Fujian Yango Group, a Chinese conglomerate with businesses ranging from property to education, made its first foray into the international bond markets this week, raising $300 million from a three-year deal.
The company decided to turn to investors without the benefit of a rating, raising the pressure on its bankers to ensure investors' pricing expectations were not too wide of the market.
The move appeared to work. The deal captured as much as $1.6 billion of orders at peak level, before closing at $1.1 billion, according to syndicate bankers running the deal. Some of this demand was already indicated before bankers announced price guidance for the deal.
“The company received enough anchor demand before the deal was launched,” a syndicate banker running the deal said. “The level of orders suggested investors are keen on taking risk for higher yield.”
Initial guidance of the Reg S deal was pitched at “the 7.25% area” on Wednesday morning, before being tightened to 6.85% the number. The deal priced with that coupon and an issue price at par, according to a term sheet seen by FinanceAsia.
The deal came with some additional security for investors. The company's onshore parent, Fujian Yango Group, provided a direct guarantee to the offshore vehicle Yango (Cayman) Investment Ltd.
Investors were also given a put option they can exercise at the end of year two, allowing them to sell the bonds back to the issuer at par on April 5, 2019. The issuer can also call the deal from that date onwards.
Syndicate bankers used two single B-rated property companies as their key comparables. Xinhu’s 6% $700 million March 2020 notes were quoted at a cash price of 101.125 to yield 5.58% on a yield-to-maturity basis. Bankers also pinpointed Oceanwide’s 9.625% $400 million August 2020 note as a second reference. Those bonds were quoted at 109.625 to yield 6.4%.
The two comparables implied that Yango was willing to leave something on the table for investors, although it can be difficult to gauge pricing for any deal — let alone an unrated, debut issuer. What does appear clear is that Yango realised it was best to adopt an investor-friendly structure.
“It was one of the rare deals that was structured to suit investors rather than the issuer itself,” the syndicate banker said.
Asian investors took the majority of the deal, with just 2% being sold into Europe. Fund managers and asset managers represented 69% of the deal, followed by banks with 25% and private banks with 6%.
The use of proceeds will be for general corporate purposes.
Yango, founded by Singaporean Chinese Lin Tengjiao in 1995, has five major businesses including finance, education, healthcare services, international trade and real estate. It controls Yango Group Co, a property developer that has been listed on Shenzhen Stock Exchange since 2012.
The global coordinators were AMTD, China CITIC Bank Intl, China Silk Road Intl Capital and UBS, while China Minsheng Banking Corp Hong Kong Branch was a bookrunner.