China SOEs diversify into euros
Bonds Two issuers pay for diversification, but China banks remain main buyersBY CAROL CHANA desire to expand funding
channels and low nominal
coupons have attracted some
Chinese corporate issuers into
the euro bond market.
Last week, state-owned pair
TIANJIN RAIL TRANSIT GROUP and
CHENGDU XINGCHENG INVESTMENT
GROUP raised a combined €900m
(US$1.1bn) from their first euro-
denominated bond issues in a
relatively quiet week for the
Chinese G3 bond market.
Neither has a strong need
for euros, but both wanted to
expand their funding channels
and investor bases, despite
having to pay higher funding
costs than in US dollars,
according to bankers on the
deals.
Tianjin Rail, rated A3/A–/A,
priced €400m 4.25-year 1.625%euro Green bonds at mid-swaps
plus 145bp, slightly tighter
than initial guidance of 155bp
area.
Xingcheng Investment,
one of the financial vehicles
of Chengdu municipal
government in Sichuan
province, priced €500m of
senior unsecured bonds in two
tranches.
The company, with a BBB+
Fitch rating, priced 2.50%
€365m three-year bonds at mid-
swaps plus 250bp, inside initial
guidance of 265bp area. It also
priced €135m five-year bonds
at mid-swaps plus 285bp, flat to
initial guidance.
Both issuers previously issued
US dollar bonds, but it was the
first time for them to tap the
euro bond market.
They add a recent run of
euro issues from China’s state-owned enterprises, including
a €500m seven-year from
China General Nuclear Power
Corporation in December and
a €1.2bn long four-year from
China National Chemical
Corporation (ChemChina)
earlier this month.
“The issuer [Xingcheng]
wants to issue euro bonds
because it wants to have
financial innovation for its debt
instruments, which could help
it to expand different funding
channels and investor base,”
said a banker on the deal.
The company was not
concerned about having to pay
more than it would have for
dollar bonds, she pointed out.
Cross-currency swaps put
Xingcheng Investment’s
implied costs at around 100bp
above its US dollar notes,
according to the same banker.It is not known whether either
issuer planned to swap the
proceeds or keep them in
euros.CHINESE BANK SUPPORT
Euro-denominated bonds carry
very low nominal coupons,
allowing the issuers to lower
their debt service costs, said
one credit analyst.
He said SOE officials were
also focused on expanding
overseas funding channels,
adding that it also aligned
with the government’s “going
global” policy.
But euro investors are not
always convinced. The main
buyers of both the Xingcheng
and Tianjin Rail new issues
were said to be Chinese banks.
Final statistics on the two
issues were not disclosed at
the time of writing. Orders
were said to be over €1bn for
Tianjin Rail at the release of
final guidance, while those for
Xingcheng Investment were
over €750m.Noble sweetens workout offer
Restructuring Commodities trader makes concessions to shareholders, perp investorsBY DANIEL STANTONStruggling commodities trader
NOBLE GROUP moved closer to
restructuring its liabilities with
the signing of an agreement
with holders of around
half its senior debt, having
improved the terms for some
stakeholders.
An ad hoc group representing
46% of the senior claims
has signed a restructuring
agreement. In addition, Deutsche
Bank has signed the agreement
and ING Bank is seeking internal
approval to do so. The two
banks together represent a
further 4% of existing senior
claims and will participate in
a new US$700m trade finance
facility.
Noble is in touch with
holders of a further 15% of the
existing senior claims, who
have indicated broad support
for the proposed restructuring,according to a stock exchange
filing.
The group’s 2022 bonds rose
around three points on the
announcement of the updated
restructuring proposal, andwere quoted at a cash price of
53 on Thursday.
The offer for senior creditors
is unchanged from an earlier
proposal. They will receive a
combination of equity in a new
Noble holding company and
bonds issued by different parts
of the group, which will be splitinto the trading business and a
unit which holds Noble’s assets.
For the restructuring
proposal to go ahead requires a
vote of senior creditors holding
at least 75% of the debt, ofwhich 75% must vote in favour.
Noble shareholders must also
approve, since the restructuring
will require spinning off assets.
Shareholders and holders
of Noble’s perpetual securities
have been offered improved
terms.
Abu Dhabi-based investmentfirm Goldilocks, which holds an
8.2% stake in Noble, on March
9 complained that the earlier
proposal was too generous
to the existing management,
which was set to receive a 10%
stake that could rise to 20% if
performance targets were met.
Other shareholders would have
been diluted to a combined
10% stake, with senior creditors
taking 70%.
“After having lost almost
US$5bn in FY2017, it is
unacceptable for Noble
directors to agree to any
upfront share allotment to
Noble’s management,” said
a Goldilocks spokesperson.
“Management compensation
should be benchmarked to
future profits, and should
contain provisions for clawback
in case such profits are reversed
in subsequent years.”
Now, other shareholders
will be able to subscribe to halfNews
“After having lost almost US$5bn in FY2017,
it is unacceptable for Noble directors to agree
to any upfront share allotment to Noble’s
management. Management compensation
should be benchmarked to future profits, and
should contain provisions for clawback in case
such profits are reversed in subsequent years.”