Foundations of success
Hong Kong blue chip CK Hutchison Holdings wowed the market with its US$2.5bn dual-tranche bond sale in April, drawing in more than US$12bn in orders as investors fought for a piece of the year’s best investment-grade bond.
The conglomerate, rated A2/A/A–, is one of Hong Kong’s largest corporations and has been a benchmark issuer for years. But CK Hutchison had not visited the G3 market since it sold US dollar and euro bonds in 2021. The euro bond in November 2021 was its debut green sale, but paid a double-digit concession and demand was muted.
Despite the challenges the 2023 market brought, CK Hutchison found an opening in the second quarter. Even though global markets were shaky in the wake of March’s bank failures and continued interest rate volatility, Hong Kong removed the last of its Covid-related restrictions in March and its issuers had a reopening story to tell investors.
Investors asked questions about the pandemic and geopolitics, but the company’s international footprint – from telecoms to retail and infrastructure – gave it more appeal than a solely Hong Kong or China-linked name. CK Hutchison took a two-day execution approach, giving investors a one-day roadshow to get up to date on the credit, before opening for orders the following day.
The strategy paid off, as the order book hit US$11bn when final guidance was announced and continued to build during US hours, making it one of the biggest books in Asia this year. That allowed the borrower to raise more than its targeted US$1.5bn to US$2bn size, despite tightening both tranches 35bp from initial guidance.
The US$1.25bn 4.75% 2028s were priced at 99.798 to yield 4.796%, and the US$1.25bn 4.875% 10-year bond was priced at 99.531 to yield 4.935%. The large size of the 10-year tranche, one of the biggest in Asia in 2023, was achieved at a time when investors were still cautious about duration risk.
The notes printed at 110bp and 135bp over Treasuries, respectively, showing zero to 5bp of premium for each tranche. The notes performed well in the secondary market and were trading at 88bp and 100bp at the end of December.
Bankers on the bond said CK Hutchison had room to do an even bigger size and tighter trade, but the issuer chose a prudent approach by not pushing too hard and left a little on the table for investors. There was reverse interest for a 30-year bond, but CK Hutchison opted not to pursue the sale because of the cost.
Bank of America, Barclays, BNP Paribas, HSBC, JP Morgan, Mizuho and Standard Chartered were joint bookrunners and lead managers.
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