CDB Capital's transaction comes right after joint global co-ordinators BOC International, Barclays, BOCOM HK and UBS wrapped up investor meetings in Hong Kong and Singapore on Monday.
Based on the market's feedback, the leads set initial guidance for the new 2021s at 145bp over US Treasuries on Tuesday morning.
Its parent CDB’s 2% 2017s and 3.25% 2022s were seen at a Z-spread of 105bp and 120bp, respectively, prior to the launch of the new bond. At the time, the bank raised money through Amber Circle Funding, a Cayman Islands-registered special purpose vehicle, and guaranteed the deal through its Hong Kong branch.
The new bond, on the other hand, will be issued under —/AA-/A+ rated CDB Capital’s $500m MTN programme, with issuing entity being CDBI Treasure I, a wholly owned subsidiary of CDB Capital, which will provide a keepwell for the notes.
CDB’s wholly-owned subsidiary China Development Bank International Holdings will be the guarantor.
A banker away from the trade said that because of the weaker structure when compared with the parent's 2017s and 2022s, the new bond should trade at least 20bp wider, which brings fair value for the new notes at a Z-spread of around 125bp or 130bp over US Treasuries after adjusting for tenor.
Joint bookrunners and lead managers Agricultural Bank of China Hong Kong branch, ABC International, Bank of China (Hong Kong), BOCOM International, China Construction Bank (Asia), CCB International, Citi, ICBC (Asia), ICBC International, Morgan Stanley and Natixis are also on the trade.
CDB Capital plays an important role in supporting companies that are strategically important to China’s investment and development strategies through fund management, private equity and mezzanine investments.
No SBLC for CMI
Separately, CMI is also looking to raise dollars on Tuesday via joint global co-ordinators AMTD, HSBC, Huarong Financial and UBS. The bond will be issued by Boom Up Investments, a wholly-owned subsidiary of CMI, and comes with a keepwell from CMI. CM International Capital will guarantee the bond.
The JGCs set initial guidance at the 4.125% area for the three year trade, and the order book had passed $500m late in the morning and around $750m by lunch time.
CMI's existing $300m 3.25% 2020s were trading at a yield of 2.55%-2.66% prior to the launch, but that bond came with a standby letter of credit from China Construction Bank (Hong Kong).
CMI is a private unrated company but due to the credit enhancement, Moody’s assigned A1 to those notes in line with the SBLC provider CCB (A1/A/A).
This time around, the notes are unrated due to the lack of such support.
Proceeds are for working capital and general corporate purposes.