Hong Kong-listed Regal Hotels International issued a $350 million five-year bond on Wednesday, getting big demand from risk-averse investors despite coming to the market without a rating.
The company, majority-owned by property tycoon Lo Yuk-sui and his family, is well known by Hong Kong investors. This is partly because of the eight hotels the company runs in the special administrative region, but also because of its previous market activity. Regal is listed on the Hong Kong stock exchange, and has previously sold a real estate investment trust.
This familiarity helped Regal generate a huge orderbook despite turning to investors without a rating. The company attracted a peak order book in excess of $1.5 billion before giving out final price guidance.
The Reg-S deal hit the market almost four years after Regal Hotels compelted its maiden sale, a $300m five-year bond issued in October 2012. Regal was tempted back to the market by the sharp fall in Treasury yields since the start of the year. But the deal was also helped by the extra caution investors have expressed since the United Kingdom voted to leave the Europen Union.
"The new Regal deal is a classic example to show how much pent-up demand has flocked into safe-haven assets," said a Hong Kong-based fund manager.
Perhaps unsurprisingly, syndicate bankers put the success of the bond more down to the credit than the market. They argued that the company's long-term stable cash flow and easy path to profitability were the main reasons behind the strong interest.
Bankers working on the deal set initial guidance at 4.25% area before tighening it to 5bp each side of 4%. The final pricing of the July 2021 deal was fixed at 99.663% on a coupon of 3.875% to yield 3.95%, according to a term sheet seen by FinanceAsia on Wednesday night.
Bankers and investors were not spoilt for choice when it came to comparables. The company's own dollar bond, which was yielding 3.29% on Wednesday, falls due next year. Bankers instead pointed to New World Development's $950 million November 2022 note, which was trading on 253bp over Treasuries, or yielding 3.56%.
Joint global coordinators were HSBC, ANZ, AMTD and China Everbright Bank Hong Kong, while ABC International, Huatai Financial and UOB were joint bookrunners.