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China developers resume bond rush
Emerging Markets Policy-driven rally spurs busiest week for dollar debt since AprilBY CAROL CHAN, INA ZHOUChinese property developers
scrambled to print US dollar
bonds last week, taking full
advantage of a policy-driven
rally that some investors warned
may be short-lived.
Six developers raised a
combined US$2.2bn, marking
the busiest week for new issues
from the sector in more than
three months.
In a reversal of the recent trend,
most of the deals drew decent
demand, closing two to three
times covered, and their bonds
TRADEDûlRMERûINûTHEûSECONDARYû
market. That was a stark contrast
to new issues as recently as July
11, when a US$200m offering
from repeat issuer Agile Group
struggled to clear the market and
immediately traded wider.
Rather than a sustained
rebound, however, many market
participants saw the rush of
issuance as a sign the renewed
interest in the sector may be
temporary.“Market sentiment is
DElNITELYûMUCHûBETTERûTHANûINû
June or early July. Developers are
rushing to launch their deals as
the window may be short-lived
in a volatile market,” a DCM
banker from a Chinese bank
said.
“Moreover, many developers
are set to announce their half-
year earnings in August. They
want to complete their bond
issuance ahead of the blackout
period.”
The Chinese high-yield bond
market has rallied since mid-July
after authorities provided more
liquidity for the domestic
market and softened the
deleveraging push in the
lNANCIALûSECTORû!ûSURPRISEû
liquidity injection into the
banking sector last Monday
ADDEDûFURTHERûCONlDENCEûTHATû
China would support the
economy amid an escalating
trade war with the US.
Still, despite an improvement
in sentiment, bankers and
issuers remain realistic. All sixdevelopers structured their deals
to appeal to investors’
preferences, with short tenors or
mOATING
RATEûSTRUCTURESû!ND û
crucially, all of last week’s high-
yield issuers provided
30bp–50bp new issue
concessions.BIGGER SIZES
YUZHOU PROPERTIES ûRATEDû"A""n
""n ûLEDûTHEûLATESTûBATCHûOFû
property names last Monday,
reopening its 7.90% May 2021
senior notes offering with a tap
more than double the original
issue size.
The risk-on tone encouraged
others to rush out deals. On
Tuesday morning, SUNAC CHINA
HOLDINGS ûRATEDû"" ""n û
opened books for a two-year new
note issue and SINO-OCEAN GROUP
HOLDING ûRATEDû"AA"""nû
(Moody’s/Fitch), came out with
THREE
YEARûmOATING
RATEûNOTES
CHINA FORTUNE LAND DEVELOPMENT,
RATEDû"" ûBYû&ITCH ûDASHEDûOUTû
with a print of three-year notes
with initial guidance of 9.5% areaon Tuesday afternoon after
building a strong order book
from anchor investors.
On Wednesday, GREENLAND
HOLDING GROUP ûRATEDû"A""""n û
THEûlRSTûHIGH
YIELDû#HINESEû
property developer to issue US
DOLLARûmOATING
RATEûBONDS û
REOPENEDûTHEûûmOATERSûITû
sold last month to raise an extra
US$300m.
Then, on Thursday, China
AOYUAN PROPERTY GROUP ûRATEDû"
" ""n ûREOPENEDûITSûû
senior notes due 2020 issue for a
tap of US$175m. (See Emerging
Markets section for details of the
deals.)
The previous week, the
0EOPLESû"ANKûOFû#HINAûTOOKû
steps to ensure ample liquidity
by allowing commercial banks
to tap its medium-term lending
facility, helping them to expand
lending and increase investment
in bonds issued by lower-rated
companies onshore.
Last Monday, the central bank
unexpectedly injected
Rmb502bn (US$74bn) into theChina Tower aims for broad base
Equities World’s largest IPO in four years comes with modest cornerstone trancheBY FIONA LAUCHINA TOWER has launched its
GIANTû(ONGû+ONGû)0/ûAFTERûLININGû
up cornerstone commitments
FORûLESSûTHANûAûlFTHûOFûTHEûUPûTOû
HK$68.1bn (US$8.7bn) base deal,
gambling that markets will hold
lRMûDESPITEûTHEûSUMMERûLULL
The world’s largest telecoms
tower operator started
bookbuilding last Monday for a
mOATûTHATûISûSETûTOûSURPASSûTHEû
HK$42.6bn listing of Xiaomi in
early July as the world’s largest
)0/ûSINCEû#HINESEûE
COMMERCEû
giant Alibaba’s US$25bn US
listing in 2014. Including the
greenshoe, China Tower could
raise up to US$10bn.
The company is selling about
43.1bn primary shares, or a 25%
FREEûmOAT ûATûANûINDICATIVEûPRICEûrange of HK$1.26–$1.58 each,
valuing the company at
US$28bn–$35bn.
The deal is seen as a key test of
THEû(ONGû+ONGû)0/ûMARKETûGIVENû
the around 6% slide in the
benchmark Hang Seng Index so
far this year.
It also comes as China’s
economy has begun to lose
momentum amid a government
push to reduce debt and an
ESCALATINGû3INO
53ûTRADEûCONmICT
“July and August are
traditionally quiet months for
)0/SûASûMANYûINVESTORSûAREû
taking a summer break. This
YEAR ûHOWEVER ûMANYû)0/SûAREû
rushing out as issuers and
bankers are worried that the
trade war will bring more
uncertainty to the markets,” said
a banker away from the deal.“If China Tower gets done, it
WILLûDElNITELYûSENDûAûPOSITIVEû
SIGNALûTOûTHEû)0/ûMARKETv
4HEûmOATûGOTûOFFûTOûAûGOODûSTARTû
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
LOWûPROPORTIONûFORûAûLARGEû)0/û
from a state-owned company.
&ORûEXAMPLE û0OSTALû3AVINGSû
"ANKûOFû#HINAûSOLDûABOUTûûOFû
ITSû)0/ûSHARESûTOûCORNERSTONEû
investors for its HK$59.1bn
listing in 2016.
Hillhouse is leading with a
US$400m commitment,
followed by Och-Ziff CapitalManagement (US$300m) and
Darsana Master Fund (US$175m).
Alibaba’s Taobao China is
PLEDGINGûABOUTû(+M û#.0#û
#APITALû53M û)NVUSû0UBLICû
%QUITIESû53MûANDû"EIJINGû
Haidian District State-owned
Capital Operation and
Management Center US$98.5m.
)#"#û!SSETû-ANAGEMENT û
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 7.1 times to 8.0 times
adjusted Ebitda for 2018 and 6.
times to 7.3 times for 2019.
American Tower and
Crown Castle International,