High-yield Asian borrowers -- Hong Kong-listed MIE Holdings and Indonesian textile maker Sritex -- raised $700 million collectively from dollar bond markets late Tuesday, taking advantage of a recent uptick in demand from professional US investors, according to syndicate bankers.
MIE Holdings raised $500 million while Sritex raised $200 million in its debut dollar bond. Both companies also tapped into high-yield bond investors’ desire to diversify away from the Chinese property sector.
Investor confidence in Chinese high-yielding property credits has been hurt by worries of a default by small real estate company Zhejiang Xingrun Real Estate and news that the mainland Chinese authorities are tightening borrowing onshore.
The volume of Asia ex Japan high-yield dollar bond issuance has underwhelmed so far this year, reaching $8.4 billion compared with $17.7 billion in the same period last year, according to Dealogic data.
MIE
Hong Kong-listed oil and gas company MIE, which has operations in China, United States and Kazakhstan, has tapped the dollar bond market twice but this is the first time it has targeted professional US investors, allowing it to raise more funds.
MIE's $500 million five-year bond, which is callable after three years, was priced to yield 7.75%, which was at the tight end of the final guidance of 7.75% to 7.875%. The deal attracted an orderbook of $2.7 billion and the lead managers accelerated the process, launching the deal just when roadshows finished on Tuesday.
MIE’s outstanding 2018s were trading to yield 7.2% and MIE’s new bonds which mature in April 2019 came at fair value or inside fair value, according to a source familiar with the deal. The bonds traded higher at 100/100.25 on Wednesday morning, over a point above the 98.98 issue price.
The proceeds will be used to redeem its existing 2016 notes, which are callable this year. Some existing holders of the 2016 bonds are being rolled into the new bond, the source said.
US investors were allocated 37% of the issue, European investors 19% and Asian investors 44%. Fund managers were allocated 74%, insurance and pension funds 14%, private banks 5% and banks and other investors 7%.
Deutsche Bank and Bank of America Merrill Lynch were joint global coordinators. HSBC, JP Morgan, Morgan Stanley and UBS were bookrunners.
Sritex
Sritex, founded by by the Lukminto family, listed on the Jakarta stock exchange in June 2013. The Lukminto family currently owns around 56.1% of the company. With a market capitalisation of $315 million and Ebitda of about $69 million, it is one of the smaller Indonesian companies to tap the dollar bond market.
Sritex chose to price a smaller deal than originally communicated and the deal was just twice subscribed drawing demand from 60 accounts.
Investors took some convincing, particularly since it was a debut name. During the global roadshow, investors had expressed concerns around certain terms, such as an exclusion of a $150 million working capital facility from calculations of debt levels allowed under bond covenants.
In response to investors' concerns Sritex decided to drop two clauses, namely one that excluded general debt of $25 million from the amount of debt the company is allowed to have under its bond covenants, and another which excluded a $90 million investment in a rayon plant from its permitted investments under the bond covenants.
Texhong Textile was cited as a comparable though it is a much bigger company with revenues of $1.3 billion and only focused on producing yarn, while Sritex focuses on a much wider range of activities from spinning yarn through garment-making.
The allocation to US investors was not available, but European and US investors were allocated 62% and according to the source, allocation was roughly split between the two geographies. Asian investors were allocated 38%. By investor type, fund managers were allocated 82%, private banks 13% and other investors 5%.
Barclays was the sole bookrunner.
