Syndicate switches gain ground
Bonds Chinese issuers shuffle lead managers on 30% of live G3 dealsBY DANIEL STANTONChinese issuers change their
bookrunners in the middle of
bookbuilding for G3 bond sales
more than a quarter of the
time, IFR research has shown.
Changes to the bookrunning
syndicate after initial guidance
is announced are practically
unheard of on bond offerings
elsewhere in the world, but
the trend has gathered pace on
offshore Chinese deals in the
past two years. The practice is
more frequent on high-yield
bonds, but has featured on
several recent investment-grade
deals, too.
So far this year, Chinese
issuers have changed their
bookrunner line-ups on 78
tranches of G3 currency bonds,
according to IFR data. This
represents 30% of the 257
Chinese offshore bond tranches
sold this year to date.
The addition of a bookrunner
midway through a live dealis usually a clear sign that
the arranger brought with it
additional investor demand.
There could be several reasons
for a bookrunner dropping
out, including failure to obtaininternal approvals, but failing
to deliver on promised orders is
the most common explanation.
“Some guys may soft-promise
they would bring X amount,
but they could not honour
the promise or didn’t like the
pricing on the day, while others
who did not commit earlier
suddenly had interest and
brought a large order,” said a
fund manager.
Some syndicate shake-upshave been more drastic than
others. In May, Shandong Gold
added CCB International, CMB
Wing Lung Bank, China Citic
Bank International, Dongxing
Securities, Huatai Securities,ICBC International, Standard
Chartered, SDG Securities (HK)
and Zhongtai International
to its original five-strong
syndicate, and still ended up
with just a US$100m issue size.
In June, property developer
Xinhu Zhongbao dropped five
bookrunners from a tap of
its existing US dollar bonds,
leaving just UBS, China Citic
Bank International and CNCB
HK Capital to finish theUS$50m reopening.
IFR data show that Chinese
brokerage Orient Securities
was most often added midway
through bookbuilding,
joining eight deals after initial
guidance had been announced
and being dropped from one.
Heungkong Securities, a unit
of privately owned Chinese
conglomerate Heung Kong,
has joined four deals during
bookbuilding so far this year.
CCB INTERNATIONAL was most
frequently dropped during
bookbuilding, having been
removed from five syndicates
this year and added to three.
Sister companies China
Construction Bank and CCB Asia
were also dropped once each.
International banks are
rarely involved in such last-
minute changes, perhaps
because capital requirements
make it extremely difficult
for them to deploy their
balance sheets, but this year
HSBC was added to one dealNews
“Adding or removing bookrunners based on
their contribution by investor engagement or
proprietary orders through their balance sheet
or trading book is going to weigh on secondary
trading for a few days, so these bonds should
underperform.”