Rush of issuance pre-CNY as Hengda Real Estate and the Republic of the Philippines’ (ROP) tapped bond markets

New Issue Weekly Monitor

For the week beginning 20th Jan 2020
Asia ex-Japan G3

Summary

Asia G3 Year-to-date issuance: USD 48.6bn

Key Market Data (as at 10am, 23 Jan 2020)
CT10 @ 1.753%(-5.6bps Week-on-Week)
S&P 500 @ 3321.75 (+0.15% Week-on-Week)
HSI @ 28,068.90 (-2.82% Week-on-Week)
JACI Index @ 245.78 (+0.07% Week-on-Week)

For the week beginning 20th Jan 2020, USD 9.66bn of bonds was issued from 14 deals.

Breakdown: USD 2.15bn of Investment Grade and USD 5.6bn of High Yield bonds, USD 1.91bn of Non Rated.

** As of this Thursday morning, there are no deals in play.**

Commentary:
It is called ‘the world’s biggest mass migration’ when China celebrates the Lunar New Year (CNY), with around 3bn trips clocked within and abroad. Therefore, markets were on tenterhooks all week as mounting fatalities and confirmation of human-to-human transmission of the mysterious ‘Wuhan virus’ has raised fears of a swift spread of the disease during this peak of peak travel periods.

The beginning of the week saw a rush of issuance pre-CNY, with 6-7 deals printed per day, but this came to an abrupt halt around mid-week. The two largest deals were dual-tranchers by Hengda Real Estate and the Republic of the Philippines’ (ROP), followed by supranational Asian Development Bank (ADB).

ROP tapped the EUR markets for 600mn each of 3yr and 9yr bonds at MS+40bps and MS+70bps, working out to yields of 0% and 0.7% respectively. With sovereign ratings from all 3 major ratings agencies firmly in the BBB bucket, ROP has managed to shave spreads paid on EUR bonds from MS+294.4bps (for a 10yr bond issued 2006) to MS+70bps (for last year’s 8yr issue due May 2027) to the present levels.

ADB also accessed the EUR market for 1bn worth of 10yr funding at MS -6bps, working out to an absolute yield of 0.025%. The AAA-rated regional development bank is headquartered in the Philippines, with Japan and the United States as its largest shareholders. As of 2018, the three largest borrowers—China, India, and Pakistan—represented 42.9% of ADB’s loan portfolio.

Just days after major shareholder Evergrande Group issued 2bn worth of bonds, property arm and flagship subsidiary Hengda Real Estate issued a jumbo-sized 4bn dual-tranche deal split equally between 2.75yr and 3.75nc1.75 issues. Priced at 11.5% and 12% respectively, the B/B2 rated deals were issued under subsidiary Scenery Journey Ltd. and guaranteed by Tianji Holding Ltd., Hengda’s wholly-owned offshore holding company.
Green was the theme for the two power companies that issued bonds this week, namely Korea South-East Power (KOSEPW) and India’s ReNew Power. One of 6 power generation companies under the Korea Electric Power umbrella, Aa2 rated KOSEPW issued a 300mn 5yr bond at T+62.5bps or 27.5bps south of IPG. Proceeds from the bond are to be used for projects associated with renewable energy, pollution prevention and control, terrestrial and aquatic biodiversity conservation and green buildings.

Similarly, BB- rated ReNew Power’s 7.1yr bond proceeds are earmarked for prepaying debt and capital expenditure on the issuer’s eligible green projects. The 450mn amortizing issue priced at 5.875%, and saw 51% participation from EMEA and the US.

For the week, 31 banks were involved either as Bookrunners or Lead Managers. Credit Suisse topped the dealboards this week with 6.4bn in volume.

1 new mandate was announced during the last two weeks.

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