SF Express finds window to deliver its maiden dollar bond

The Chinese version of Fedex is now tapping offshore bond investors as it seek to be the powerhouse of modern logistic and delivery.

SF Express, sometimes dubbed the Chinese version of Fedex, plans to start pitching its maiden dollar bond sale to investors on Monday, as the country's largest express delivery company by revenue seeks to build up its integrated air, ground and information networks.

The planned Reg S sale will take place against a backdrop of choppy markets as investors fret about the rising credit risk in China following a steady rise in defaults. According to a Standard Chartered report in May, nine companies have defaulted on their onshore bonds this year. The value of the defaulted bonds rose 32% year on year. 

Investors may still lend an ear to SF as the Shenzhen-listed company looks to expand into other areas in the advanced logistics and delivery sector.

“Asia dollar bonds are off their lows this week but investors remain on the sideline following the defaults in Wuzhou and Wintime Energy,” a Singapore-based fund manager told FinanceAsia. “A successful bond sale by SF is expected to draw investors back from a dull summer break.”

In May this year SF won China’s first-ever drone operating license from the Civil Aviation Administration of China, opening up the potential of using unmanned aerial vehicles for package delivery.

Earlier this year, SF invested $100 million into US logistic startup Flexport, making its first-ever overseas investment. The mission behind Flexport is to digitize various aspects of logistics including tracking packages globally and finding warehouse space. Founded in 2013 by serial entrepreneur Ryan Petersen, Flexport provides cloud-based solution for managing global shipments over 150 kilograms and offers route suggestions and order tracking.

To be sure, the company doesn't need the extra cash from the debt sale, but the sucess of the deal will open a new channel for its capital management in the future. SF has been in a net cash position for the past two financial years, its financial statements show.

According to the company’s 2017 annual results, it has Rmb17.3 billion of cash on hand, more sufficient to cover its capital spending on tangible and intangible assets of Rmb8 billion over the next 12 months, as well as its Rmb7.3 billion in short-term debt.

The Shenzhen-based company, controlled by billionaire Wang Wei, has mandated Credit Suisse, HSBC and Morgan Stanley to lead the offshore bond offering.

The senior executives of SF will be meeting fixed-income investors in Hong Kong, Singapore and London in the week of July 16, while the final structure and maturity of the transaction are still being discussed between the bankers and the management, according to a source familiar with the deal.

As a household name in China, SF, the abbreviation of “Shun Feng” in Chinese, was founded in 1993 by Wang, the son of a Russian interpreter for the People’s Liberation Army. Wang first got into the trade business by shuttling packages between the borders of Shenzhen and Hong Kong, according to his 2011 interview with the People’s Daily.

The Reg S deal could raise about $500 million for single A-rated company, the source said, adding that most of the newly raised capital from the debt sale will be used for general corporate purposes.

“The company’s chief financial officer Grace Ng will be leading the roadshow,” the source said.

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