NWD, Huaneng Launch $ Bonds; HKAA’s $1.5bn Perps 10x Covered; CS Upgraded to Baa1; Vedanta’s $ Bonds Inch Up S&P and Nasdaq closed 1.1% and 1.3% higher with DAX and CAC also higher by 0.7% and 1.1%. On the data front, China’s Caixin/Markit Manufacturing PMI surprised at 54.9 from October’s 53.6 while both the US and Germany’s ISM and PMI Manufacturing showed resilience at 57.5 and 57.8 respectively. Eurozone headline and core CPI dipped -0.3% MoM last month. Sentiment was also lifted with the unveiling of a $908bn US bipartisan congressional relief bill to support US small businesses, the unemployed and airlines. The announcement led the US 10Y and 30Y Us Treasury yields to rise 7bp and 9bp. In the UK, the government said that its telecoms operators will be banned from installing new 5G equipment made by Huawei after September 2021. US IG CDS spreads tightened 0.15bp and HY spreads widened 1.2bp. EU main CDS spreads were 2.6bp tighter while crossover CDS spreads tightened 14bp. Asia ex-Japan CDS spreads were tighter by 1.3bp and Asian equities have opened slightly higher with the Shanghai Composite up 0.2%, KOSPI up 1.4%, IDX up 0.7% while Straits Times and Hang Seng were down 0.5% and 0.3% respectively. Bond Traders’ Masterclass Sign up for the upcoming sessions on Understanding New Bond Issues & Credit Rating at 4PM Singapore/HK time today and Using Excel to Understand Bonds tomorrow, December 3. These are more advanced sessions focused on the primary markets, credit ratings and using Excel for bond calculations. These modules are specially curated for private bond investors and wealth managers. Thursday’s session has limited seats as it is a hands-on interactive session conducted by ex-Credit Suisse trader George Thomas so do sign up before seats sell out. Click on the image below to register. New Bond Issues Philippines $ 10.5Y/25Y at T+100bp/3% area New World Development $ PerpNC3 at 5.25% area China Huaneng $ PerpNC3/PerpNC5 at 3.3%/3.55% area Sichuan Languang Development $ 2.25Y at 10.875% area
Fosun International raised $300mn via a tap of their 5.95% 2025s at a yield of 5.4%, 50bp inside initial guidance of 5.9% area. The bonds have a BB rating and received orders of over $2.2bn, ~7.3x issue size. Fund managers and asset managers bought 87%, banks 10% and private banks 3%. Asia took 76% and the rest went to EMEA. Proceeds will be used to refinance some of the Chinese conglomerate’s existing offshore debt, including funding a concurrent cash tender
offer for its $254mn 6.875% bonds due 2021 and its $1.297bn 5.25% bonds due 2022. The company is offering $1,008.75 and $1,014.25 plus accrued and unpaid interest for each US$1,000 in principal amount for the 2021s and the 2022s. Kaisa Group raised $250mn via a 364-day sustainable bond at a yield of 7%, 50bp inside initial guidance of 7.5% area. The bonds have an expected B+ rating by Fitch and received orders over $2.65bn, 10.6x issue size. Proceeds will be used for debt refinancing. The issue comes alongside a concurrent tender offer for two of its outstanding bonds. They have launched a tender offer for $224.613mn of their 6.75% 2021s and $379mn 11.75% 2021s. The purchase prices are $1,006 and $1,018 respectively plus accrued and unpaid interest, for each $1,000 in principal. Commonwealth Bank of Australia too has launched tender offers on seven of its dollar/euro bonds on Tuesday. Fantasia Holdings raised $120mn via a tap of their 9.875% 2023s at a yield of 9.95%, 50bp inside initial guidance of 10.45% area. The bonds have an expected B+ rating by Fitch and received orders of over $1.25bn, 10.42x issue size. The issuer is rated B2/B/B+ and proceeds will be used for offshore debt refinancing. Moody’s Upgrades Credit Suisse to Baa1 from Baa2 Moody’s has upgraded the rating of Swiss bank Credit Suisse to Baa1 from Baa2 and has changed the outlook to stable from positive on the back of a strengthening credit profile. The rating agency considered the bank’s profitability as stable due to a lower cost base and lower funding costs. It also viewed the revenue growth, stable earnings and lower risk profile positively. The restructuring of the bank between 2015 and 2018 has also lowered its reliance on less predictable revenue items, and has improved the returns and operating leverage. The bank has maintained “superior liquidity” and “solid funding profile” the rating agency said. The rating action includes the following: Bank’s senior unsecured debt ratings upgraded to Baa1 from Baa2 Long-term senior unsecured debt and deposit ratings of its subsidiary, Credit Suisse AG (CS), upgraded to Aa3 from A1 Baseline Credit Assessment (BCA) upgraded to baa1 from baa2 and Adjusted BCA to upgraded to baa1 from baa2 Long-term Counterparty Risk (CR) Assessment upgraded to Aa3(cr) from A1(cr) In related news, Moody’s affirmed the rating of another Swiss bank, UBS at Aa2 reflecting its strong capital position and active risk management by the bank. The
bonds of the Credit Suisse were stable. Its 6.25% and 7.5% perps were up ~0.1 at 110.1 and 111.8 respectively. HK Airport Authority Raises $1.5 Billion via Two Tranche Perps 10x Covered HK Airport Authority (HKAA) raised $1.5bn via perpetual non-call 5.5Y (PerpNC5.5) bonds and perpetual non-call 7.5Y (PerpNC7.5) bonds. It raised $750mn via the PerpNC5.5 to yield 2.1%, 65bp inside initial guidance of 2.75% area and $750mn via the PerpNC7.5 to yield 2.4%, 70bp inside initial guidance of 3.10% area. The bonds are rated AA by S&P and met with strong investor demand with orders of over $15.5bn, ~10.3x issue size. Proceeds will be used to fund capital expenditure, including the construction of a third runway, and for general corporate purposes. The coupons will reset and have a 300bp step-up if the perps are not called on the first call/reset date of June 8, 2026 and June 8, 2028 for the PerpNC5.5 and PerpNC7.5 respectively. The issuer has an optional redemption (in whole and not in part) at par on any business day on or after three months before the first reset date. The bonds have an optional distribution deferral on a cumulative and compounding basis, subject to a dividend stopper and 3-month look-back distribution pusher (Term of the day, explained below). The dividend stopper is applicable on dividends, distributions, redemptions, reductions, cancellations, buy-back, acquisitions or any other discretionary payments related to Junior and Parity Securities; they also have a dividend pusher with no deferrals allowed if dividend, distributions or other payment were paid or declared on parity or junior securities and such had been redeemed within a 3-month look-back period. The solid response to HKAA’s perp issuance has led other non-financial corporates to launch perpetual issues with new deals from Hong Kong-based real estate developer New World Development and Chinese state-owned electricity company China Huaneng. HKAA’s existing USD 3.45% 2029s were down 0.48 to 112.32, yielding 1.83%. Vedanta, DP World Eye Stake in SCI, Vedanta’s Dollar Bonds Rally Vedanta and Dubai’s DP World have shown interest in acquiring a stake in stateowned Shipping Corporation of India (SCI) by organizing investor roadshows, The Economic Times said citing sources. The roadshows attracted up to 9 potential investors, including shipping companies from Norway and South Korea they said. The government plans to sell its entire 63.75% shareholding in SCI to a strategic buyer after the Cabinet Committee on Economic Affairs first approved
the strategic divestment in November last year. SCI is India’s largest shipping company that owns and operates around a third of the Indian tonnage, and has operating interests in practically all areas of the shipping business. They have a fleet of 70 ships, including crude oil tankers and crude carriers, petroleum product carriers, LPG carriers, bulk carriers, container ships and off-shore support vessels. DP World’s 4.7% 2049s were higher by 1.2% to 111.31 while most of Vedanta’s dollar bonds rallied by 4-9% on Tuesday.