The lead launched the deal with guidance of 90bp over mid-swaps. However guidance was revised to 105bp over mid-swaps during the roadshow.
Final pricing for the Reg-S only deal came in at a re-offer of 99.592% with a semi-annual coupon of 6.375%. That equates to a yield of 6.431%, a spread of 105bp over mid-swaps or 157.2bp over comparable US Treasuries.
The deal closed with a final order book of $715 million, an oversubscription of 1.7-times, with a total of 50 investors taking part.
Geographically the deal was bought primarily in Singapore, which took 60% of allocations. Hong Kong investors, probably the most familiar with the borrower bought 26%, with Europe buying 9% and the remaining 5% going to the other Asia, Japan, Australia and offshore US accounts.
In terms of investor type, banks bought 48%, fund managers 38%, insurers 10% and private banks 4%.
Heading into the deal bankers had estimated that a fair market value for the deal would be around the 90bp over Libor area. At 105bp over the deal looks extremely cheap.
Bankers had quoted Hong Kong LandÆs (HKL) 2014s as the clearest comparable for Kerry. That deal was trading around 55bp over Libor, and most estimated that a new HKL 10 year would price in the 65bp area. Given the fact that at BBB- (S&P only, it has no MoodyÆs rating) Kerry is two notches lower than HKL which has a A3/BBB+ rating, the market expected a new Kerry 10-year to come with a 30bp or so premium or around the mid-90bp over swaps range.
The apathy of the market notwithstanding, the wider than expected pricing is surprising, given the fact that as a debut borrower, the deal should have picked up considerable traction from its rarity factor.
However, market suggestions that Goldman was seeking to increase the deal to upwards of a $1 billion, could have pushed pricing somewhat higher.
Indeed, a $1 billion dollar sole led trade would have added considerable clout to GoldmanÆs league table status. Prior to the completion of Kerry, Goldman lay in eighth position on the Dealogic league table with volume of $1.27 billion from 5 deals. An additional $1 billion would have placed the US firm in the top five just ahead of JPMorgan, and behind Morgan Stanley, Citigroup, Deutsche Bank and UBS. Currently it sits in seventh place with $1.69 billion.
The deal was issued via the wholly owned subsidiary, Gain Silver Finance.
As a result of recent property acquisitions, KerryÆs net debt surged to HK$9.4 billion ($1.2 billion) last year, compared with HK$4 billion ($510 million) in 2004. Along with an increase in net debt, capital expenditure has also risen, cutting into the companyÆs cashflow protection ratios.
Kerry Properties is a subsidiary of Kerry Holdings, which holds 62% of its equity. Its portfolio consists of mid to high-end residential and commercial properties in both Hong Kong and the mainland. The properties include hotel, logistics and warehouse operations.