Road King Infrastructure Finance priced $350 million of senior Reg-S notes yesterday evening. The five-year notes pay a 9.5% coupon and were reoffered at par for a yield of 9.5% as well. The spread to the five-year US Treasury at the time of pricing was 801.4bp.
The maturity date has been set to September 21, 2015 and the bonds are callable after three years. Part of the proceeds will be used to fund a buy-back tender of the company's existing 2011 and 2012 bonds.
The issuer went on a non-deal roadshow earlier this year, which together with the fact that Road King is a repeat issuer with existing bonds in the market allowed for a swift execution of the deal, said one source familiar with the offering.
Road King Infrastructure, parent of the issuer and guarantor of the bonds, is primarily a toll-road operator, but with links into the China property sector. Taking the latter into account, the bookrunners viewed the existing Road King 2014 bonds, as well as Agile Property's recent 2015 issue as decent benchmarks.
The deal was announced on Monday morning (Hong Kong time) with a yield guidance in the area of 9.625%. According to one banker, orders from Asia built very quickly and, on the back of strong demand, the guidance was revised on Tuesday to a range between 9.5% and 9.625%. The deal finally priced at the tight end -- at 9.5%. At the time of pricing the Agile 2015 bonds were quoted at a yield of 8.56%, while the existing Road King 2014s were just below 9%.
The bookrunners, DBS and J.P. Morgan, were able to secure a $2.2 billion order book, or more than 6.2 times the deal size, from 178 accounts. Asset and fund managers bought 59% of the bonds, private banks took 26%, banks 12% and other types of accounts 3%.
“Road King is a name that the market is familiar with,” said one source, “The current market environment is stable enough for investors to focus on the fundamentals of the transaction, away from excessive market volatility and the macro environment,” he added.
The notes hold the same ratings as the issuer – Ba3 by Moody’s and BB- by Standard and Poor’s. S&P attributed the sub-investment grade rating to the company's “high exposure to China’s cyclical and competitive property market amid an evolving regulatory environment”.
In addition, its toll road portfolio has become more concentrated following the disposal of one of its key assets, the Jihe expressway in Shenzhen.
