Evergrande prints largest Chinese senior high yield USD bond

One of China’s major residential developers, China Evergrande Group, returned to the US dollar bond market when it priced on March 17 a dual-tranche offering totalling US$1.5 billion. This is the largest US dollar senior note transaction ever in the Chinese high yield debt capital market space and one of the largest by an Asian real estate company.

The Reg S deal comprised of a three-year US$500 million bond, which was priced at par with a similar coupon and re-offer yield of 7%. This was in line with the final price guidance and 50bp inside of the initial guidance of the 7.50% area.

The other tranche was a five-year non-call three bond amounting to US$1 billion, which was also priced at par with a similar coupon and re-offer yield of 8.25%. This was likewise in line with the final price guidance and 25bp tighter than the initial guidance of the 8.50% area.

The transaction attracted a combined order book of US$5.4 billion, with the three-year tranche garnering in excess of US$3.1 billion from 153 accounts. In terms of geographic distribution, 94% of the bonds were sold in Asia and 6% in EMEA. By type of investors, fund managers accounted for 46%, banks 41% and private banks 13%.

The five-year tranche secured a total demand of over US$2.3 billion from 140 accounts with 95% of the paper distributed in Asia and 5% in EMEA. Private banks were the biggest buyers with 38%, followed by banks with 36% and fund managers 25%.

Proceeds from the transaction will be used to refinance existing indebtedness. Credit Suisse, China Merchants Securities (Hong Kong) and Haitong International acted as joint bookrunners and lead managers for the transaction.

Franco Leung, vice-president and senior credit officer at Moody’s Investors Service, which assigned a B3 rating to the bond, says the issuance will improve Evergrande’s debt maturity and liquidity profiles.

In its filing to the Hong Kong stock exchange regarding the bond issuance, Evergrande says since June 30 2016, the group has incurred additional debt in its ordinary course of business to finance its operations as well as to refinance its short-term debt. Subsequent to June 30 2016 and up to March 3 2017, the group has incurred additional material borrowings (net of repayments) in the aggregate amount of not less than 165 billion yuan (US$24 billion).


21 Mar 2017


Capital Markets

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