Maturity: 7 December 2010
Issue price: 99.51
Launch date: Wednesday 30 November
Payment date: 7 December
Sole mgr: ABN Amro
Ocean Grand's inaugural transaction went well, especially given that the wall of new issues makes completing any kind of deal a result at the moment. The issuer is pleased and investors should be pleased too because it has traded well.
We went out with initial price thoughts of 9.00%-9.25%, which we revised to 9.25%-9.50% to include some large orders at 9.50%. None of these requests had anything to do with the company itself — people were impressed with Ocean Grand's clear business model and strategy. Investors were more concerned about the small issue size and liquidity in the secondary market.
Also, there was the issue of the sheer volume of supply in or close to the market at present. There are an estimated seven high yield deals worth more than $2bn due over the next two weeks — not to mention around $1.5bn of high grade transactions.
I have never seen such a big backlog of deals this late in the year.
We indicated on Tuesday morning that books would go subject by the end of the day, that the coupon would be 9.25% and the yield would be in the range of 9.25% to 9.50%.
At that point, we proceeded to firm up the last indications and the book came together towards the tight end of guidance. We finished up with the deal two times oversubscribed and were able to price it to yield 9.375%.
The bonds are yielding inside 9.25% and trading above par. This is evidence that the price was right, although with the heavy supply in the market, investors were demanding something of a premium because of their higher opportunity costs.
Banks took 23% of the paper, fund managers and insurance companies 43% and retail 34%. By geography, Hong Kong accounted for 17% of demand, Singapore 37%, Europe 34% and offshore US buyers 11%.