Investors demonstrated their confidence in CMB Financial Leasing Company as they piled into its latest fund-raising amounting to US$1.2 billion, the largest bond issuance by a Chinese leasing company so far this year.

The company, through CMB International Leasing Management, on August 5 priced a dual-tranche offering including a five-year bond amounting to US$800 million. It was priced at 99.786% with a coupon of 1.875% to offer a yield of 1.920%. This was equivalent to a spread of 170 basis points over the US treasuries, which was in line with the final price guidance and 55bp tighter than the initial price range of 225bp area.

The other tranche was a 10-year bond amounting to US$400 million, which was priced at 99.325% with a coupon of 2.75% to offer a yield of 2.828%. This represented a spread of 228bp over the US treasuries, which was also in line with the final price guidance and 52bp inside the initial price range of 280bp area. This was the first 10-year bond offering from the Chinese financial institution group (FIG) space since late June this year.

As of August 8, the 10-year bond continued to perform well, tightening by more than 26bp in the secondary market, while the five-year paper remained almost unchanged.

CMB Financial provided a keepwell and asset purchase deed support to the transaction. The proceeds will be used for offshore general corporate purposes.

The deal generated strong investor demand, with the participation of high-quality real money accounts, which supported the aggressive price tightening. The order book for the five-year bond peaked at 6.1x oversubscription, while the demand for 10-year bond peaked at 9x oversubscription, thus achieving the largest order book size among Chinese leasing firms year-to-date.

The five-year bond attracted the participation of 91 accounts with 95% of the paper sold in Asia and 5% in EMEA. By type of investors, banks and financial institutions accounted for 59% of the paper, fund and asset managers 32%, and insurance companies, private banks and other investors 9%.

A total of 130 accounts participated in the 10-year bond offering, with 92% allocated in Asia and 8% in the Middle East, Africa and in offshore US. Fund and asset managers were the biggest buyers of this tranche with 61%, followed by banks and other financial institutions 26%, and insurance companies, private banks, sovereign wealth funds and other investors 13%.

Agricultural Bank of China (Hong Kong), ANZ, Bank of China, BNP Paribas, CMB International, CMB Wing Lung Bank, Shanghai Pudong Development Bank (Hong Kong) and Standard Chartered were the joint global coordinators for the transactions, while China Minsheng Bank (Hong Kong), Citi, Industrial Bank (Hong Kong) and United Overseas Bank were the joint bookrunners.