Wanda Properties Overseas raised a previously postponed debut $600 million five-year senior unsecured bond on Thursday, compensating investors with a higher pricing the second time around amid speculation that the Federal Reserve (Fed) will begin its tapering next month.
The company sought to price the Reg S note to a yield of Treasuries plus 387.5pp, up from the 325pp offered on November 7 – which was deemed too aggressive – but ended up pricing the deal 12.5bp tighter at 375bp above Treasuries, according to a term sheet seen by FinanceAsia. The bond has a coupon of 4.875%.
“Investors still have cash to put to work but new issue premiums are larger at this time of the year, which is to be expected versus say, September,” said a source close to the deal. “The rationale for that is investors need to be compensated against a potential underperformance heading into December, when they can just keep cash and use that cash next year.”
Wanda’s deal takes the number of transactions done in the G3 Asia ex-Japan space to one. Asian debt capital markets have not been this quiet since June 17, which also saw one deal come to market, according to Dealogic data.
The Chinese company planned to issue its debut international bond last week but it was postponed because of weak demand and heightened market volatility.
There has been increased speculation that the US central bank will start tapering its $85 billion a month bond buying programme next month, strongly supported by the country’s latest job growth figures, which beat market expectations.
The world’s biggest economy shrugged off the impact of the three-week government shutdown to create 204,000 new jobs in October – an announcement that was made on November 8. Financial markets were initially bracing for an increase of 120,000 from non-farm payrolls.
Comparables
The closest comparables for Wanda’s bond were China Vanke’s existing bonds, which were trading around Treasuries plus 278bp with a G-spread of 304bp at the time of pricing.
However, sources note that there is a lot of difference between the two issuers because the latter is partially state-owned and listed, while the former is unlisted, not government-owned and has a slightly better structure in terms of a standby facility.
“It was hard to assign a new issue premium for this as there was a lot of variables going into the equation and finding out the fair value,” said a source. “But an attractive pricing level was assigned to the transaction the second time round.”
As a result of the revised pricing, Wanda’s deal received good anchors from investors who were keen to participate in last week’s transaction. Using that momentum, syndicate bankers were able to push ahead with the deal, upsizing it from $500 million to $600 million.
The bond achieved an order book of $2.75 billion from approximately 220 accounts. Fund managers subscribed to a bulk of the issuance, accounting for 69%, followed by the public sector with 12%, insurance 7%, financial institutions and private banks with 5% each and the rest to corporates. Asian investors purchased 80% of the notes, while the rest went to European investors.
The Baa2/BBB-/BBB+ rated bond is now trading tighter at Treasuries plus 360bp in secondary markets.
Barclays, Bank of America Merrill Lynch, Goldman Sachs, HSBC and UBS were the joint global coordinators and joint bookrunners of the deal.
