S&P slid 0.9% yesterday while Nasdaq ended 0.1% down after it managed to erase an early decline of 2.6% with dip buying. Energy, financials and industrials led the index lower. Tesla continued its slide and closed 1.9% lower as its April sales in China dipped; its plans to expand its Shanghai plant also took a backseat due to uncertainty on US-China tensions. US IG CDS spreads were 0.4bp wider and HY widened 2.1bp. EU main and crossover CDS spreads widened by 1.2bp and 5.1bp respectively. Most Asian equity markets opened flat while KOSPI is down over 1.5% and Taiwan down 4.5%. Asia ex-Japan CDS spreads were 1bp wider. Asian primary bond markets have cooled off after two busy days ahead of the Hari Raya holiday tomorrow.
New Bond Issues
China Railway Construction $ 5Y at T+155 area, EUR 5Y at MS+155 area; books over $2.2bn
Country Garden raised $500mn via a tap of their 3.125% 2025s at a yield of 3.097%, 25bp inside initial guidance of T+255bp area. The bonds have expected ratings of Baa3/BBB-, and received orders over $1.9bn, 3.8x issue size. Proceeds will be used for offshore debt refinancing. The tapped bonds were priced at a new issue premium of ~10bp over their initially issued 3.125% 2025s that currently yield 2.99%. It is also looking to issue a 10Y bond that was launched at initial guidance of T+275bp area on Tuesday, which is yet to price.
Fosun International raised $500mn via a 5Y non-call 3Y (5NC3) bond at a yield of 5%, 35bp inside initial guidance of 5.35% area. The bonds have expected ratings of BB, and received orders over $2.8bn, 5.6x issue size. Asia took 85%, EMEA 14% and offshore US 1%. Asset/fund managers got 91% of the bonds while banks and private banks got 5% and 4% respectively. Fortune Star (BVI) is the issuer and the Hong Kong-listed parent company is the guarantor. Proceeds will be used for offshore refinancing, including the concurrent tender offer for two of its guaranteed senior bonds, and for working capital and general corporate purposes. The tender offer is for their outstanding $1.025bn 5.25% 2022s and $446mn 5.50% 2023s at a purchase price of $1,014 and $1,008 per $1,000 in principal, respectively. The tender offer is being made as part of a policy to proactively manage its balance sheet and optimize its capital structure. The tender offer will be subject to a maximum acceptance amount to be announced later and acceptance priority will be given to the 5.25% 2022s. The deadline for the tender offer is May 21. The 5.25% 2022s and 5.5% 2023s are currently trading at 101.25 and 100.97 respectively. Fosun’s new bonds were priced tighter to its 5.05% 2027s callable in 2025 which yield 4.99%.
Yanlord Land raised $500mn via a 5Y non-call 3Y (5NC3) debut green bond at a yield of 5.125%, 37.5bp inside initial guidance of 5.5% area. The bonds have expected ratings of Ba3, and received orders over $1.8bn, 3.6x issue size. Asian investors took 92% of the bonds and EMEA 8%. Fund managers and insurers received 80%, banks 5% and private banks 15%. Yanlord Land (HK) is the issuer and the parent is the guarantor. Proceeds will be used for debt refinancing, general corporate purposes and to finance or refinance eligible green projects.
Studio City Finance raised $350mn via a benchmark tap of their 5% 2029s, at a yield of 4.636%, and a price of 101.5 as compared to initial guidance of 101.00-101.50. Allocations were not available for the deal yet. Proceeds will be used to partially fund the capex of the remaining project for Studio City and for general corporate purposes. The deal was upsized from $300mn considered initially.
HDB raised S$900mn via a 10Y at a yield of 1.73%, unchanged from guidance. The bonds have expected ratings of AAA, and proceeds will be used to finance HDB’s development programmes and meet working capital and debt refinancing needs. This is HDB’s third deal of the year, following a S$900mn 7Y bond at 1.37% issued in March and a S$800mn 5Y bond at 0.635% issued in January.
ABC London branch raised $300mn via a 3Y at a yield of 0.817%, 39bp inside initial guidance of T+90bp area. The bonds have expected ratings of A1, and received orders over $1.5bn, 5x issue size. Asia took 97% of the bonds and EMEA 3%. Banks booked 70%, central banks/pension funds/insurers 21%, fund managers 8%, and others 1%. Proceeds will be used for general corporate purposes.
China Water Affairs Group raised $200mn via 5Y non-call 3Y (5NC3) green bond at a yield of 5.125%, 25bp inside the initial guidance of 5.375% area. The bonds have expected ratings of Ba1/BB+ and received orders of $620mn, 3.1x the issue size. Proceeds will be used to repay its $300m 5.25% 2022s and other debt, and for working capital and projects in accordance with its green finance framework.
Jiayuan International raised $130mn via 2.75Y non-call 2Y (2.75NC2) bonds at a yield of 12.5%, 25bp inside the initial guidance of 12.75% area. The bonds have expected ratings of B3 by Moody’s and received orders of over $725mn, 5.6x the issue size. Proceeds are likely to be used for debt refinancing.
Vista Land raised $170mn via a tap of its $200mn 7.25% 2027s at a yield of 6.5%, 15bp inside the initial guidance of 6.65% area. The bonds are unrated and received orders of $250mn, 1.5x the issue size. VLL International is the issuer and Vista Land & Lifescapes is the guarantor. Proceeds of the tap will be used to refinance debt, buy and develop assets and for general corporate purposes. The original 7.25% 2027s bonds callable from July 2024 are currently trading at 104 to yield 6.45%.
Hopson Development raised $300mn via 3Y non-call 2Y (3NC2) bonds at a yield of 7%, 35bp inside the initial guidance of 7.35% area. The bonds have expected ratings of B+ by Fitch and received orders of $900mn, 3x the issue size. Proceeds will be used for debt refinancing. Asian took 98% and Europe 2%. Fund managers, asset managers and corporates were allocated 46%, banks 31% and private banks 23%.
Haitong International Securities raised $300mn via 5Y bonds at a yield of 2.139% or T+135bp, 40bp inside the initial guidance of T+175bp. The bonds have expected ratings of Baa2/BBB and received orders of $1.2bn, 4x the issue size. Proceeds will be used for refinancing and general corporate purposes. Asia took 99% of the bonds and Europe 1%. Banks booked 74%, fund/asset managers 18%, insurers 6%, and private banks, securities firms and others 2%.
Nanjing Pukou Economic Development raised $100m via 364-day credit-enhanced bonds at a yield of 2.2%, 50bp inside the initial guidance of 2.7% area. The bonds are unrated. Subsidiary Boxinyuan International will issue the bonds and the parent company will provide a keepwell and liquidity support deed and deed of equity interest purchase undertaking. The bonds also have support of an irrevocable standby letter of credit by Bank of Beijing Nanjing branch. Proceeds will be used for offshore debt refinancing and general corporate purposes.
- Greenland Holding And Greenland Hong Kong Outlooks Revised To Stable By S&P On Narrower Funding Channels; Ratings Affirmed
- Moody’s affirms Piraeus Bank’s Caa2 deposit rating and changes outlook to positive from stable
- Moody’s changes outlook on EDP to positive, affirms ratings
- Domtar Corp. ‘BBB-‘ Ratings Placed On CreditWatch Negative On Planned Acquisition By Paper Excellence
- Fitch Affirms PTTEP at ‘BBB+’; Revises Up Standalone Credit Profile to ‘bbb+’
Term of the Day
Amortizing bonds are debt instruments that pay both coupons and principal through the life of the bond. Unlike straight bonds that pay back the principal as a bullet payment at maturity, amortizing bonds pay back principal at regular intervals based on a predefined schedule prior to the maturity date. Since the principal is retired slowly over the life of the bond, the weighted average life (WAL) is keenly looked out for. Amortizing structures are more common in loans and mortgages. JSW Hydro’s debut $707mn 10NC5 bond priced on Tuesday was an amortizing bond with a WAL of 7.12Y.
“There are a number of things changing that undermine the premium put on Bunds since the euro crisis. [The EU’s bonds] are as good in credit quality as Bunds but they are issued at a higher yield. It cannibalises the demand for the Bund market.”
James Athey, fund manager at Aberdeen Standard Investments.
“The idea of Bunds as a gigantic shorting opportunity has occasionally reared its head over the past 10 years, and it’s usually ended up being a massive pain trade. When things go wrong, Bund yields fall aggressively, and I don’t see why that dynamic should change now”