Curtain raiser
Swire Properties’ public Dim Sum debut in July was a breakthrough for the borrower, and an important transaction for the offshore renminbi market.
Hong Kong property developer Swire frequently conducts private placements, as the company likes the competitive pricing the private market offers, but it rarely taps the public bond market in any currency. Its last public appearance had been in 2016 when it sold US dollar notes.
Rising US interest rates and lower Chinese rates meant that renminbi was an appealing funding option. The offshore renminbi bond market allowed issuers to benefit from low rates while their deals looked relatively attractive to investors from onshore China. Banks began pitching the idea of a public Dim Sum sale to Swire in 2022, highlighting the competitive funding cost and benefit of expanding its investor base. The currency also made sense for the developer as it has projects in mainland China.
Unlike most Dim Sum bonds which are done in a club style with Chinese banks, Swire’s bond was widely marketed, a rare case for the market and a good example for others to follow.
While Swire is a well-followed name in Hong Kong, a debut Dim Sum sale still required extensive work. There were two months of non-deal roadshows and meetings with more than 100 investors.
The work proved to be crucial in gaining support, especially from Chinese banks, the main source of liquidity for Dim Sum bonds. Some Chinese banks did not have existing credit lines with the company but were willing to set them up to participate or even anchor the bonds. After the mandate announcement, some anchor investors still needed more time to get their credit lines ready, so Swire opted to hold back the deal to allow them to participate.
The wait paid off, as the anchors helped Swire woo asset managers, fund managers and regional banks, who joined after seeing strong bookbuilding momentum. Some investors who did not hold renminbi were willing to swap their dollar holdings into renminbi to participate in the bond offering, a strong sign of support for the credit during a period when the renminbi was under depreciation pressure.
The Rmb3.2bn (US$445.4m at the time) green bond was split between a Rmb2.5bn 3.3% two-year tranche and a Rmb700m 3.55% five-year tranche. The two-year tranche was 1.5 times covered with fund and asset managers together with sovereigns taking more than 30%, while the five-year piece, a relatively long tenor for Dim Sum, was 1.8 times covered with fund and asset managers taking 47%.
HSBC, Bank of China (Hong Kong), Bank of America, ICBC (Asia) and Mizuho were the global coordinators.
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