 

However, the bonds traded weaker in secondary trading at Treasuries plus 443bp/438bp amid a soft tone in the market. HSBC, J.P. Morgan and Goldman Sachs were joint bookrunners. HSBC was a global coordinator.

The growing pipeline of companies looking to tap the dollar market includes MMI Holdings, a precision manufacturing company that was delisted from the Singapore exchange by private equity firm KKR in 2007. It was planning to re-list in a Singapore IPO last year, but the deal was called off. It is now planning to issue an inaugural high-yield bond. The planned five-year bond will be callable after the third year. 

Global investor meetings covering Asia, London and the US will begin today and conclude on February 17. Credit Suisse, J.P. Morgan and UBS are joint bookrunners.

Elsewhere, Vincent Lo’s Shui On Land plans to issue a dollar bond following a roadshow in Asia and Europe. BNP Paribas, Deutsche Bank, Standard Chartered and UBS are joint bookrunners. Also, waiting in the wings is China Overseas Land, which has mandated Deutsche Bank, J.P. Morgan, ICBC International and HSBC for its potential dollar bond.

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