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New Bond Issues
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AVIC International Leasing capped € 250mn 364-day bonds at 1.35% area
- Chongqing Wansheng ETDZ $89mn 3Y at 2.3% area
Adani Ports SEZ raised $750mn via a two-trancher. It raised $300mn via a 10.5Y bond at a yield of 3.828%, 25bp inside initial guidance of T+280bp area. It also raised $450mn via a 20Y bond at a yield of 5%, 25bp inside initial guidance of 5.25% area. The bonds have expected ratings of Baa3/BBB-/BBB-, and received orders over $1.98bn, 2.6x issue size. For the 10.5Y, Asia took 47%, the US 30% and EMEA 23%. Fund/asset managers bought 61%, insurers, sovereign wealth funds and pension funds 22%, banks and financial institutions 9% and private banks 8%. For the 20Y, Asia took 36%, the US 38% and EMEA 26%. Fund/ asset managers bought 77%, insurers and pension funds 12%, private banks 7% and banks and financial institutions 4%. Proceeds will be used to repay debt as well as for the capital expenditure and the general corporate purposes of the issuer and its subsidiaries in India and Sri Lanka.
Temasek raised $2.5bn via a three-trancher. It raised:
- $750mn via a 10Y bond at a yield of 1.688%, 20bp inside initial guidance of T+60bp
- $750mn via a 20Y bond at a yield of 2.506%, 15bp inside initial guidance of T+80bp area
- $1bn via a 40Y bond at a yield of 2.799%, 15bp inside initial guidance of T+100bp area
The bonds have expected ratings of Aaa/AAA. Temasek Financial (I) is the issuer and Temasek Holdings is the guarantor. Proceeds will be used to fund its ordinary course of business.
ICBC Financial Leasing raised $1.25bn via a three-trancher. It raised:
- $450mn via a 3Y bond at a yield of 1.264%, 40bp inside initial guidance of T+130bp
- $550mn via a 5Y bond at a yield of 1.804%, 35bp inside initial guidance of T+145bp area
- $250mn via a 10Y bond at a yield of 2.753%, 30bp inside initial guidance of T+185bp area
The bonds have expected ratings of A2/A and received orders over $4.1bn, 3.3x issue size. ICBCIL Finance is the issuer with a keepwell and liquidity support deed, as well as a deed of asset purchase undertaking, from ICBC Financial Leasing. ICBCIL Finance is a wholly owned subsidiary of Industrial and Commercial Bank of China, which owns ICBC Financial Leasing.
Fujian Yango Group raised $250mn via a 2 year 5 month bond at a yield of 12.5%. The bonds have expected ratings of B-. Yango (Cayman) Investment is the issuer and Fujian Yango Group is the guarantor. Proceeds will be used for debt refinancing, including a tender offer for its outstanding $285mn 12.5% 2021s at par plus accrued and unpaid interest. The deadline is August 2, 2021.
New Bonds Pipeline
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Gemdale Corp hires for $ green bonds
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India Cleantech Energy/ACME Solar Holdings hires for $ amortizing 5Y green bond
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Chindata Group hires for $ green bonds; calls today
Rating Changes
- Evergrande And Subsidiaries Downgraded To ‘B-‘ By S&P On Weakening Funding Access; Outlook Negative
- Japan’s Rakuten Downgraded To ‘BB+’ By S&P On Souring Finances; Outlook Negative; Subordinated Debt Downgraded To ‘B+’
- Standard Industries Inc. Downgraded To ‘BB+’ By S&P; Off CreditWatch; Outlook Negative; Debt Ratings Lowered And Assigned
- Brookfield Property Partners L.P. Downgraded To ‘BBB-‘ From ‘BBB’ By S&P On Sustained Elevated Leverage; Outlook Stable
- Moody’s downgrades Frigoglass’ ratings to Caa1, outlook stable
- Fitch Revises Outlook on Council of Europe Development Bank to Positive; Affirms at ‘AA+’
- Fitch Revises Outlook on Swedbank to Positive; Affirms at ‘A+’
- Fitch Revises SEB’s Outlook to Stable; Affirms at ‘AA-‘
- Fitch Revises Gulf International Bank’s Outlook to Stable; Affirms IDR at ‘BBB+’
- Fitch Revises 6 Saudi Banks to Stable Outlook; Affirms IDRs
- Fitch Places 5 Spanish RMBS Ratings on RWP on Catalonia Decree Law Stress Scenario Retirement
- Negative Rating Actions By S&P On Four Kuwaiti Banks Follow Sovereign Downgrade
ICYMI: Chinese Developers’ Bond Spreads Widen as Focus on Three Red Lines Increases
In case you missed it – China’s real estate developers’ high yield Index underperformed its peers witnessing a sharp drop of 6% in June and down 3.7% YTD. Investor concerns were apparent since the start of Q2 with Z-Spreads widening across certain Chinese real estate developers. China Evergrande’s Z-Spread widened by a massive 1,800bp since April, the highest in the sector as investor concerns grow over its liquidity position. The ‘three red-lines’ (Term of the Day, explained below), a key regulatory threshold for property developers set by Beijing has become an important factor that separates the winners and the losers.
In this editorial piece, we detail the widening Z-Spreads across companies in the Chinese property sector, the sector’s underperformance, and the three red-lines calculations of the key players.
Term of the Day
Three Red Lines
The ‘three red lines’ are leverage guidelines set for select property developers in China. They consist of caps on the following ratios:
- Liabilities to assets (ex-advanced proceeds) not more than 70%
- Net Debt to Equity not more than 100%
- Cash to Short-term Debt greater than 1x
These ratios were devised by China’s PBOC and Ministry of Finance. Not adhering to these ratios would result in them being cut-off from new loans. Those who adhere to all three ratios can increase debt by 15% in the subsequent year.
Click here to view the calculations of the three red lines for China’s property developers.
Talking Heads
“Even though the underlying growth backdrop is very strong, the market has moved from thinking about reflation to maybe a little bit of stagflation fear.”
Top Gainers & Losers – 27-Jul-21*
