It was another hectic day in Asia’s debt markets yesterday as the news of a second rescue package for Greece helped boost credit markets. While Greece is far from being out of the woods -- and bondholders have agreed to take a larger haircut on the country's debt than expected -- the package helped to shore up confidence among fixed-income investors in Asia.
Taking advantage of this positive sentiment, Swire Pacific, Sun Hung Kai Properties and DBS Bank all decided to push out dollar bonds last night. The two Hong Kong companies together raised close to $1 billion -- with Swire Pacific raising $500 million from a new 10-year bond and Sun Hung Kai Properties printing $400 million through a re-opening of its 2022 bonds.
Hong Kong conglomerate Swire Pacific was returning to the bond market after an absence of over two years, so there was rarity value in its deal. The offering was warmly received by investors which put in orders of $5.4 billion. A total of 280 accounts participated in the transaction.
The deal was initially marketed at a spread of 275bp over Treasuries. This was later revised to a final guidance of Treasuries plus 260bp to 265bp, with the bonds pricing at the tight end. The company turned to HSBC and J.P. Morgan -- the same two banks that handled its 2009 bond -- for this latest deal.
The initial guidance was attractive, and this pulled orders into the book. “Swire is tapping the market after quite a long while, and based on the initial guidance of Treasuries plus 275bp, it looks quite attractive compared to the Swire 2019s which are at Treasuries plus 245bp/250bp," one Hong Kong-based investor said yesterday afternoon before the deal priced. The final size was at the top end of what investors were expecting, which was a deal of up to $500 million.
Swire Pacific has interests in properties, aviation, industrials, trading and marine services. It is the largest shareholder of Hong Kong airline Cathay Pacific and its property investment portfolio in Hong Kong includes Pacific Place and Island East, a residential and commercial complex that includes Taikoo Shing, Taikoo Place and Cityplaza. The company is rated A3 by Moody’s, A- by S&P and A by Fitch.
The last time Swire Pacific tapped the offshore market was back in August 2009 when it issued a $500 million 10-year bond at Treasuries plus 190bp to yield 5.562%. While it is issuing at a wider spread over Treasuries this time, it is paying a lower yield. The coupon for its latest 10-year bond, which matures February 28, 2022, is fixed at 4.50% and the notes were reoffered at 99.021 to yield 4.624%.
Asian investors were allocated 75% and European investors 25%. Fund managers bought 53%, banks 19%, private banks 10%, insurance companies 10%, agencies 4% and others 4%.
Meanwhile, Hong Kong developer Sun Hung Kai Properties priced a $400 million re-opening of its 2022 bonds, which was issued early this month. The initial deal size was $500 million, so the tap brought the total to $900 million.
The bonds were marketed and priced at a spread of 270bp over Treasuries -- the same spread that was offered on the initial deal. They were reoffered at 98.126 to yield 4.738%. HSBC was the sole bookrunner.
Sun Hung Kai has been revisiting the market a number of times over the past few months. Before this re-opening of its 2022 bonds, it reopened its 2016 bonds twice. The latest tap also came at the top end of the $300 million to $400 million expected size. But despite the tide of new supply, the bonds have been well-absorbed by the market. “So far, there has been no indigestion,” said a second Hong Kong-based investor.
DBS Bank was also in the market with a five-year dollar bond that was expected to price overnight. DBS Bank, Bank of America Merrill Lynch and Goldman Sachs were joint bookrunners. DBS conducted roadshows last year but held off printing a deal. Based on feedback from investors, the deal was expected to get a good take-up from US accounts.
“We expect it to tap US investors and there should be good take-up from there as European and US banks are deleveraging and returning money to investors. DBS is a good credit that US or European investors should be comfortable holding,” the first investor said.