HNA Group, the acquisitive Chinese conglomerate, returned to the international bond markets on Thursday, raising $300 million through the sale of an unrated three-year bond.
Despite being a household name in China, the privately-held company — which owns Hainan Airlines, China's fourth largest airline — had generated only $800 million of orders before giving out final price guidance, highlighting investors' concerns over its growing leverage. The group and its affiliates have announced takeovers and investments worth at least $19 billion since 2009, while generating about $30 billion of revenue per year.
The Hainan-based company has unveiled more than $9 billion worth of outbound investments this year, including the $6 billion acquistion of US information technology firm Ingram Micro and the $1.45 billion takeover of Switzerland's Gategroup, the world's second-largest airline caterer, according to Dealogic.
HNA's buying spree has been reflected in its fundraising volume. The company has issued more than $3 billion of bonds in dollars, renminbi and Singapore dollars this year, the data shows.
The Reg S sale comes a day after Bank of Communications — A2/A-/A rated by Moody's, S&P and Fitch — drew more than $3.3 billion of demand for its $550 million floating rate note. It is hardly surprising that bank's higher rating helped it generate more demand than HNA. But the airline's punchy approach also limited orders.
"The current environment is strong for new issues but some investors withdraw their bids when an issuer goes out with an aggressive pricing," said a Hong Kong-based fund manager.
The company set initial price guidance at the 6.25% area before tightening it to between 6% and 6.1%. The August 2019 deal ended up pricing at the tight-end of that, being fixed at par to yield 6%, according to a term sheet seen by FinanceAsia.
The closest comparable was the company's existing 8.125% $250 million bond maturing in December 2018, which was trading on a yield of 5.77%. The curve extenstion meant the new issue was priced in line with where the existing debt was trading in the secondary market, bankers said.
The joint bookrunners of the transaction were AMTD, Bank of China, Bocom Hong Kong branch, Bocom International, DBS, Guotai Junan International, Hong Kong International Securities and VTB Capital.