Corporate Debt Restructuring Masterclass

18 July 2022 (Mon), 5pm Singapore/HK time

US markets slipped marginally ahead of the US consumer price index (CPI) for May, to be published later today. S&P was down 0.2% and Nasdaq was down 0.1% after wiping out some initial gains. Financials and Industrials led the losses with a drop of ~1% while Healthcare gained 1%. Economists are expecting the CPI to rise 4.7% from a year earlier, according to Dow Jones vs. April’s reading of 4.2%, the highest since 2008. US 10Y Treasury yields dropped by ~4bp to 1.49%, its lowest since October despite higher inflation expectations. European markets once again struggled for direction. DAX and FTSE closed 0.4% and 0.2% lower respectively while CAC closed 0.2% higher. US IG and HY CDS tightened ~0.2bp and ~0.4bp respectively. EU main and crossover CDS also tightened by ~0.5bp and 2.7bp respectively. Gulf markets closed higher tracking the oil prices. Saudi TASI was up 0.5% and UAE’s ADX was up 0.6%. Latam markets were mixed with Brazil’s Bovespa up 0.1%. Asian markets have opened higher ~0.5% and Asia ex-Japan CDS spreads widened 0.4bp.

 

New Bond Issues

  • BoCom Financial Leasing $ 3Y sustainability notes IPG T+135bp area
  • Hyundai Capital America $ 3Y/5Y/7Y IPTs T+85-90bp/T+105-110bp/T+125-130bp areas
  • Ganzhou Jiankong Investment capped $270mn 3Y credit-enhanced bonds IPG 3.8% area

New Bond Issues 10 Jun

Lifestyle International raised $350mn via a 5Y at a yield of 4.8%, 40bp inside initial guidance of 5.2% area. The bonds are unrated and received orders over $2.3bn, 6.6x issue size. APAC took 98% of the bonds and EMEA 2%. Private bank orders took a solid 46% (with a 25-cent rebate), fund managers and hedge funds took 53%, and others 1%. Wholly owned subsidiary LS Finance (2017) is the issuer with a guarantee from the parent. Proceeds will be used to fund a tender offer of its 4.95% 2022s at a cash price of $1,011.52 per $1,000 in principal plus accrued interest alongside general corporate purposes. Its 4.95% 2022s currently trade at 101.

Agricultural Bank of China HK branch raised $1bn via a two-trancher. It raised $500mn via a 3Y bond at a yield of 0.743%, 40bp inside initial guidance of T+85bp area. It also raised $500mn via a 5Y bond at a yield of 1.318%, 38bp inside initial guidance of T+95bp area. The bonds have expected ratings of A1, and received orders over $5.6bn, 5.6x issue size. Proceeds will be used for general corporate purposes.

Fraser and Neave raised S$100mn via a 5Y bond at a yield of 2%. The bonds are unrated and received orders over S$225mn, 2.25x issue size. Fund managers, insurance companies and banks took 94% and the rest was taken by private banks. Funding arm F&N Treasury is the issuer with the parent providing a guarantee. The issuer retains redemption rights with a make-whole pledge on any interest payment based on the new prevailing benchmark rate of SORA-OIS + 0.5%. Proceeds will be used to fund working capital needs and capital expenditure, as well as to refinance debt.

KEB Hana Bank raised $600mn via a 5.5Y bond at a yield of 1.642%, or T+55bp. The bonds have expected ratings of A1/A+. Proceeds will be allocated to finance and/or refinance green and social projects in accordance with Hana’s sustainable financing framework.

Piraeus Bank raised €600mn via a PerpNC5.5 bond at a yield of 8.75%, 37.5bp inside initial guidance of 9%-9.25% area. The bonds have expected ratings of Ca/CCC-, and received orders over €2.15bn, 3.6x issue size. The coupon is fixed until the first reset date of December 16, 2026, and if not called, resets to the 5Y Mid-Swaps + initial margin of 919.5bp. The bonds are callable from and including June 16, 2026 to and including the first reset date and each interest payment date thereafter.

NatWest raised $1.5bn via a 6Y non-call 5Y (6NC5) bond at a yield of 1.645%, 25bp inside initial guidance of T+115bp area. The SEC registered bonds have expected ratings of Baa2/BBB. Proceeds will be used for general corporate purposes.



Happy to share that we have raised US$6mn in our Series A round led by
MassMutual Ventures and Citigroup. Click on the image below to read the press release.

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To trade bonds in smaller denominations (starting at US$1,000) on BondbloX, sign up via the link below.

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New Bond Pipeline

  • Gajah Tunggal $ bond alongside tender offer
  • Bayfront Infrastructure Capital II hires for $ multi-trancher backed by project finance portfolio

 

Rating Changes

 

Term of the Day

Bid-Offer Spread

The bid-offer/bid-ask spread is the difference between the ask/offer (buy) price and bid (sell) price, from an investor’s perspective. This is often used as a proxy for liquidity in the security – lower (tighter) the bid-ask spread, greater the liquidity available and higher (wider) the bid-ask spread, lower the liquidity available.

China Huarong’s 2.875% Perps have a wide bid-offer spread as seen in the picture below from the BondEvalue App. The price at which the investor has to buy the bond (offer/ask) is 81.25 and he/she can sell it at 79.09 (bid), showing a bid-offer spread of 2.16. In comparison, HSBC’s 6.375% Perp has a bid-offer spread of only 0.39.

 

Talking Heads

Naokazu Koshimizu, senior rates strategist at Nomura Securities
“As the recovery in the (U.S.) job market is contained, any discussion at the Fed on tapering is unlikely to gain momentum, even if it starts soon.”
James Athey, investment director at Aberdeen Standard Investments
“Nothing that we see in tomorrow’s report can prove or disprove any of the theories around the future path for inflation but I suspect that the market isn’t entirely believing of the Fed’s on-hold forever message.” “I therefore see potential for a higher print to push real yields and shorter dated yields higher thus flattening the curve and boosting the dollar. This might not be a great environment for risky assets.”
On cutting risks in light of tight credit spreads and potential for market volatility – Vivek Prabhu, head of fixed income at Perpetual Ltd
“Because credit spreads are so tight now, there’s a lot less spread dispersion so that means investors are being a lot less discerning about risk,” Prabhu said. “People are chasing yield at any cost or taking more risk in order to maintain their returns.” “We’re at this inflection point with interest rates and inflation and that could be the catalyst for market volatility going forward.”
Henry Shilling, founder of Sustainable Research & Analysis LLC
“This poses a dilemma for the green-bond investor.” “You need to account for the risk that you are holding something that, in the end, may turn out not to be green.”
Mitu Gulati, a law professor at the University of Virginia
“There are no mechanisms to ensure investors that the green investment will actually occur.” “The only conclusion I can draw from that is that investors don’t actually care. It’s so much eyewash.”
Jason Ewart, lawyer on debt deals at Latham & Watkins
“There’s really no teeth here.” “Investors have no recourse—there’s just egg on the face of the issuer in the green-investing community.”
Alastair Gillespie, an analyst at research firm Covenant Review
“The market is in its infancy, and its deficiencies are now becoming better known.” “If fund managers decide what’s happening isn’t good enough, there will be a natural desire for it to evolve.”

On extra support needed for Britain’s airlines if travel stays shut – in a letter by airlines industry lobby Airlines UK

“If a meaningful reopening is not possible during the summer … then targeted economic support will be essential to ensure UK airlines are able to reach the point when a restart is possible, in order to protect many tens of thousands of jobs.”

Top Gainers & Losers – 10-Jun-21*

BondEvalue Gainer Losers 10 Jun (1)
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