China Petroleum & Chemical Corp (Sinopec) raised $3.5 billion through a multi-tranche bond early Friday morning. The company, which is China’s biggest oil refiner, is the latest major state-owned enterprise to issue a dollar bond to fund overseas acquisitions.
It is the biggest US dollar bond from an Asian borrower since Hutchison Whampoa International’s $4.9 billion triple-tranche bond in November 2003, according to Dealogic.
Unusually, the deal was split into four tranches: a $750 million three-year piece, a $1 billion five-year piece, a $1.25 billion 10-year piece and a $500 million 30-year piece. The last four-tranche dollar deal was back in 1997, when both the Sinar Mas Group and Hutchison Whampoa Finance tapped the dollar market.
The bonds were issued by Sinopec Capital and guaranteed by Sinopec. The proceeds will help fund the acquisition of “certain overseas assets of Sinopec” and to its overseas businesses, according to the term sheet.
Hong Kong-listed Sinopec has been busy buying overseas assets from its parent company, under the chairmanship of Fu Chengyu, who previously ran Cnooc, another acquisitive Chinese oil company.
Last month, Sinopec formed a joint venture with its parent to buy $3 billion of oil and gas assets held by its parent in Russia, Kazakhstan and Colombia. The parent is expected to sell more assets to Sinopec, with speculation suggesting that its North Sea assets in the UK could be next.
Sinopec has been on a funding spree to pay for its acquisitions. In February, it raised $3.1 billion through a private placement of new H-shares, arranged by Goldman Sachs. Together with its latest bond deal, it has taken $6.6 billion off the table during the past two months.
Even so, pricing for the deal was competitive. According to a source, the bonds priced flat to the parent, which was a good outcome as Sinopec Group is wholly state-owned and is eligible for the inclusion into the emerging markets bond index, whereas Sinopec is not.
The parent issued a $3 billion triple-tranche debut bond in May last year, but this was the first issuance from the listco, Sinopec.
The three-, five-, 10- and 30-year bonds carried coupons of 1.25%, 1.875%, 3.125% and 4.25%, and priced at Treasuries plus 100bp, 120bp, 150bp and 140bp, respectively. The guidance was tightened quite a bit, and the bonds printed 25bp inside the initial guidance for the three- and five-year pieces and 30bp inside for the 10- and 30-year tranches
The five-year bond attracted the most orders — $4.5 billion. The three-, 10- and 30-year tranches attracted demand of $4 billion, $3.9 billion and $2.65 billion, respectively.
However, the bonds mostly traded wider in a weak secondary market. On Friday afternoon, the 2016s were a couple of basis points tighter, while the 2018s were 3bp wider, the 2023 were 8bp wider and the 2043s were 2bp wider.
Citi, Bank of America Merrill Lynch, UBS and J.P. Morgan were joint global coordinators and bookrunners. Goldman Sachs, Morgan Stanley, Nomura, Deutsche Bank, Societe Generale, Citic Securities International, CICC Hong Kong and HSBC were joint bookrunners.
