Among a growing number of jumbo investment-grade issues out of Asia this year, Hutchison Whampoa’s 144A/Reg S offering stood out for its record-breaking size, smart timing, swift execution and wide distribution.
The Hong Kong-based ports-to-telecoms conglomerate made a stylish return to the bond market at the end of October after a gap of two years to raise an impressive US$5.4bn across two currencies and three tranches.
Split into a US$2bn 1.625% three-year, a US$1.5bn 3.625% 10-year and a €1.5bn 1.375% seven-year, the issue broke the record for the largest international bond from Asia’s corporate sector, trumping Sinopec’s US$5bn multi-tranche offering in early April and Hutchison’s own US$5bn bond printed in 2003. Its euro tranche was also the largest from an Asian issuer in 2014.
The deal stood out for more than just its size – and another issuer would beat that record after the end of IFR’s review period. Just as significant was Hutchison’s execution, with speed and timing that underlined just what was possible from a top issuer in Asia’s rapidly maturing bond markets.
Hutchison’s funding team made a bold decision to pull the trigger one day ahead of the policy meeting that confirmed the end of the US Federal Reserve’s extended quantitative-easing programme. A single-day execution process minimised market risk, while the combination of different maturities and currencies was a stroke of genius that created price tension on such a large offering.
The seven-year euro tranche, in particular, allowed Hutchison to target a different group of investors and, with it, push for tighter pricing on the US dollar tranches. Hutchison has a sizable European business, but the tranche also looked flat to the group’s dollar curve in its own right after a favourable shift in the basis.
All three tranches left negligible new-issue concessions, as investors piled into the offering from the flagship company of Asia’s richest man, Li Ka-shing. The notes also performed well in the secondary market, tightening a few of basis points on the break.
The timing added to the group’s reputation for reading the capital markets, as Hutchison took advantage of October’s short-lived dip in Treasury yields. Rates edged higher after the Fed meeting, with the three-year gaining 19bp over the next two weeks and the 10-year benchmark 10bp.
The distribution pointed to a high-quality and truly diverse investor base, with funds dominating and US buyers taking the lion’s share of the three-year and 42% of the 10-year. Orders hit US$10.75bn across the dollar tranches, while the euro was 3.4x covered.
HSBC (B&D), Bank of America Merrill Lynch, Citigroup, Goldman Sachs ran the dollar tranche, while Barclays, Credit Agricole, Deutsche, Goldman and HSBC arranged the euro tranche.
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