ICBC Asia priced an increased $400 million bond deal yesterday (September 9) via lead managers Goldman Sachs, HSBC and JPMorgan.
The A2 rated deal was priced at 99.513% on a coupon of 4.125% to yield 4.234%. This equates to 88bp over Treasuries or 40bp over Libor. Fees were 20bp.
The transaction marks the first investment grade deal from Asia since the summer and was well received by investors, attracting an order book of $1.47 billion. This enabled the deal to be upsized from a base deal size of $300 million and pricing tightened from an indicative range of 90bp to 95bp over Treasuries.
The order book contained 104 investors, of which 34% were from Hong Kong, 29% from Singapore, 20% from Europe, 12% from China and 5% from the rest of Asia. By investor type, banks took 68%, asset managers 22%, private banks 8% and insurance companies and corporates the remaining 2%.
The transaction has huge rarity value for two main reasons. Firstly it marks the first senior fixed rate bond by a Hong Kong incorporated bank. However, it is also something of a hybrid since its Mainland parentage gives its credit far more of a China edge than many of Hong Kong's other major banks.
Following its acquisition of Fortis Bank, ICBC Asia has jumped from being the 10th largest listed bank in Hong Kong by assets to the sixth largest, with an asset base of HK$95 billion ($12.18 billion).
Pricing has come in line with Chinese policy banks CDB and Chexim.
The former has a May 2009 bond outstanding, which is currently bid around the 1175 level to yield 80bp over Treasuries or about 41bp over Libor. The latter recently priced a July 2014 bond, which is now bid at about 100.90% to yield 97bp over Treasuries or 53bp over Libor.
Bankers calculate that there is about 10bp to 12bp on the Libor curve between five and 10 years. As such ICBC Asia has priced marginally through the Mainland policy banks, which share the same A2 rating.