Want Want, Huarong bonds draw whopping demand

The two companies took vastly different approaches to the bond market. But they both managed to generate huge demand.

Two Chinese investment-grade companies turned to the offshore US dollar bond market on Thursday, with snacks titan Want Want selling a $500 million bond and state-owned asset manager China Huarong raising $3.4 billion from a multi-tranche deal.

Both companies received strong demand from investors. Hong Kong-listed Want Want captured more than $2 billion of orders at the end of its marketing process, while Huarong collectively garnered more than $13.7 billion of demand for its five-tranche sale.

“There is little evidence that mainland investors are losing their appetite for Chinese debt,” a Singapore-based investor told FinanceAsia. “Non-bank financial companies such as Huarong and Cinda are actively issuing cheap dollar bonds to [fund investments] in high-yield bonds.”

The success of the two deals came amid prominent geopolitical risks that are being watched closely by investors. But Asia’s bond market continues to prove its resilience. As a whole, emerging market bond markets attracted $17.5 billion of net inflows in the first quarter of this year.

Wanted

Want Want, rated A3/A- by Moody’s and Fitch, returned to the international bond markets for the first time in almost four years, selling a $500 million April 2022 note that pays a yield of 3.119%.

The Reg S sale came after the company last month posted an 8% drop in annual revenue for 2016, its third consecutive yearly decline. However, it was not all bad news for the company — its net cash doubled to Rmb 2.595 billion, according to its latest financial results.

On Thursday morning, the leads — Credit Suisse and Nomura — pitched investors with initial price talk at 160bp over US Treasuries, before narrowing the range to Treasuries plus 135bp to 140bp.

Final pricing of the bond was fixed at 98.878 on a coupon of 2.875% to yield 3.119%, or Treasuries plus 135bp, according to a term sheet seen by FinanceAsia.

For fair value, bankers used Cofco's $500 million 2023 bond as a benchmark. The bonds were quoted at a five-year Treasury yield plus 147bp and a G-spread of 124bp, suggesting pricing of the new Want Want bond was reasonably generous to investors.

In the secondary market, the new bond was trading tigher at 126/125bp over the five-year US Treasuries on Friday afternoon, around 10bp tighter than its launch price, according to market data.

The company plans to use the proceeds to refinance certain existing borrowings and for general corporate purposes.

Asian investors took the bulk of the deal, leaving the remaining 15% to European accounts. Fund managers took 60%, banks 25%, insurers 13% and private banks 2%.

Good asset manager

China Huarong returned to the market for the second time this year, raising $3 billion from a mix of two floating-rate notes and three fixed-rate bonds.

The issuer sold a $500 million three-year floater, a $1 billion five-year floater, a $570 million five-year fixed-rate bond, a $700 million 10-year fixed-rate bond and a $200 million 30-year fixed-rate bond.

The two floating-rate notes were priced at the tight end of the marketing range, and both were traded significantly tighter in the secondary market on Friday.

"The floaters were the best performers in spread terms, tighening as much as 17bp at one point," a fixed-income trader said. "The fixed-rate bonds were left anywhere from 5-10bps tighter.”

On the fixed-rate notes, Huarong pitched the five-year note and 10-year note at 225bp and 275bp over the respective US Treasury yields. The A-rated group slashed pricing for the 2022 note to 200bp over Treasuries and for the 10-year to 255bp.

Final pricing of the April 2022 note was fixed at 99.892 with a coupon of 3.75%, or 200bp over Treasuries, while the April 2027 note was priced at 99.709 with a coupon of 4.75%, equivalent to 255bp over Treasuries, according to a term sheet seen by FinanceAsia.

The 30-year bond was added to the deal after the books were opened, following strong reverse enquires from investors, syndicate bankers said. The April 2047 bond was sold at a yield of 5.5%.or 2.6% over the 30-year US Treasury yield.

The global coordinators were ANZ, Bank of China, Bank of Communications, CCB International, DBS Bank, HSBC, Huarong Financial, ICBC, Nomura and Standard Chartered Bank, while BOC International, China Minsheng Banking Corp Hong Kong branch, CMB International, Commonwealth Bank of Australia, Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley were joint bookrunners.

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