“The beginning of book building was a bit slow,” as CDB competed with the other launches, said a banker close to the deal. “But this is one of the strongest names.”
The five year bond had initial price guidance of 95bp over US Treasuries, tightening to 70bp over. The Reg S, senior unsecured bond priced with a coupon of 1.875%, at 99.172 with a yield of 2.05%, with the issuer taking $350m.
“Normally for AA credit people expect 15bp or 20bp maximum tightening, but the CDB five year tightened 25bp,” said the banker.
Meanwhile, the bank also price a €500m three year bond. The Reg S, senior unsecured bond had initial price guidance in the 45bp over mid-swaps area, and tightened to 30bp over mid-swaps. It priced with a coupon of 0.125%, at 99.854 and a yield to maturity of 0.174%
Despite the busy day, the bank hit its goals for a smaller dollar deal, and a slightly larger euro tranche. The bank often launches dollar and euro bonds in close succession, if not on the same day. “They are confident the market can support that,” said the banker on the issuance. Much of the investor demand came from Chinese banks.
“I think it was a bit of a surprise to see that many deals, but we knew it was going to be a busy week,” said the banker. “I think a lot of clients wanted to avoid next week.”
Comparables for the dollar portion included CDB’s $2bn 2.5% 2020s, which were quoted at 70bp over US Treasuries before the new deal launched; CDB’s $1bn 2.2125% 2021s seen at 67bp over, and the Export-Import Bank of China’s $1.25bn 2% 2021s trading at 68bp over.
Bank of China, BoCom Hong Kong, China Construction Bank, HSBC, ICBC Asia, OCBC Bank and Standard Chartered were the joint bookrunners and joint lead managers for the dollar tranche.
Meanwhile, comparables for the euro trade included CDB’s €1.5bn 0.875% 2018s with an I-spread of 19bp; CDB’s €1bn 0.5% 2021s with an I-spread of 34bp, and Export-Import Bank of China’s €0.65bn 0.375% 2019s with an I-spread of 31bp.
Bank of China, Barclays, China Construction Bank Europe, Commerzbank, Crédit Agricole CIB and HSBC were named joint bookrunners and joint lead managers for the euro bond.
The bank’s wholly owned subsidiary CDB Capital raised $500m in July with a five year offering. That bond sold at 99.751 with a coupon of 2.25% and yield of 2.303%.
Both the tranches of the new bonds are expected to receive ratings of Aa3/AA-. The issuer is rated the same. The notes are listed in Hong Kong, and the company has also applied for the notes to be listed in London.
Proceeds from the deal will be used for working capital and general corporate purposes.