Do you invest or plan to invest in CoCo/AT1 bonds?
If yes, do attend the upcoming masterclass conducted by debt capital market professionals Pramod Shenoi, Head of Research APAC at CreditSights and Rahul Banerjee, Founder and CEO at BondEvalue. The session will cover understanding the AT1 structure, common features & covenants, and how to pick the right AT1 bond(s) for you. Click on the banner below to register.
New Bond Issues
- New World Development $ PerpNC7 at 4.5% area, alongside tender offer
- Greenland Hong Kong 364-day $ notes at 9.75% area
- Times China Holdings $ 3NC2 bonds at 6.05% area
- Yango Group capped $290mn 3.25NC2.25 green bond at 8.45% area
- Shandong Finance Investment $ 5Y bond at 2.8% area
- Zhuzhou Geckor Group $50mn 3Y credit-enhanced bonds at FPG 3.5%
- Lendlease Global Commercial REIT S$ PerpNC5 at 4.35% area
- Mamoura $ 10Y and 30Y Formosa at MS+130bp area and 3.7% area
Westpac raised $2.75bn via a three-trancher. It raised:
- $1.45bn via a 5Y bond at a yield of 1.166%, 22.5bp inside initial guidance of T+62.5bp area.
- $500mn via a 5Y floater (FRN) at SOFR+52bp vs. initial guidance of SOFR equivalent area
- $1bn via a 10Y bond at a yield of 2.157%, 27.5bp inside initial guidance of T+87.5bp area
The bonds are unrated and received combined orders over $8bn, 2.9x issue size.
Morgan Stanley raised $3bn via a 4Y non-call 3Y (4NC3) bond at a yield of 0.79%, 17bp inside initial guidance of T+65bp area. The bonds have expected ratings of A1/BBB+/A. The bonds are callable at par one month prior to maturity and also have a make whole call (MWC) until May 30, 2024. Proceeds will be used for general corporate purposes.
UniCredit raised $2bn via a dual-trancher. It raised $1bn via a 6NC5 bond at a yield of 1.982%, 25bp inside initial guidance of T+145bp area. It also raised $1bn via a 11NC10 bond at a yield of 3.127%, 25bp inside initial guidance of T+180bp area. The bonds have expected ratings of Baa1/BBB/BBB-. The 6NC5s are callable on June 3, 2026 and the 11NC10s are callable on June 3, 2031 at par, and if not called, the coupon resets to the 1Y Constant Maturity Treasury (CMT) + initial margins of 120bp and 155bp respectively.
OUE Commercial REIT raised S$150mn via a 5Y bond at a yield of 3.95%, 20bp inside initial guidance of 4.15% area. The bonds are unrated and received orders over S$415mn, 2.8x issue size. Private banks will get a 25 cent rebate. OUE CT Treasury is the issuer and DBS Trustee is the guarantor.
CMB (China Merchants Bank) International Capital raised $600mn via a 3Y bond at a yield of 1.421%, 40bp inside initial guidance of T+150bp area. The bonds have expected ratings of Baa1, and received orders over $2.5bn, 4.2x issue size. Asian took 99% and Europe 1%. Banks and financial institutions were allocated 67%, fund/asset managers 29%, and sovereign wealth funds/insurers/private banks 4%. The bonds are issued by wholly owned subsidiary Legend Fortune and guaranteed by CMB International Capital. CMB’s investment banking arm plans to use proceeds for general corporate purposes.
Jiangsu Shagang Group raised $300m via a debut 3Y bond at a yield of 3.3%, 50bp inside initial guidance of 3.8% area. The bonds have expected ratings of BBB-, and received orders over $1.1bn, 3.7x issue size. Asian took 98% and Europe/offshore US took 2%. Banks and financial institutions received 57%, fund/asset managers 39%, and sovereign wealth funds/insurers/others 4%. Proceeds will be used for offshore debt refinancing. The bonds will be issued by Wealthy Vision Holdings and guaranteed by Jiangsu Shagang.
AAC Technologies raised $650mn via a two-trancher. It raised $300mn via a 5Y bond at a yield of 2.625%, 40bp inside the initial guidance of T+225bp area. It also raised $350mn via a 10Y bond at a yield of 3.75%, 45bp inside the initial guidance of T+270bp area. The bonds were rated Baa2 and received combined orders of over $5.2bn, 8x the issue size. For the 5Y bond, APAC bought 88% and EMEA 12% – Asset/fund managers got 79%, insurers and pensions 14%, and banks/private banks/others 7%. For the 10Y, APAC bought 78% and EMEA 22% – Asset/fund managers got 81%, insurers and pensions 11%, and banks/private banks/others 8%. Proceeds will be used for refinancing and general corporate purposes. AAC listed in HK, is a manufacturer of miniature components including acoustic and touch screen feedback systems for smartphones.
Jiujiang Municipal Development Group raised $300m via a 3Y bond at a yield of 3.45%, 45bp inside the initial guidance of 3.9% area. The bonds have expected ratings of BBB- and received orders of over $1.4bn, 4.7x issue size. Proceeds will be used for onshore project construction. The issuer is wholly owned by The Jiujiang State-owned Assets Supervision and Administration Commission, an investment/financing/construction platform in Jiangxi province.
Chinalco Capital Holdings Ltd raised $800mn via a 5Y bond at a yield of 2.125%, 40bp inside the initial guidance of T+185bp area. The bonds were rated A- and received orders of over $4bn, 5x the issue size. Asian investors took 99% and Europe 1%. Banks and financial institutions were allocated 67%, fund/asset managers 29%, and sovereign wealth funds/insurers/private banks 4%. The bonds are guaranteed by state-owned Aluminium Corporation of China (Chalco). Proceeds will be used for offshore debt refinancing.
Jinke Property raised $325mn via a 3Y bond at a yield of 7.5%, 20bp inside the initial guidance of 7.7% area. The bonds have expected ratings of B+, a notch lower than the issuer rating and received orders over $1.45bn, 4.5x the issue size. The notes provide a 20-cent rebate for private bank orders.
Hong Kong-listed Chinese natural gas operator, Zhongyu Gas pulled its $200mn 3Y issuance. Prior to the announcement, the bonds were expected to be issued at a yield 6%, 10bp inside the initial guidance at 6.1% area. The bonds had expected ratings of Ba3/B+, and had received orders over $520mn, 2.6x the issue size. The reason for pulling the bond deal is unclear.
- The GEO Group Inc. Downgraded To ‘CCC+’ From ‘B’ By S&P On Increased Distressed Exchange Risk; Debt Ratings Also Lowered
- Lufthansa’s Hybrid Bond Downgraded To ‘CC’ By S&P On Deferral Risk; Other Ratings Unchanged
- Kongsberg Automotive Outlook Revised To Positive From Negative By S&P On Strong Deleveraging Prospects; ‘B-‘ Rating Affirmed
- GeoProMining Investment (CYP) Ltd. ‘B+’ Rating Affirmed And Removed From CreditWatch Negative By S&P; Outlook Negative
- Coca-Cola Consolidated Inc. Outlook Revised To Positive By S&P On Continued Debt Repayment, Ratings Affirmed
- Fitch Revises Baytex’s Outlook to Stable; Affirms Ratings at ‘B’
- Fitch Affirms CEMEX’s IDRs at ‘BB-‘; Outlook Revised to Stable
- Fitch Revises Outlook on Prudential plc to Stable; Affirms IDR at ‘A’
- Mexican Conglomerate Grupo KUO Outlook Revised To Stable From Negative By S&P On Likely Stronger Performance, Rating Affirmed
- British Airways PLC’s 2020-1 Class A Pass-Through Certificates Upgraded To ‘A+(sf)’ By S&P On Depositary Provider Termination
- Moody’s withdraws Enel Generacion Chile S.A. rating for business reasons
New Bond Pipeline
- Qingdao Jiaozhou Bay Development hires for $ bonds
- Indofood CBP Sukses Makmur hires for $ bond
- Pakistan WAPDA $ green bond
- Maldives HDC $ sukuk
- CSC Financial sets up US$3bn
Term of the Day
A keepwell provision is a legal agreement between a parent company and a subsidiary to ensure solvency and financial stability of the subsidiary for the duration of the agreement. Keepwell provisions are included in bond terms to offer bondholders confidence on the issuer’s ability to repay. The keepwell structure emerged around 2012-2013 to assuage concerns of investors over a bond issuer’s creditworthiness. However, it is important for investors to understand that keepwells are not a guarantee that the parent company will support the subsidiary in the event of a default, and there has previously been no precedent on the enforcement of keepwell structures.
“There will come a time in upcoming meetings, we’ll be at the point where we can begin to discuss scaling back the pace of asset purchases.” “It’s going to depend on the flow of data that we get.”
“The policy trend is now focused on ensuring financial stability,” said Wolf. “Beijing will want to resolve bubbles risks at the outset, in a targeted manner, using strong rhetoric and small adjustments to policy. That appears to be enough for now.” “When you have a closed capital account like China and you loosen policy through the credit channel, the money stays contained domestically.” “It then needs to find a place. It can be housing, it can be stocks — it moves across the financial system. This is one of the biggest constraints to policy and is why China has been quick to remove stimulus this year.”
“In the future, we may have to swap a kind of special national debt to replace local government debt. If the central government does not intervene in time, then once local government debt breaks out, the pressure will shift to the banking system.” “Considering that the banking system plays an important role in the country’s financial system, when there’s a systemic crisis, the central government will definitely intervene.”