Nan Fung gets debut bond away before European downgrades

Nan Fung raises $350 million in Asia's bond market, while NWS Holdings and Lifestyle International line up deals of their own.

Hong Kong luxury property developer Nan Fung International Holdings pushed ahead with a $350 million debut bond late Friday, coming at the tail end of a busy week, which included bond deals from Hutchison Whampoa, Indonesia and Korea Gas Corp.

The leads went out with initial guidance in the area of Treasuries plus 475bp on Friday morning. This was revised to Treasuries plus 460bp to 470bp and the bonds priced at the tight end. Nan Fung gathered an order book of $1.3 billion from more than 90 accounts.

“We decided to go out on Friday and that decision was vindicated as we’ve seen markets move wider this morning, after France was downgraded,” said one person familiar with the deal.

On Friday, ratings agency Standard & Poor’s cut its rating on both France and Austria by one notch to AA+. It also lowered its rating on Spain and Italy by two notches to A and BBB+ respectively. Credit conditions opened weaker in Asia on Monday with the iTraxx Asia Investment Grade Index pushing 7bp wider.

HSBC was a global coordinator and bookrunner. J.P. Morgan and Goldman Sachs were joint bookrunners.

According to one person familiar with the deal, the bonds initially traded wide of re-offer at Treasuries plus 465bp before tightening to Treasuries plus 458bp. A rival, however, said the bonds widened as far as Treasuries plus 475bp on the bid before tightening to Treasuries plus 465bp.

Private banks were the biggest buyers of the bonds (51%), followed by banks 29%, funds 13%, insurers and others 7%. The book was almost completely dominated by Asian investors, which were allocated 94%. European investors were allocated the rest.

Nan Fung is rated Baa3 by Moody’s, BBB- by S&P and BBB by Fitch. The bonds mature on January 20, 2017.

Elsewhere, department store operator Lifestyle International concluded roadshows for a potential dollar bond on Friday. According to one banker who pitched for the deal but was not mandated, Lifestyle was seeking pricing of 5% to 6% for a benchmark transaction with a tenor of seven years or 10 years. However, a person familiar with the deal said that is not the case and that Lifestyle is in fact issuing a five-year bond.

The company’s business model is unique in the sense that it is one of the few retailers that owns its department stores. Its Sogo Hong Kong operations contributed to 79% of total net revenue in 2011, according to Moody’s. Lifestyle is rated Baa3 by Moody’s and BBB- by Fitch. Bank of America Merrill Lynch and J.P. Morgan are joint bookrunners.

NWS Holdings, the infrastructure and service flagship of New World Development, started roadshows on Monday for a potential US dollar bond to be offered to Asian and European investors. Deutsche Bank, HSBC, J.P. Morgan and Standard Chartered are arranging the meetings.

Korea Gas late last week also priced the first ever 30-year global bond for a Korean issuer. The $750 million bond priced at 30-year Treasuries plus 345bp to yield 6.396%. The coupon was fixed at 6.25%. Initially, the bonds tightened sharply by about 25bp on Friday, before moving slightly wider to Treasuries plus 332bp on Monday. Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and UBS were joint bookrunners.

US investors were allocated 48%, Asian investors 35%, and European investors 17%. Fund managers were allocated 75%, insurers and pension funds 14%, banks 7%, private banks 3% and central banks 1%.

¬ Haymarket Media Limited. All rights reserved.
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