KWG pays up for $350 million bond

Brace yourself for more new issues. A flurry of investor meetings for Megaworld, Winsway and Woori Bank are set to hit the market.
China property developers are still raising funds
China property developers are still raising funds

On Wednesday night, PRC real estate developer KWG Property priced a $350 million five-year non-call three bond. The notes were bid at 100.375 in secondary markets yesterday, slightly above the par issue price.

The company offered investors an attractive new issue premium – a sign that China property issuers need to pay up if they want to raise funds. The guidance was for a yield in the 12.75% area and that was where the deal was finally priced. The total book-size stood at $1 billion from more than 110 accounts.

“It was a good headline order book, and should have been given a pretty attractive new issue premium,” said one rival banker yesterday morning. “It hasn't traded particularly solidly this morning, but at least it is above par,” he added.

KWG Property’s outstanding August 2017s were trading at a yield of about 12.4% on Wednesday evening and the bonds dropped 1.5 percentage points in price terms after the announcement of the deal. The new bonds, which mature on March 30, 2016, offered a yield of 12.75% for a tenor that was shorter.

KWG Property last tapped the bond market in August 2010 with a $250 million Reg-S/144a seven-year bond. But US investors bought only 8% of that deal. So this time round, it chose not to sell the bonds to professional US investors.

Asia took up 88%, Europe 10% and offshore US accounts bought 2%. Private banks drove the trade, buying 48% of the deal, fund managers/asset managers 30%, banks 12% and companies bought 10%. The proceeds will be used to finance new and existing property projects. The issue is rated B1 by Moody's and the equivalent B+ by Standard and Poor's (S&P).

Citi, HSBC and Standard Chartered were joint bookrunners.

Following the successful pricing of the Philippines sovereign bond, Yanlord Land, Industrial Bank of Korea and KWG Property this week, a flurry of investor meetings has been announced. Clearly, issuers want to make hay while the sun still shines.

Winsway Coking Coal, a supplier of imported coking coal to China has mandated Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs and ICBC International as joint bookrunners for its debut US dollar denominated five-year non-call three bond issue.

The Reg-S/144a bond is expected to be launched, subject to market conditions, following an investor roadshow which starts in Hong Kong on March 28, and then moves to Singapore on March 29, London on March 30 and New York and Boston on March 31. The expected issue rating is B1/BB-/BB by Moody’s/S&P/Fitch respectively.

Meanwhile, Woori Bank will start an investor roadshow on March 28. Barclays Capital, BNP Paribas, Bank of America Merrill Lynch, HSBC, J.P. Morgan, UBS and Woori Investment & Securities are joint bookrunners. The lender is expected to issue a dollar denominated Reg-S/144a lower tier-2 subordinated bond.

Finally, in the Philippines, real estate developer Megaworld is rumoured to be holding non-deal roadshows arranged by UBS.

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