SGD New Issue Review : Grand China Air (Guaranteed by Hainan Airlines)

_ New Grand China Air (HK) SGD 3Y announced post roadshow. Deal is anchored
– Guarantors: Hainan Airlines Co.,Ltd.and Grand China Air Co., Ltd.
– Initial price guidance: 6.25% area
– Issue size: TBC
– Timing: As early as today

Comparable Bonds :
Hainan Airlines 6.25% 2017 CNH – 99.75, 6.35%  which swaps to 4.50% in SGD (indicative)
Singapore Airline 3.22% 2020 SGD – 2.82% indicative yield

Grand China Air is managed under a parent company called Grand China Airlines Holding Company (GCAHC) which is held jointly by Hainan province government (48.6%), George Soros (18.6%), and the HNA group (32.8%).

Grand China Airlines Holding Company owns 29.06% of Hainan Airlines, a listed company in Shanghai Composite which is their cashcow although their revenue is growing alot more than their operating income, and in this case, it is more important to look at the guarantor than the issuer.

hainan airlines revenue

Then we have this.

NEW DELHI, Oct. 11, 2014 /CNW/ — The World Travel Awards (WTA) Reception Ceremony for 2014 was held at the Oberoi Hotel in New Delhi India on the evening of October 10th, with Hainan Airlines Co., Ltd receiving high recognition by industry judges and passengers and awarded with “Asia’s Leading Airline Business Class” at the event. ”

My thoughts :

Hainan Government + George Soros > = Temasek or GIC ?

The gist is this – Grand China will takeover all the 4 airlines under the HNA Group and they have a fleet of 133 planes !!! (SIA has only 105 planes !)

“According to the plan, the former four airlines under HNA group, Hainan Airlines, Shanxi Airlines, Chang’an Airlines, and China Xinhua Airlines should be transferred into Grand China Air in the near future.”

Hainan Air has been on an issuing spree this year in CNY space issuing a total of CNY 6.17 bio in bonds.

Hainan Airlines 7.4% 09/2017 CNY 1.2 bio
Hainan Airlines 7.2% 08/2017 CNY 1.17 bio
Hainan Airlines HK Co 6.25% 05/2017 CNH 3 bio (currently indicating 6.29%)
Hainan Airlines 8% 05/2019 CNY 400 mio

Singapore is a natural choice for companies running a bit tight at home eg. Vanke and Far East Horizon.

Recent headlines.

Chinese Tap Singapore Wealthy in Record Bond Sales: Asean Credit
Singapore’s bond market is getting a boost from Chinese borrowers tapping the island’s millionaires for record amounts at rates almost 30 percent cheaper than home.
Private investors in Singapore took almost all of the S$380 million ($299 million) of local dollar-denominated notes sold by mainland Chinese companies excluding banks last month, according to people familiar with the matter. Offerings in the currency by all Chinese borrowers rose to S$1.7 billion this year, almost double such sales for the whole of 2013, according to data compiled by Bloomberg.”

Yes. I know the climate is not good for airlines right now with stock prices suffering on Ebola fears.

But the 4th largest airline in a country of 1.3 bio ? partly government owned as well ? And paying you 6.25% ?

Good bye Far East Horizon !