Korean IG rebound 08 Clifford Capital CLO 08 Temasek returns 09
an escalating Sino-US trade
conflict.
“July and August are
traditionally quiet months
for IPOs as many investors
are taking a summer break.
This year, however, many
IPOs are rushing out as issuers
and bankers are worried the
trade war will bring more
uncertainty to the markets,”
said a banker away from the
deal.
“If China Tower gets done, it
will definitely send a positive
signal to the IPO market.”
The float got off to a good
start last week, with the books
covered after one day. This was
particularly important given
the relatively small cornerstone
tranche.
Ten cornerstone investors
have agreed to invest about
US$1.4bn in total, covering
16%–20% of the deal – an
unusually low proportion for
a large IPO from a state-owned
company. For instance, Postal
Savings Bank of China sold
about 70% of its IPO shares to
cornerstone investors for its
HK$59.1bn listing in 2016.
Hillhouse is leading with
a US$400m commitment,
followed by Och-Ziff Capital
Management (US$300m)
and Darsana Master Fund
(US$175m).
Alibaba’s Taobao China is
pledging about HK$785m,
CNPC Capital US$100m, Invus
Public Equities US$100m and
Beijing Haidian District State-
owned Capital Operation and
Management Center US$98.5m.
ICBC Asset Management,
Wallong (Hong Kong), a unit
of China National Machinery
Industry Corporation, and SAIC
Motor HK Investment have each
committed to invest US$50m.DIVIDEND RATIO
The price range represents a
multiple of 7.1x–8.0x adjusted
Ebitda for 2018 and 6.5x–7.3x
for 2019.
American Tower and
Crown Castle International,
both US-listed, and India’s
Bharti Infratel are trading at
18.8x, 19x and 7.5x Ebitda,
respectively, for the next 12months, according to Thomson
Reuters data.
“The EV/Ebitda of China
Tower is very competitive
compared to the listed peers.
This helps compensate for the
not-so-high dividend payout
ratio of the company,” said a
person close to the deal.
China Tower plans a dividendpayout ratio of at least 50%
of its annual distributable
net profit, according to the
prospectus. That is lower than
some investors would like.
“Although the company is
projected by its underwriters
to enjoy a 10%–20% growth
rate in the future, we do think
this investment should alsogenerate a decent dividend
yield. A payout ratio of at
least 70% could be a more
comfortable level,” said a fund
manager.
China Tower was formed in
2014 from the tower operations
of China’s three state-backed
telecoms providers – China
Mobile, China Telecom and
China Unicom – in a bid to
streamline operations and
reduce duplication.
As of the end of June, the
company operated 1.9 million
tower sites and had 2.8 million
tenants. It plans to use 60%
of the proceeds for capital
expenditure, 30% for loans
repayment and 10% for general
working capital.
The deal will price on August- Share trading will start on
August 8.
CICC and Goldman Sachs are
the joint sponsors for float.
The two banks are also joint
global coordinators and joint
bookrunners with Bank of
America Merrill Lynch and JP
Morgan. There are 11 other joint
bookrunners.
building a strong order book
from anchor investors.
On Wednesday, GREENLAND
HOLDING GROUP, rated Ba1/BB/
BB–, the first high-yield Chinese
property developer to issue
US dollar floating-rate bonds,
reopened the 2021 floaters
it sold last month to raise an
extra US$300m.
Then, on Thursday, China
AOYUAN PROPERTY GROUP, rated
B1/B+/BB–, reopened its 6.35%
senior notes due 2020 for a tap
of US$175m.
The previous week, the
People’s Bank of China took
steps to ensure ample liquidity
by allowing commercial banks
to tap its medium-term lending
facility (MLF) loans, helping
them to expand lending
and increase investment in
bonds issued by lower-rated
companies onshore, sources
told Reuters at the time.
Last Monday, the central
bank unexpectedly injected
Rmb502bn (US$74bn) into the
financial system via its one-year
MLF, even though no MLF loans
were due to mature on Monday.
Also last Monday, the State
Council announced that it
would adopt a more vigorous
fiscal policy to help tackle
external uncertainties, in an
apparent reference to the
current trade tensions with
the US.SHORT-TERM BOOST
Market participants reckoned
that the policy adjustment was
unlikely to provide a long-term
stimulus to the China high-
yield sector.
“The support (to the bond
market) will be short term,”
said a Hong Kong-based fund
manager. “The painstaking
deleveraging effort is being put
off, but China will – and has
to – tackle the issue at a moreappropriate time.”
A Hong Kong-based fund
manager from a Sino-foreign
joint venture was also sceptical
about the recent rebound.
“The credit fundamentals
remain unchanged – for
example, developers’ mounting
onshore refinancing pressure
remains imminent, especially
for the Single B names,” he said,
adding that the strong recovery
in the past two weeks was partly
driven by short covering.
Moreover, concerns over
pricing have made some
developers hesitate. For
instance, COUNTRY GARDEN
HOLDINGS, which the NDRC
announced recently had
registered an offshore bond
quota, is heard to be still in
discussion with investors.
The last time so many
Chinese developers were in the
dollar market was the week
beginning April 16, when 12deals printed. Bankers expect
supply from the sector this
time would be much weaker
than that seen in April.
The April deluge of US
dollar offerings from Chinese
developers, combined with
fears of rising default risks,
practically shut down the China
high-yield market for the past
two months.
A DCM banker at a Chinese
securities firm noted that
developers have so far utilised
most of their offshore debt
quotas from the NDRC.
Moreover, the blackout period
around interim results will also
push some names to wait until
September before launching
new deals.
Some recent issuers,
including Yuzhou and Sunac,
have now used up all their
offshore debt issuance quotas,
and applying for new ones will
take some time. For daily news stories
visit http://www.ifrasia.com“Many IPOs are
rushing out as issuers
and bankers are
worried the trade
war will bring more
uncertainty to the
markets.”