ChemChina attracts strong demand in latest bond deal

China National Chemical Corporation (ChemChina) made a quick return to the international debt capital markets just less than two months after printing a perpetual capital security – this time pricing on July 12 a three-tranche offering totalling US$3 billion.

The Reg S deal comprised a three-year bond amounting to US$500 million, which was priced at 99.923% with a coupon of 3% to offer a yield of 3.027%. This represented a spread of 150bp over US treasuries, or at the tight end of the final price guidance of between 150bp and 155bp, and 35bp inside of the initial guidance of the 185bp area.

The second tranche was for US$1.5 billion for five years, which was priced at 99.855% with a coupon of 3.50% and re-offer yield of 3.532%. This was equivalent to a spread of 165bp over US treasuries, or at the low end of the final price guidance of between 165bp and 170bp, and also 35bp tighter than the initial range of the 200bp area.

The final tranche amounted to US$1 billion for 10 years, which was priced at 99.570% with a coupon of 4.125% to offer a yield of 4.178%. This represented a spread of 185bp over US treasuries, which was also at the tight end of the final price guidance of 185bp and 190bp, and 35bp inside of the initial guidance of the 220bp area.

The bonds are issued through CNAC (HK) Finbridge Company and guaranteed by ChemChina. Proceeds will be used to refinance existing debt and for general corporate purposes.

Similar to the US$600 million perpetual securities that ChemChina priced on May 24, the latest transaction garnered a robust investor response as it generated a total demand in excess of US$11.7 billion. The three-year bonds secured an order book of over US$3.6 billion from 200 accounts with 72% of the paper sold in Asia and 28% in EMEA. Fund managers accounted for 44% of the bonds, banks 39%, private banks and corporates 11%, and sovereign wealth funds, insurance companies and pension funds 6%.

The five-year bonds attracted the biggest demand in the offering with US$5.3 billion worth of orders from over 300 accounts. A big chunk of the paper was also allocated in Asia at 75%, while the remaining 24% was distributed in Europe and 1% in US offshore accounts. Fund and asset managers took 55%, banks 34%, insurance companies and pension funds 7%, and private banks and other investors 4%.

The order book for the 10-year bonds amounted to over US$2.8 billion from 170 accounts with 67% sold in Asia and 33% in EMEA. Fund managers were also the biggest buyers as they accounted for 44%, followed by banks with 36%, sovereign wealth funds, insurance companies and pension funds 15%, and private banks 5%.

S&P Global Ratings believes the bond issuance will have a minimal impact on ChemChina’s cash flow and leverage ratios, given that the company will mainly use the proceeds to refinance existing debt. It says the bonds have no financial covenants and may be redeemed early under a number of circumstances, including a change of control, breach of undertakings and a relevant indebtedness default event.

In early June, ChemChina announced that it has acquired 94.7% of Swiss pesticides and seeds group Syngenta, and intends to delist the shares from the Swiss Exchange and New York Stock Exchange.

BNP Paribas, BoC International, China CITIC Bank International, Credit Suisse, HSBC and Morgan Stanley acted as the joint global coordinators for the transaction, as well as joint bookrunners along with China Industrial Securities International, Credit Agricole CIB, Industrial Bank Company (Hong Kong), Natixis, Rabobank, Shanghai Pudong Development Bank Company (Hong Kong) and UniCredit.