News
US investors revive Asia bonds
Bonds AIA, Baidu reopen Asian primary, driven by US demandBY DANIEL STANTONAsian issuers returned to the
offshore bond market after
a two-week absence, but US
investors are likely to be critical
to the success of primary issues
for months to come.
On Tuesday, insurer AIA GROUP
(A2/A/A+) completed the first
widely marketed dollar bond
from Asia since March 11,
followed a day later by Chinese
internet giant BAIDU, rated A3/A
(Moody’s/Fitch), with a US$1bn
dual-tranche deal.
Both deals were marketed
to US investors, who drove the
trades and took the largest part
of each offering, continuing
the buying spree that saw the
US high-grade market break
records last month.
The success of a US$1bn
10-year deal for A3/A– (Moody’s/
S&P) rated insurer AFLAC on
Monday prompted some US
investors to approach AIA about
issuing, and the pan-Asianinsurer sold US$1bn of 3.375%
10-year bonds at 99.706 to yield
3.410%, equivalent to Treasuries
plus 275bp.
Recent high-grade issuers
in the US market have beenwilling to pay new issue
concessions of as much as
50bp–75bp to achieve chunky
deal sizes, demonstrate market
access and ensure they are
cash-rich in case the economic
downturn lasts longer than
expected.
Initial price thoughts for the
AIA trade were Treasuries plus
325bp area, which was around
75bp back of fair value on its
existing 2029 bonds, quoted at
Treasuries plus 245bp, though
those are fairly illiquid. Ten-year bonds from Prudential and
Met Life were seen at Treasuries
plus 270bp, while Aflac’s 2030s
were at 280bp.
The new issue premium
was seen at 20bp–25bp over ahypothetical 10-year point on
AIA’s curve.
The sharp decline in US
Treasury yields in recent
months meant that the coupon
and yield were both lower than
those on AIA’s 10-year bonds
issued last year, when it printed
3.6% bonds at 99.493 to yield
3.661%.
AIA was spun off from US
insurance giant AIG following
the last financial crisis and as
such has a big following in the
US. It has tended to focus itsmarketing efforts for bond sales
there rather than in Asia, and
Asian buyers had little chance
to get involved this time as it
announced IPTs in New York’s
morning session on Tuesday.
Books were over US$1bn within
an hour, peaking at US$6.4bn,
and the deal had priced by
midday.
Despite the timing, there
was healthy support from
global accounts, not just US
investors.
“Since everyone started
working from home, there is
less division between working
hours and non-working hours
than in the past, so that might
have resulted in more credible
demand from Asia,” said a
source close to the deal.
Asian investors put in sizable
orders for the 144A/Reg S
offering, but in the end were
allocated less than 20% of the
book. No official statistics were
released, but US investors drove
the deal, with some institutions
placing US$100m-plus orders.
“If this had been a Reg
S-only deal, it wouldn’t have
happened,” said one DCM
banker.BUMPER BOOK FOR BAIDU
On Wednesday, Chinese
internet search company Baidu
sold US$1bn of SEC-registered
bonds in two tranches, in
a deal that closed around
10x subscribed and drew
particularly strong US orders.
A US$600m five-year 3.075%
tranche priced at 99.793 to
yield 3.12%, equivalent to
Treasuries plus 275bp, inside
initial price thoughts of 312bp
area. A US$400m 10-year
3.425% tranche priced at 99.
to yield 3.48%, or Treasuries
plus 285bp, inside IPTs of 325bp
area.
Baidu’s outstanding 2024s
were seen at Treasuries plus
250bp and its 2028s at 261bp,Follow-ons gather pace 06 Downgrade epidemic 07 PTT Global finds home support 07
4 International Financing Review Asia April 4 2020“A 14-hour bookbuild is as anachronistic as a
seven-day roadshow. Three months ago seems
like a different world.”B 1 HZVLQGG