The Hong Kong infrastructure and services company priced the five-year offering at 99.790 percent with a coupon of 6.50 percent to offer a yield of 6.55 percent. This was at the tight end of the revised price guidance of between 6.55 percent and 6.65 percent, or equivalent to a spread of 583.9bp over the US treasuries. This was more than 30bp to the 550bp spread guidance when the company sounded the deal to the market for the first time.

 

The company initially tried to sell the deal before the Lunar New Year, but failed to gain traction among the investors, forcing it to revisit the market after the holidays. “Given the impending holidays, the issuer made the decision to come back to the market once the investors are back on their desks,” a banker familiar with the transaction says. “In the interim during the Lunar New Year when Asia was mostly shut, there was a rally in the US and Europe, and when the Asian markets came back, it was really a question of playing catch up on that rally. We saw a string of successful transactions that were priced during the week and NWS moved quickly into that positive tone.”

 

As the banker explains, NWS received some reverse interests from accounts after the break at 6.8 percent yield and based on that, it went out to announce the transaction just after lunch time on February 2 with an initial guidance at that area. The deal attracted a strong response and within an hour, it attracted an order book of USD500 million.

 

NWS initially was looking to print USD300 million, but because of the huge demand that amounted in excess of USD3 billion from more than 150 accounts, it decided to upsize the deal amount to USD500 million. Asia accounted for 89 percent of the bonds, with the remaining 11 percent sold in Europe. Private banks and fund managers drove the transaction, taking 48 percent and 34 percent of the paper, respectively. Banks bought 14 percent and corporates four percent.

 

Issued through Rosy Unicorn Limited, the unrated bond offering was arranged by Deutsche Bank, HSBC, J.P. Morgan and Standard Chartered Bank.

NWS is a 60.38 percent owned subsidiary of New World Development and is involved in roads, energy, water, ports and logistics, facilities management, construction and transport and strategic investments. A Nomura report says the company as of end-November 2011 had a debt of HKD18.5 billion (USD2.38 billion), significantly higher than HKD6.8 billion as at end of June 2011 due to the acquisition of Hangzhou Ring Road (HZRR).

 

It notes NWS has significant amount of short-term debt coming due, which includes a HKD5 billion bridge loan arranged for the HZRR acquisition and USD225 million of 12 percent senior notes due 2015 issued by Chinese Future Corporation, which will be redeemed on February 13 this year at 107.5 percent of the principal amount. Chinese Future is an indirect wholly-owned subsidiary of NWS, which holds a 95 percent in the project company operating HZRR.