Huatai Securities, a Chinese brokerage, priced a three-year $1bn bond or 2.375% 2025 bond at 99.756% to yield 2.46%. It was actually a dangerous decision, reflecting market uncertainty due to the Russia-Ukraine conflict. So, raising funds for a five-year tenor is risky at the moment. Huatai in this case, squeezes the five-year bond to three-year bond to tackle volatile market. It becomes a wise decision, said the syndicate banker.
One of the Reg S transaction bankers argued that due to Ukrainian crisis led banks to withdraw five-year tranche. Plus, when the market is volatile, it is quite risky to take five-year tenors. Another syndicate banker also adds that when investors demand more premium for longer tenor bonds, Huatai was quite aggressive with its pricing approach.
Throughout the week, most Chinese deals are leaning on friends, family, and syndicate team support. Huatai is doing the same. This type of deal allows onshore parent entities to guarantee. Thus it has stronger anchor demand from Chinese banks. The banks provide onshore credit lines at rates close or in line with the interbank market, quoted IFR Asia.
From the three-year bond, the bank got a large part of order over $3.9bn including $2bn from leads. The deal was basically from friends and family support, said one of the banks. Between Nomura and Huatai, the final pricing is tight in comparison. Nomura’s trading desk estimation is 100bp to reflect 0.9-year duration of extension. In Huatai, it is 1.3% April 2024, along with additional new issue premium for the volatile market back up.
One of Huatai’s issuers is Pioneer Reward, while Huatai becomes its guarantor. The senior unsecured notes have an expected BBB+ rating by S&P, recorded IFR Asia. The proceeds allocation will support Huatai’s overseas business and repay overseas debts.
