Qantas takes off for long haul
Loans Australian airline seeks 10-year money from asset-backed borrowingBY CHIEN MI WONGQANTAS AIRWAYS is seeking an
asset-backed corporate loan
of up to A$300m (US$216m),
mimicking the structure of a
financing it completed under
an innovative loan programme
last October and testing lenders’
appetite for a longer maturity.
Australia’s largest airline is
aiming to raise a 10-year bullet
facility led by BNP Paribas,
National Australia Bank and
Standard Chartered – two years
longer than the eight-year tenor
on a A$350m bullet loan raised
last October.
“If you look at the Australian
loan market this year, the
trend of pushing out tenors is
quite clear,” said a Singapore-
based syndicated loans banker.
“And given how well Qantas
has been performing for the
past few years, it’s a goodopportunity for them to test
the market at this tenor.”
Although the 10-year tenor
may not be palatable to many
banks in Asia, there are still
some – particularly Chinese
banks flush with liquidity –
that would be willing to take
exposure.
“Of course we are very
happy to have Qantas with us,”
said another Singapore-based
syndicated loans banker at a
Chinese bank. “It’s a quality
name and there’s no issue with
the long tenor at all.”
Chinese lenders committed
significant amounts to the
A$350m eight-year bullet loan
Qantas completed in October.
That loan was the world’s first
aviation financing of its kind,
carrying a flexible security
package that allowed Qantas to
change the planes and aircraft
engines used as collateral.Bank of China, China
Construction Bank and
Industrial & Commercial Bank
of China joined with A$80m
combined, nearly a quarter
of the total deal size. Seven
other lenders, including Asian,
European and US banks,
committed A$200m combined.
BNP Paribas was the sole
structuring bank, while
NAB was the joint MLAB of
the A$350m facility, which
refinanced part of A$442m
in secured aircraft and other
amortising debt maturing in
the financial year ending in
June 2018.RETURN FLIGHT
The new loan is the second
series under the same
programme and its structure is
similar to the first transaction.
It carries interest margins tied
to the loan-to-value ratios,giving the borrower more
flexibility whenever collateral
is added or removed, leading
to pricing and/or collateral
adjustments.
“The borrower is able to
monetise its mid-life aircraft
and because of the structured
nature, pricing is extremely
tight,” the loans banker said.
The margins on the latest
loan are 175bp, 160bp and
145bp over BBSY for LTV ratios
of 75%–80%, 65%–75%, and
less than 65%, respectively.
Lenders can participate at three
ticket levels: MLAs receive a
participation fee of 90bp for
commitments of A$40m or
more, while lead arrangers earn
80bp for tickets of A$30m–
$39m and arrangers receive
70bp for A$20m–$29m.
Pricing details on the
October loan are not known,
but a recent unsecured loan
for Qantas provides a good
comparison. In April, Qantas
closed a A$325m five-year
refinancing, which was
increased from the A$250mSinopec, CGNPC fill up offshore
Bonds Investors see high-quality Chinese SOE credits as safe assets in market turmoilBY CAROL CHANTwo of China’s top state-owned
enterprises received healthy
demand for new offshore
bonds last week, defying
emerging markets turmoil and
the ongoing US-China trade
dispute.
Both locked in tight pricing
as investors sought a safe haven
in choppy market conditions,
although order books failed to
reach the dizzy oversubscription
levels of past years.
CHINA GENERAL NUCLEAR POWER
CORPORATION, rated A3/A–/A,
on Tuesday priced US$1.18bn-
equivalent dual-currency
three-tranche Reg S bonds,
kicking off supply from central
SOEs following the summer
holidays and first-half corporate
earning announcements.
The next day, CHINAPETROCHEMICAL CORPORATION
(Sinopec Group), rated A1/
A+ (Moody’s/S&P), printed
US$2.4bn four-tranche 144A/
Reg S bonds with minimal new
issue concessions.
In the meantime, CHINA
SOUTHERN POWER GRID and CHINA
STATE SHIPBUILDING CORPORATION
have picked banks for proposed
offshore bond sales and are
likely to tap the market this
month.
“High-quality Chinese SOEs
are always in demand and it is
just a problem of pricing,” said
a banker close to CGNPC and
Sinopec deals.
He admitted the rout in
emerging markets, global trade
tensions and tight pricing had
dampened investor sentiment,
but said the two deals still
attracted a good response.
“In such a market, you can’texpect to exceed US$10bn of
orders like in the good old days,
but demand was still healthy
and big institutional investors
including central banks
and sovereign wealth funds
participated,” he said, referring
to Sinopec’s issue.
Final orders for Sinopec’s four-
part issue were over US$3.725bn
with US investors actively
participating in the deal. (See
China Debt capital markets.)
Asia’s largest refiner priced
US$750m 3.75% five-year,
US$500m 4.125% seven-year and
US$750m 4.25% 10-year notes at
110bp, 135bp and 145bp over
Treasuries, respectively, inside
initial guidance of 125bp area,
145bp area and 160bp area. A
US$400m 4.60% 30-year tranche
priced 5bp inside 4.65% area
guidance.
The issue size fell slightlyshort of an informal US$2.5bn-
$3bn target, partly because of
the tight pricing.
“Sinopec is more concerned
about the pricing than the issue
size as it has a strong balance
sheet and plenty of funding
channels,” the banker said.
“The deal is indeed more of a
yearly exercise and it wants to
achieve a reasonable curve for
its bonds and is reluctant to
give too much premium.”
Indeed, Sinopec’s IPTs
were already relatively tight,
especially the five and seven-
year tranches, which have
repriced Sinopec’s secondary
curve 1bp-3bp tighter on the
day of bookbuilding.
At final pricing, the seven
and 10-year tranches only
offered about 3bp new issue
concession while the five-year
tranche priced without anyNews