New Bond Issues – Unusual Timing?

Just when we saw one of the worst weeks ever in US stock markets and thoughts of 2008 were racing through our minds over the weekend, we see the announcement of 2 new issues in both the SGD and USD space this morning.


Issuer: Ascendas Pte Ltd
Status: Senior, unsecured, off SGD1bn Multicurrency Medium Term Note Programme
Rating: Unrated
Format: Bearer / Reg S, S274 & 275 of Singapore SFA
Tenor: 7 years
Issue Size: TBD
Initial Price Guidance: 3.65% Area
Payment: Semi-annual, Actual/365 (fixed)
Settlement Date: [ ] January 2016
Maturity Date: [ ] January 2023
Details: SGD250,000/SGX-ST/CDP/Singapore Law
Use of Proceeds: In accordance with the Programme
Joint Bookrunners: DBS (B&D), Mizuho Securities, OCBC Bank, UOB
Timing: As early as today


Evergrande Proposes Issue of 8% USD Senior Notes Due 2019

(Bloomberg) — Aggregate principal amount, offer price will be determined through book-building exercise, according to statement to Hong Kong stock exchange.
Proposed notes to refinance existing debt, for general working capital
Subsequent to June 30 and as of Dec. 25, co. has incurred additional borrowings of at least 80b yuan. Credit Suisse, China Merchant Securities, Haitong Intl are joint lead managers, joint bookrunners of proposed notes

Curious timing given the overwhelming negativity and fear in the markets? Surely there could be a better time to price these deals? Or maybe not.

Let’s look at Ascendas first. AREIT bonds have been remarkably stable even after incorporating last week’s mayhem in global markets. The 2022 bonds have been trading in a 0.50 point range for the last 4 months. The 3.65% initial guidance looks about right in line with where it should be trading. With its safe haven appeal, the deal should probably do alright or at least outperform other sectors in a weak macro environment.

What about Evergrande? This is the more interesting one since it’s probably not a name that you would consider even close to the “safe haven” category. After all, didn’t the market mayhem last week stem from the fears of a sharp deceleration in the Chinese economy, and by implication the real estate market there? A closer examination will show that Evergrande USD bonds were up anywhere from 5-8 points last year. In fact, you will not make a dissimilar observation if you look at the overall Chinese property bond market. An amazing achievement considering what happened in the global HY market last year! The outperformance of Chinese real estate bonds was driven to a large extent by monetary easing by the Chinese authorities as well as increasing onshore debt issuance which took away supply pressures on the offshore bond market. Going forward, the Chinese government still looks likely to support the slowing economy with further monetary easing. However with the CNY now expected to suffer further weakness in 2016, will there still be investor appetite for onshore issuance?

Notwithstanding current market turbulence, what is clear that there is still liquidity on the sidelines waiting to be put to work. Will this be another of year of outperformance in Asian credits? We shall see.