HSBC kicked off roadshow last Monday (December 4) in Singapore, moved on to Hong Kong the following Tuesday, then London on Wednesday before wrapping up a series of meetings in the US.
The B1/B+ deal was initially launched as a $200 million deal with an initial price guidance in the 9.375% area. Guidance was then revised down to 9.25% to 9.375% as the deal picked up traction. When the deal closed at the London open on Tuesday, it settled at $225 million priced at par with a coupon of 9.25% - a spread equivalent to US Treasuries plus 476.3bp.
The deal attracted a solid order book which totaled just under $900 million with 85 accounts taking part. Geographically, the transaction was sold 24% into Europe, 28% into the US and 48% into Asia. In terms of investor type, asset and fund managers bought 63%, banks 27%, private banks 6%, with insurance companies and corporates accounting for the remaining 4%.
Due to the nature of the borrowerÆs business, finding adequate comparables is somewhat difficult. China Fisheries is the first Asian fishing and fishmeal corporate to place a deal in the international markets.
However, in terms of similarly rated China-based comparables, bankers quoted Ba2/BB- rated Sino Forest and B1/BB- Asia Aluminium. Both companies have 2011 deals in the market. Sino Forest has a $300 million 9.125% deal which is currently quoted at bid / offer spread of 248bp to 263bp over Treasuries. While Asia Aluminium has a $450 million 8% deal which is quoted at 370bp to 346bp over Treasuries.
In looking for comparables that have priced more recently, B1/B+ rated Berau Coal recently completed a $225 million fixed-rate note priced at 9.375% for a spread of 485.9bp over US Treasuries.
Through its subsidiary China Fisheries, CFG operates 41 fishing vessels for coastal fishing and deep-sea industrial fishing in the northwest Pacific, southeast Pacific, Indian Ocean, and Atlantic Ocean, with its harvest dominated by Alaskan pollock and Peruvian anchovy.
Last year, approximately half of its total haul was sold into China, with Japan and Korea accounting for 13% and Europe 23%. While 43% of total revenue came from its China sales, compared with 33% from Japan and Korea, and 18% from Europe. However in 2006, its Russian fishing operations have accounted for a hugely disproportionate 99% of total revenue.
In its presale report, MoodyÆs states that: ôCFG does not have any proprietary Russian quotas and does not own any vessels operating in Russian waters. The company has secured quotas and 14 fishing vessels through two 10-year VOAs with Russian partners. CFG has made total prepayments of $132 million under its two agreements and is required to share 20% of the profit from vessel operations with its Russian partners. CFG also purchases additional quota shares from Russian fishing companies on an annual fee basis. CFG has been operating in Russia since 2001.ö
Additionally CFIL also controls the Chinese fishing business, China International Fisheries Hong Kong (CIFHK). CIFHK manages 27 fishing vessels under its current management agreement.
CFG will use the proceeds from the sale of the notes to refinance its acquisition of Alexandra in Peru, a fishing vessel owner and fish oil and fishmeal processor, for $103.6 million. The acquisition of Alexandra will help to diversify CFG's business risk and revenue stream and its operations in Peru are expected to account for 30% of Ebitda over the next several years. Peru is the second-largest ocean catch producer of fish and the largest fishmeal producer in the world.