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Property developer New World China Land is terming out the tenor of its debt obligation as part of its liability management programme, as it undertook a tender offer and printed a tightly-priced new bond offering.
The company, which was privatized in 2016, priced on January 10 a US$600 million 10-year issue with a similar coupon and re-offer yield of 4.75%. This was at the tight end of the final price guidance of 4.875% area (+/- 12.5bp).
The Reg S unrated transaction, as explained by a banker familiar with the deal, made sense for New World Development Company, which now owned 100% of New World China Land, to take out older, shorter-dated bonds and replaced them with new, longer tenor paper with lower coupon. The proceeds of the new bonds will be used to refinance the outstanding US$900 million notes due 2019, and for general corporate purposes.
The overall transaction was announced on January 5, and the arrangers spent the next two days explaining the rationale of the exercise, working with investors under the allocation code mechanism, which was the strategy employed in other liability management exercises, such as that for International Container Terminal Services Inc (ICTSI) of the Philippines in 2016.
The mechanism gives priority allocation to the investors who tendered their old securities and at the same time intend to reinvest in the new issue.
Following the release of the US non-farm payroll numbers on January 6, the arrangers formally announced the new bond issue on the morning of January 9 with calls to investors. The deal generated a strong market feedback over the course of the afternoon and by January 10, they announced an initial price guidance at 5.25% area. On the back of the strong investor demand, the price guidance was tightened to 4.875% area (+/- 12.5bp), eventually printing the deal at the tight end.
The final order book amounted to over US$2.7 billion from 215 accounts, with 93% of the bonds allocated in Asia and 7% in EMEA (Europe, Middle East and Africa). By type of investors, fund and asset managers were the biggest buyers with 46%, followed by private banks 29%, banks 21%, and other investors 4%.
HSBC and J.P. Morgan were the joint bookrunners for the new bond offering, while HSBC was sole dealer manager for the tender offer.
Photo courtesy of New World China Land.
12 Jan 2017