Three bonds flop in busy week
Bonds Picky investors steer clear of Hanwha, H&H and TewooBY FRANCES YOON,
DANIEL STANTONThree Asian issuers were
forced to cancel US dollar bond
sales last week as a glut of new
issues came up against picky
investors.
South Korea’s HANWHA GENERAL
INSURANCE pulled the plug on a
US dollar subordinated bond
on Thursday, after failing to
tighten guidance on the 10-
year non-call five from 5.5%
area.
Hong Kong-listed wellness
group HEALTH & HAPPINESS (H&H)
INTERNATIONAL HOLDINGS, rated
Ba2/BB+ (Moody’s/S&P), also
called off a US$400m combined
new issue and exchange offer
on the same day.
Chinese state-owned
commodities trading and
logistics company TEWOO GROUP
failed to cross the finish line
earlier in the week, despite
offering 8.25% on a BBB ratedtwo-year bond.
The three flops raise this
year’s tally of pulled dollar
bonds in Asia to 14, more than
the number of failed deals
in 2016 and 2017 combined,
according to IFR data.
The outcomes show that
investors can afford to pick
their spots in a market
that remains shaken by the
ongoing US-China trade war
and emerging market sell-off.
Other issuers fared better last
week, with Single A rated
AGRICULTURAL DEVELOPMENT BANK OF
CHINA, split-rated Double/Triple
B developer COUNTRY GARDEN and
Single B rated ZHENRO PROPERTIES
among those managing to
price. (See China Debt capital
markets.)
“There’s a big differentiation
going on between very good
quality, high-yield names and
weaker names at the moment,”
said a banker on one of the
deals that priced last week.“When you consider the risk
versus reward, simply paying
double digits still may not be
enough.”NOT JUST THE MONEY
Hanwha General’s deal came
up against investor concerns
over how insurance capital
securities will be affected once
Korea adopts international
accounting standards and
stricter domestic solvency
rules become effective in 2021.
(See Korea Debt capital markets.)
“I don’t think pricing was
the issue, because they were
offering about 100bp over the
recent Shinhan Tier 2s,” said
one investor who looked at the
deal.
“But there is uncertainty
over the blueprint of the new
regulatory regime. Currently,
insurance capital does not have
loss absorption, but that could
change.”
Hanwha General is notthe first Korean insurer to
pull a US dollar deal this
year. Heungkuk Fire &
Marine Insurance, rated Baa
(Moody’s), also failed to garner
momentum for a 10-year non-
call five Tier 2 offering in June
at initial guidance of 7.375%
area. The bonds were expected
to be rated Baa3.
Hanwha General Insurance
is rated A2/A/A, and the 10-
year non-call five had an
initial rating of A– from S&P.
One investor said there was
no book update before the
London open, and the final
book update was US$300m-
plus.FLAKY ORDERS
Pricing was not the main
concern on Tewoo either,
which succumbed to flaky
anchor orders and fears over
worsening trade tensions.
A banker on the deal said
Tewoo had lined up about
US$150m and was targeting
around US$200m–$300m, but
the promised demand did not
materialise.
“We agreed to go aheadLenders spurn Tata Sons pricing
Loans Tata Holdco finds few takers in syndication for US$1.5bn loanBY PRAKASH CHAKRAVARTITATA SONS, the holding company
of Indian conglomerate Tata
Group, has drawn a poor
response for a US$1.5bn
multi-tranche loan, in a sign
of resistance from lenders to
Indian borrowers pushing for
aggressive terms.
The three-tranche loan,
split between maturities of
four, five and six years, has
struggled to attract lenders
since launching general
syndication in early June,
with only Mega International
Commercial Bank committing
US$20m–$25m.
This has left the dozen
banks in the arranger group
with larger final holds than
expected, although some
admitted that the tight pricingwas always likely to pose a
significant hurdle for many
retail lenders.
“Syndicating the deal was a
steep challenge right from the
outset given how aggressively
priced it was,” said one senior
loan syndications banker in
Hong Kong. “The rarity value
of the deal could not offset the
super-tight pricing.”
The top-level blended all-in
pricing was 103bp, 104bp and
113.7bp respectively based
on a blended average interest
margin of 90bp over Libor and
a blended average life of five
years.
Tata Sons last borrowed in
its own name in the offshore
loan market in April 2007,
when it enjoyed a much better
reception.
A dozen lenders, includingseven mandated lead arrangers
and bookrunners, participated
in the US$150m seven-year
bullet loan. It paid a top
level all-in pricing of 57.5bp
based on an interest margin
of 52.5bp over Libor – before
the global financial crisis later
that year sent borrowing costs
skyrocketing.
More than a decade later,
Tata Sons returned to the
market for a US$1.5bn loan,
at the same time as other Tata
Group entities were seeking
financings.
In January, Tata Steel
mandated 21 banks for a
US$2.16bn six-year loan to
refinance short-terms loans at
one of its units in Singapore.
By early March, Tata Sons
had picked nine banks to form
the initial arranger group forthe US$1.5bn loan. Meanwhile,
Tata Steel decreased its deal to
US$1.86bn by early April after
raising US$1.3bn from a dual-
tranche bond.
Tata Steel also received a
poor response, despite a top-
heavy arranger group, with
only four banks joining in
syndication.PRICING TOO TIGHT
The liquidity freed up
among lenders following
the reduction of Tata Steel’s
refinancing should have
ensured a smooth ride for
Tata Sons. However, the new
financing proved too tight for
the retail market.
“The pricing is not
attractive to us as Tata Sons
has reported weak financial
performance and its leverageNews