HONG Kong-based conglomerate CK Hutchison Holdings tapped the euro market for its first offshore bond offering in 2018, pricing on April 10 a dual-tranche issuance totaling 1.25 billion euros (US$1.54 billion).
The Reg S deal comprised a seven-year tranche amounting to 750 million euro, which was priced at 99.495% with a coupon of 1.25% to offer a yield of 1.326%. This was equivalent to a spread of 68bp over mid-swap, or 2bp tighter than the final price guidance of the 70bp area and 12bp inside the initial price thought of the 80bp area.
The second tranche was for 500 million euros for 12 years, which was priced at 99.546% with a coupon of 2% to offer a yield of 2.043%. This represented a spread of 93bp over mid-swap, or 2bp lower than the revised price guidance of the 95bp area and 7bp inside of the initial price thought of the 100bp area.
In terms of relative value, a banker familiar with the deal says CK Hutchison offered a minimal new issue concession of less than 5bp for the seven-year tranche and slightly over 5bp for the 12-year bonds.
“In line with the market volatility that we’ve seen in February and March, paying a new issue concession has become a norm in both the US dollar and the euro bond markets and this is likely to continue until the market environment settles down and becomes stable,” the banker adds.
The euro market is not an attractive market for Asian issuers at this point in time, the banker notes, as the US dollar is still cheaper on a swap basis. But CK Hutchison requires euro and the proceeds will be used to refinance the redemption of its euro perpetual notes callable in May 2018.
The bonds, which were issued through CK Hutchison Europe Finance (18) Limited, attracted a total demand in excess of two billion euros. Barclays, BNP Paribas, Credit Agricole CIB, HSBC and ING acted at the joint bookrunners for the transaction.
S&P Global Ratings, which assigned an A- rating to the deal, expects the bond issuance to increase the CK Hutchison’s debt-to-Ebitda ratio to 3.6x in 2018 from its current base-case assumption of 3.5x. It had previously assigned 50% equity content to the soon-to-be redeemed perpetual notes, which would be replaced by the new bonds, and now S&P Global assess it as 100% debt.
CK Hutchison was one of the most active issuers in the US dollar bond market in 2017 with three transactions to raise a total of US$5.05 billion equivalent. “CK Hutchison is well-liked by investors and they will always attract strong investor appetite in any market they tap,” the banker adds.
