Haier enjoys sovereign support
Bonds Sovereign wealth funds among big fans of debut dollar perpetualBY CAROL CHANSovereign wealth funds and
other top-tier investors helped
HAIER GROUP to print an unrated
perpetual bond at one of the
lowest coupons on record for a
Chinese issuer.
The consumer electronics
and household appliances
maker on Thursday priced
US$1bn of senior perpetual
non-call five securities at par to
yield 3.875%, the tight end of
final guidance of 3.875%-4.00%,
and 50bp below initial guidance
in the 4.375% area.
The issue was Haier’s first in
the international bond market,
underscoring its ambitions to
expand its funding channels
after last year’s US$5.6bn
acquisition of General Electric’sappliances business.
Although many orders fell
away after the sharp cut in
price guidance, final orders for
the unrated Reg S issue stillstood at US$3bn across 141
accounts. Ahead of the release
of final guidance, orders were
over US$5bn at one point.
“The magnitude of order
contraction was quitesignificant, but it was not at an
excessive level,” said a Chinese
banker on the issue.
“Indeed, the strong support
from high-quality investors hasallowed the company to price
below the 4% psychological
barrier,” the banker said.
Asia took 90% of the bonds
and EMEA 10%. Sovereign
wealth funds and fundmanagers bought a combined
87%, banks took 8%, private
banks and other investors
purchased the rest.
According to bankers,
sovereign wealth funds, said to
include China Investment Corp
and Singapore’s GIC, accounted
for more than half of the 87%
allocation to funds - a rare
statistic in offshore Chinese
bond issues.
“Supply of high-quality non-
SOE Chinese credits was not
high, while the yields of big
SOEs were already at very tight
levels. So, Haier’s notes have
provided some premium to
investors,” the banker said.TIGHT PRICING
Some investors saw the final
pricing as tight.
“Some of our clients saw
fair value at 3.9%–4.0% and
withdrew orders because of
the tight pricing,” said a bond
salesperson.UOB sets tight AT1 benchmark
Bonds Debut deal from Singapore bank prints at tightest spreadBY DANIEL STANTONUNITED OVERSEAS BANK achieved
the tightest reoffer spread
globally for a US dollar Basel
III Additional Tier 1 offering
with its first such issue in the
currency.
The US$650m perpetual non-
call six offering drew orders
of over US$2.6bn from 150
accounts, as investors sought
the chance to gain exposure
to rare Singapore bank capital
paper.
“UOB’s latest Tier 1 offering
in the international US dollar
market is significant as it
reinforces our commitment to
engaging investors from various
markets and jurisdictions,”
said Koh Chin Chin, head of
central treasury unit at UOB.
“We chose to enter the market
now taking into account the
demand and preference from
European and Asian investors
for international subordinateddebt from high quality issuers.”
Initial price guidance was
4.15% area, with CreditSights
putting fair value at 3.9%, but
the issue priced a touch insidethat at 3.875%.
The subordinated Reg S notes
are expected to be rated Baa1/
BBB (Moody’s/Fitch), lower than
the issuer’s Aa1/AA–/AA–.
DBS Group’s 3.6% AT1s,
callable in September 2021
and rated Baa1/BBB (Moody’s/Fitch), were trading at a yield of
around 3.5% on Wednesday.
UOB, though, has its call
date in 2023, as it opted for an
unusual perpetual non-call sixstructure.
“We decided on the perpNC
structure as it is in line with
our strategic objective of
staggering UOB’s bond maturity
profile,” said Koh. “It also
provides a more attractive yield
to investors via a longer call-date instrument.”
Accounting for the extra
time to call, compared with
DBS’s AT1, UOB printed flat to
or slightly inside fair value.
If UOB does not call the
bonds on the first reset date,
the distribution rate resets
to the prevailing five-year US
dollar swap rate, plus the initial
spread of 179.4bp, with no
step-up, and every five years
thereafter. That was the tightest
spread for a dollar AT1 from
any issuer, beating the 239bp
spread over swaps that DBS
achieved for its issue last year.
“Singapore banks are as low-
risk as it gets, and there are few
Double A banks globally,” said a
DCM banker.NO CHINESE INDIGESTION
In the month before UOB’s
issue, three Chinese banks
printed almost US$10bn of AT
paper, but that seemed to have
little impact on the SingaporeNews
“UOB’s latest Tier 1 offering in the international
US dollar market is significant as it reinforces our
commitment to engaging investors from various
markets and jurisdictions. We chose to enter the
market now taking into account the demand and
preference from European and Asian investors for
international subordinated debt from high quality
issuers.”“The magnitude of order contraction was quite
significant, but it was not at an excessive level.
Indeed, the strong support from high-quality
investors has allowed the company to price below
the 4% psychological barrier.”