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Sinochem diversifies into Swiss franc bond market
Chito Santiago 1 Jun 2015

Sinochem Hong Kong (Group) Company became the first Chinese corporate to tap the Swiss franc bond market when it priced on May 21 a 250 million Swiss franc (US$266 million) issue as it diversifies its investor base.

The seven-year deal was priced at par with a similar coupon and yield of 0.76% per annum. This was equivalent to 77bp over the Swiss franc mid-swaps, or 3bp inside the initial price thought of 80bp area.

The transaction followed the first ever China Swiss franc bond deal in April 2014 by China Construction Bank Asia amounting to 300 million Swiss franc. That offering was for five years with a coupon of 1.375%.

Sinochem launched the deal following two days of investor meetings beginning May 19 and the arrangers soft-sounded an issue for a minimum amount of 150 million Swiss franc for seven years at 80bp area over Swiss franc mid-swap, which was equivalent to 140bp area over the three-month US dollar mid-swap.

Before the deal announcement, the outstanding Sinochem US dollar 4.50% due 2020 bonds were trading at a Z-spread of 135bp, while within the Swiss franc space, the paper came at a more compressed differential to oil and gas, and Chinese bank comparables than the US dollar bond market.

The order book was opened for an upsized amount of 200 million Swiss franc with the price guidance unchanged to continue to maximize the deal momentum, which saw the demand amounting to 300 million Swiss franc.

Just over an hour later, the deal size was raised to 250 million Swiss franc and the spread was tightened to 77bp over mid-swap, at which level the issue was eventually priced. The order book was dominated by asset managers, and banks and private banks, which sought to buy the geographical and issuer diversification.

The bonds, issued through Sinochem Offshore Capital Company and guaranteed by Sinochem Hong Kong, were drawn under the company’s US$3 billion global medium-term notes programme. Proceeds will be used to refinance existing debts and for general corporate purposes.

HSBC and UBS were the joint lead managers for the transaction. In tapping the Swiss franc bond market, Sinochem Hong Kong followed the footsteps of the Indian and South Korean issuers, which sold Swiss franc debt to diversify their funding sources. The company previously raised money in the US dollar and renminbi bond markets.

According to Moody’s Investors Service, which assigned an A3 rating to the bonds, Sinochem Hong Kong is 98% owned by the Sinochem Group and holds the majority of its parent’s important assets such as its exploration and production assets and oil trading business; a majority interest in a listed fertilizer company Sinofert Holdings; and Franshion Properties (China), a listed real estate company.

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