Agricultural Bank of China (ABC) Hong Kong branch priced its first ever $500 million five-year note on Tuesday, receiving a sizable order book that enabled the issuer to tighten pricing despite a higher rates environment.
The Reg S notes, which had an initial price guidance of Treasuries plus 170bp, priced 20bp tighter at Treasuries plus 150bp, according to a term sheet seen by FinanceAsia. This was achievable once the order book crossed $1.8 billion by early afternoon, according to a source.
“The reception and book size outcome was great, which resulted in a final pricing that met their expectations,” said the source close to the deal. “The transaction was well supported despite the fact that US treasuries being high in the opening.”
The 10-year Treasury yield reached 2.81% on Tuesday, the highest since November 21 amid bets that a December 6 report forecast will show rising US employment and reinforce arguments that the Federal Reserve will reduce its bond purchases.
Nonetheless, ABC’s notes managed to receive a good order book of more than $3.1 billion from 245 accounts. Asset and fund managers subscribed to nearly half of the notes, followed by financial institutions with 40%, private banks 4%, insurance companies 2% and others 5%. Asian investors bought a bulk of the papers, accounting for 82%, while the rest went to Europe.
The nearest comparable for ABC’s bond were Bank of China’s 2016s, as well as ICBC Asia’s 2017s, both of which were trading at a G-spread of 110bp and 136bp respectively at time of pricing.
The bond, part of ABC’s $5 billion medium-term note programme, will be used for working capital and general corporate purposes, sources say.
ABC Hong Kong branch, ABC International and Standard Chartered were joint global coordinators, bookrunners and lead managers of the A1/A rated transaction. Other joint bookrunners and lead managers include Bank of America Merrill Lynch, Citi, DBS, Goldman Sachs and JPMorgan.