China Development Bank International Holdings (CDBI) on July 26 priced a US$500 million bond offering, effectively re-opening the new issue space for quasi-sovereign US dollar credits as the first such benchmark transaction out of Asia-Pacific post Brexit on June 24.
The Reg S five-year deal was priced at 99.751% with a coupon of 2.25% to offer a yield of 2.303%. This is equivalent to a spread of 115bp over the US treasuries, or at the tight end of the final price guidance of 120bp area (+/- 5bp) and 30bp inside of the initial guidance of 145bp area.
The final pricing reflects a minimal premium versus its ultimate parent China Development Bank (CDB). At that level, the spread premium achieved over CDB’s prevailing US dollar bonds is the tightest among all US dollar issuances from CDB’s subsidiaries, including those guaranteed or supported by the standby letter of credit from CDB Hong Kong branch.
CDBI also achieved the largest price revision for AA-rated Asian issuers year-to-date in 2016. Riding on relatively low US treasury yields, the transaction was also one of the lowest all-in yield for a five-year US dollar issuance out of China post the UK referendum.
Considering the technical factors such as curve extension and keepwell structure premium, the latest issuance by CDBI has achieved a negative new issue concession of at least 10bp inside its fair value based off CDB’s US dollar curve.
In executing the transaction, CDBI conducted a series of roadshows in Hong Kong and Singapore ahead of the offering. It also held separate investor conference calls with European accounts, having met over 100 institutional investors in total.
On the back of positive investor feedback and a relatively stable market backdrop following the roadshows, ahead of the FOMC (Federal Open Market Committee) meeting on July 26-27, CDBI announced a five-year benchmark transaction in Asia morning of July 26 with an initial price guidance of 145bp area.
At the time of the final guidance, the total order book amounted to over US$5 billion, allowing CDBI to make a significant price revision to 120bp area (+/- 5bp). The deal was eventually printed at the tight end of the range to meet CDBI’s size and price requirements.
CDBI is a 100% owned subsidiary of China Development Bank Capital Corporation (CDBC), which in turn is owned 100% by CDB. The bonds are issued through CDBI Treasure I Limited and supported by a guarantee from CDBI. The deal also benefits from a keepwell and liquidity support deed and deed of equity purchase undertaking provided by CDBC.
Barclays, BOC International, BOCOM (Hong Kong) and UBS were the joint global coordinators for the transaction, as well as joint bookrunners and lead managers, along with Agricultural Bank of China (Hong Kong), ABC International, Bank of China (Hong Kong), BOCOM International, China Construction Bank (Asia), CCB International, Citi, ICBC (Asia), ICBC International, Morgan Stanley and Natixis.
