Noble Group prints $750 million dual tranche deal

Hong Kong’s Noble Group returns with a five-year security and a 10-year non-callable issue. The next in line are Coastal Expressways and Olam.

Noble Group has returned to the market with its second transaction for the year printing a $750 million (Baa3/BBB) dual tranche deal. As the sole bookrunner to the deal, J,P. Morgan helped Noble sell a $500 million 4.87% semi-annual five-year security and a $250 million 6.625% 10-year bond.

The five-year bond is a Reg-S/144A deal and holds an August 5, 2015 maturity date. At the time of pricing it was re-offered at 99.842 to yield 4.911%. This is equivalent to a spread of 330bp over the five-year US Treasury yield.

The 10-year bonds will be callable after five years and are set to mature on August 5, 2020. The re-offer spread for the new 2020s was 375bp over the equivalent US 10-year Treasuries. It priced at 99.704 to yield 6.666%.

Against a market backdrop that has remained stable during July, Noble was able to take advantage of healthy investor appetite for investment grade notes. It secured an order book of $1.5 billion for the 2020s and $1.3 billion for the 2015s.

A source familiar with the deal said investors are after absolute yield in a low-rate environment and Noble fits the bill as a well-known investment grade credit -- hence the healthy uptake for the notes in both the primary and secondary markets.

Given Noble was in the market back in February with a 10-year issue, investors viewed the existing 2020 bonds as the most obvious choice for a liquid benchmark.

At the time of announcement the existing 2020s were trading at Treasuries plus 345bp. This would theoretically mean a new 10-year issue should come to market at about 375bp taking into account a new issue premium.

Based on this, Noble went to investors early Friday morning in Asia with formal guidance for the 2020 bonds set at around 387.5bp. For the 2015s, the borrower set the pricing guidelines between 337.5bp and 350bp.

In the end, the notes priced late Friday night (August 30) at 375bp for the 10-year and 330bp for the five-year. After the first trading day, during which rates were lower across the board and credit spreads held well within the investment grade sector, both bonds tightened considerably.

By midday Monday the 2020s had tightened by 13bp to 362bp and the 2015s had come in considerably to 318bp.

According to Annisa Lee, credit analyst with Nomura, the 2015s and the 2020s priced at a z-spread of 312bp and 375bp respectively.

"This implies a spread pick-up of about 63bp in the new 2020 bond," wrote Lee.

When Asia opened yesterday the new 2020s were trading at a z-spread of 355bp while the old 2020s were at 338bp, implying a 17bp pick-up in the new bonds.

Though, given the call option on the new 2020s, the old bonds look more attractive without any call risk, which, according to Lee, "provides positive technicals for negative basis trades".

The 10-year issue attracted 138 orders and the bulk of the allocation went to Asia with 58%, US got 31% and Europe 11%. With a strong credit profile the notes were able to attract real money accounts; asset and fund managers picked up 53% of the sale and retail 23%. Banks received 11%, agencies 8% and the remaining 5% went to pension and insurance funds as well as other types of investors.

Given the Rule 144a structure of the five-year bonds, Noble was able to attract a strong register of US-based investors, which picked up 75% of the allocation. Europe took 18% and Asia 7%.

The co-managers on the deal were ING, Societe Generale and RBS.

The next deal expected to price is Coastal Expressway from the Philippines. Meanwhile, Malaysian company Olam International announced that it will be doing a roadshow for a dollar bond.

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