China Minmetals Corporation has booked US$2.6bn for a debut US$1bn dual tranche of five and 10-year bonds.
The deal came off despite ongoing concerns over commodity price weakness. Bankers on the deal said that, as a state owned enterprise, investors were much more comfortable buying the credit.
The bonds were issued through subsidiary Minmetals Bounteous Finance. It was suggested that if the issuer had been rated its rating could have been as low as BB+, but the guarantee from A3 rated state-owned enterprise China Minmetals made investors feel like they were buying sovereign credit.
“The fundamentals of the credit and the state support are an important part of the deal,” said a syndicate banker based in Hong Kong who was familiar with the transaction. “So investors did not have the same concerns that they normally would have about the sector.”
As a debut issue for the company, comparables given were Sinochem and Baosteel. Boasteel’s five-year bonds are trading at T+195 and Sinochem’s at T+176, according to Tradeweb.
The US$500m five-year priced at Treasuries plus 195bp and the US$500m 10-year at T+245bp.
Initial guidance was around 215bp and 265bp over US Treasuries respectively.
Bankers said that there was definitely a 15bp–20bp concession offered at initial guidance, but a solid investor book enabled them to tighten to final pricing. The tightening however cost the issuer some investors. At one point orders had reached more than US$3bn, but this slid back to US$2.6bn.
Investors on the five-year notes gave orders worth US$1.1bn. The tranche’s 70 accounts were mostly from Asia at 96% of the book, with 4% coming from Europe. Banks bought three-quarters of the deal, while funds took 20% and private banks and others 5%.
The 10-year deal had a larger European take-up at 13% with the rest going to Asia. Orders on the tranche hit US$1.5bn from 90 accounts.
Funds bought 42% of the offering, insurance companies took 27% as did banks. The remaining 4% went to private banks and others.
The Reg S notes are expected to be rated A3/BBB+ by Moody’s and Fitch, on par with guarantor China Minmetals Corp.
Deutsche Bank, HSBC, ICBC (Asia) and JP Morgan were joint global coordinators. They also acted as joint bookrunners with Citigroup and MUFG.
