Chinese real estate developers returned to the primary markets with guns blazing this week

New Issue Weekly Monitor

For the week beginning 28th Oct 2019
Asia ex-Japan G3


Asia G3 Year-to-date issuance: USD 295.061bn

Key Market Data (as at 12pm, 1 Nov 2019)
CT10 @ 1.696% (-6.0bps Week-on-Week)
S&P 500 @ 3037.56 (+0.91% Week-on-Week)
HSI @ 27,020.20 (+0.73% Week-on-Week)
JACI Index @ 241.94 (+0.10% Week-on-Week)

For the week beginning 28th Oct 2019, USD 6.349bn of bonds was issued from 12 deals.

Breakdown: USD 3.555bn of Investment Grade, USD 2.294bn of High Yield bonds, USD 500mm of Non Rated bonds.

** As of this Friday morning, there are no new issues in play. **

The Fed lowered interest rates, as expected, by another 25bps for the third time in four months, but implied that a pause might be in order thereafter. Coupled with comments that were widely interpreted as positive, markets rallied on the news but the euphoria was short-lived as President Trump’s impeachment inquiry advanced to the next phase. Treasuries signalled risk aversion even as  China October Manufacturing PMI slumped to the lowest in 8 months and negotiations in US-China trade talks continue.

Chinese real estate developers returned to the primary markets with guns blazing this week. Real estate developer CIFI Holdings issued a 5nc3 senior note amounting to 400mn, 30bps below IPG of 6.75%. The BB-rated bonds were mostly taken up by Asian investors and FMs by investor type. Sunac’s 650mn offering was well-received with final books 6.8x oversubscribed. Asian FMs dominated the order book for the B1-rated 4.25yr deal, which priced at 7.75% from an initial guidance of 8.25%.

In an extremely busy year-to-date, Zhenro Properties had already accessed the bond markets a startling eight times (inclusive of two taps). It initiated a ninth this week with a 300mn issue priced at 9.15%. Not to be left out, Kaisa Group added another 200mn outstanding to its recently issued 400mn 11.95% 22s with a tap that eventually priced at 11.625%. Central China Real Estate’s (CCRE) 200mn 4yr BB- rated deal priced at 7.9% yield, bringing its total fundraising YTD in USD bonds to 1.2bn. One of the earliest Chinese property developers to access the dollar bond markets, Henan-based CCRE was until recently ~24% owned by Singapore developer Capitaland.

Hyundai Capital America printed a dual-tranche deal, raising 1.5bn in total at T+120bps for 3yr and T+175bps for 7yr bonds. While deal-stats were not available, the Baa1-rated bonds tightened 22.5bps apiece from IPG.   

100% Indonesian state-owned electricity provider PLN came to the dollar bond markets for the second time this year and fourth time in 2 years with issuance of dual-tranche 10.25 / 30.25yr bonds totalling 1bn and 12yr EUR-denominated bonds totalling 500mn. While all bonds enjoy a 3-notch uplift from PLN’s standalone rating of Ba2 on the assumption of strong parental support, the longest-dated bond saw particularly robust demand from mostly outside Asia for its 4.4% yield, with books oversubscribed by 5.4x.

Just days after reporting lower yoy 3Q and YTD net profit, Singapore-listed Hutchison Ports Holdings Trust (HPHT) issued a benchmark-sized 5yr senior bond priced at T+137.5bps which was nevertheless oversubscribed a modest 2.2x. The stock was removed from the benchmark Straits Times Index the month prior, having plummeted 84% since IPO in 2011.

For the week, 30 banks were involved either as Bookrunners or Lead Managers. With the predominance of HY/NR deals this week, Credit Suisse topped the dealboards with 7 deals from 8 bonds.

Ten new mandates were announced during the last two weeks. 

Asia G3 Year-to-date issuance: USD 288.54bn

Key Market Data (as at 12pm, 25 Oct 2019)
CT10 @ 1.756% (+1.5bps Week-on-Week)
S&P 500 @ 3010.29 (+0.41% Week-on-Week)
HSI @ 26,678.92 (-0.54% Week-on-Week)
JACI Index @ 241.69 (+0.17% Week-on-Week)

For the week beginning 21st Oct 2019, USD 8.11bn of bonds was issued from 19 deals.

Breakdown: USD 3.66bn of Investment Grade, USD 3.05bn of High Yield bonds, USD 1.4bn of Non Rated bonds.

** As of this Friday morning, New World Development is out with a tap of its 6.25% Perpetual callable in March 2024 with price guidance at 6% YTC. **

With a rare lull in trade war headlines and market-moving economic data, Treasury yields remained largely unchanged (and unmoved) by Brexit drama that took centre stage to fill the void. The relative quiet meant a prolific week for Asian debt capital markets, with more ex-China diversification (56.2%) than seen in a while.

Debuting on the RegS/144A international markets with the distinction of being the first Indian NBFC to do so, premier gold loan financier Muthoot Finance saw 2.5x oversubscription and 25bps IPG tightening for its 450mn 3yr issue priced at 6.125%. Strengthening the appeal of the BB/BB+ rated deal was senior secured status with change of control and maintenance covenants.

In contrast and underlining the risk of failure to launch, dairy producer Nutifood of Vietnam postponed a planned 150-200mn maiden deal despite holding investor meetings in 3 major financial centers beforehand. HSBC was sole bookrunner and lead manager for the proposed B / B+ rated issue, initially priced at 9.25%.

With no outstanding USD bonds, Ba1 / BBB- rated PT Adaro re-entered the dollar markets with a 750mn 5nc3 priced at 4.5%. Final books were over 2bn, with healthy minority participation from EMEA and the US.

Riding on the crest of Chinese central government-owned entities issuing perpetuals at relatively low coupons, Baa1-rated Power Construction Corp successfully printed a 300mn nc5 issue at 3.55%. Extended maturity was indeed the flavour of the week with the likes of the Republic of Indonesia (ROI) issuing a 30yr fixed, and CLP Power, Ayala Corporation and Agile Group Holdings issuing perpetuals with first call dates in the vicinity of 5yrs.

Ayala’s newest 400mn 4.85% fixed-for-life offering joins 2017’s 5.125% perp nc5 as its only outstanding bonds in the USD space. The Philippines’ oldest conglomerate saw 27.5bps tightening from IPG and books oversubscribed 4.3x. HK stalwart CLP Power’s benchmark sized 3.6% issue priced 30bps inside IPG and 65bps below the 750mn 4.25% perp that will be redeemed in lieu early next month. In absolute terms, ROI paid the lowest coupons on record for two 1bn tranches of 30yr (3.7%) USD and 12yr (1.4%) EUR senior notes.    

If tenor was one trend measure this week, then surely geography was the other. Three LGFVs (Rugao, Jiangsu Zhongguancun and Nanjiing Pukou) originating from the coastal province of Jiangsu (just north of Shanghai) issued a total of 1.1bn in 3yr bonds within the 5.5-6.5% range.  

Hong Kong issuers also featured prominently in the new issue lineup. Apart from the aforementioned CLP Power, retailer Li & Fung tapped the bond market less than 1 month after the issuance of its 400mn 4.375% 2024s priced at issue at T+290bps. The bond traded at around T+259bps when the 100mn tap was announced and ended up priced 11bps higher. As well, Richard Li’s PCGI Limited raised 250mn in the bond markets, paying 4.75% for a 5yr unrated issue. Included in the deal were CoC put provisions for key man (Mr. Li) ownership change and an issuer call upon IPO.  

Deserving a mention for outsize demand, Shanghai municipal government owned commodity chemical producer Shanghai Huayi (as guarantor to issuer Huayi Finance) printed 350mn worth of 5yr tenor bonds at T+153bps (47bps inside of IPG). Books over 9.7x oversubscribed, and demand was overwhelmingly from Asia and bank institutions.

For the week, 44 banks were involved either as Bookrunners or Lead Managers. Standard Chartered Bank led the league tables this week with 10 deals totaling USD 4.61bn.

3 new mandates were announced during the last two weeks. 

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