Shangri-La upsizes debut bond to $600 million

And Zoomlion prints a $400 million maiden deal.
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The Shangri-La hotel in Huhhot, Inner Mongolia</div>
<div style="text-align: left;"> The Shangri-La hotel in Huhhot, Inner Mongolia</div>

Hong Kong-based hotel operator Shangri-La Asia last night priced its $600 million five-year debut bond amid a warm welcome from the market. The deal was unrated but that did not deter investors; the total order book exceeded $7 billion from more than 200 accounts. This enabled the deal to be upsized to $600 million from an expected $500 million.

The bonds priced at Treasuries plus 375bp, which was at the tight end of the final guidance at Treasuries plus 375bp to 387.5bp. The initial guidance was in the area of Treasuries plus 400bp. Bank of China, Credit Agricole, HSBC and Morgan Stanley were joint bookrunners.

Hong Kong-listed Shangri-La owns and operates about 72 hotels and resorts worldwide, mainly under the "Shangri-La" and "Traders" brands. Its biggest shareholder is Malaysia’s Kuok family, which owns about 50% through the Kerry Group.

Given its parentage, most investors were looking at bonds within the Kerry stable as comparables.

“Compared to the Kerry Group bonds, which are trading at around Treasuries plus 300bp, there might be some value and we could see people switching into [the new bond] even though Shangri-La is a smaller player and less diversified," said one fund manager yesterday afternoon. "There should be a private banking bid for this since there is a rebate," he added.

He pointed towards the New World Development 2017s, which were at Treasuries plus 420bp, as another comparable. Syndicate bankers suggested that other comps included Hong Kong companies such as Wheelock, Lifestyle and Henderson Land which were quoted in the Treasuries plus 300bp region.

In the end, Shangri-La's branding in Asia clearly helped, with a strong take-up from regional investors. Asian investors were allocated 85% and the rest went to Europe. By investor type, funds took 40% private banks 27%, banks 22% and insurance 11%.

The coupon was fixed at 4.75% and the notes were reoffered at 99.938 to yield 4.764%. The bonds mature on April 10, 2017.

Shangri-La tapped the market with a $500 million convertible bond in April 2011 with HSBC as the global coordinator and bookrunner and BOC International (BOCI) as a bookrunner, so it returned to both of those banks for its latest bond.

Away from Shangri-La, construction machinery company Zoomlion Heavy Industry Science and Technology was also in the market last night and priced a debut $400 million bond early this morning. The deal was expected to be a "benchmark" size, which usually means about $500 million but despite being offered to US investors the final print raised slightly less than that, suggesting that the bonds did not get as much traction with investors as Shangri-La did.

Guidance was released at 7% to 7.25% for a five-year bond and the bonds priced at the tight end of that range, for a yield of 7%. The coupon was fixed at 6.875% and the notes were reoffered at 99.48. BOCI, Credit Suisse and Goldman Sachs were joint bookrunners. The bonds are expected to be rated BB+ by S&P and BBB- by Fitch.

Elsewhere, China Resources Gas released price thoughts for its maiden 10-year bond at Treasuries plus 280bp. The bond is expected to price tonight. Citi and DBS are joint global coordinators and bookrunners. J.P. Morgan, HSBC, Standard Chartered and UBS are joint bookrunners.

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