APAC CREDIT PREVIEW: Trio of issuers get primary market back on track

APAC US$ primary market headlines (12-Nov-2024)

** Westpac Banking Corp is refreshing senior unsecured & subordinated tier 2 curves

** Fosun International tests sentiment for Chinese HY corporate supply after 3.5-year absence

** China Everbright Bank takes dual-currency approach with fixed and floating rate exercise

For the first time in nine back-to-back sessions the APAC US$ primary bond market is embracing issuers that are not Chinese LGFVs, as a trio of regional borrowers from China and Australia are vying for attention with a mix of senior unsecured and subordinated paper this session.

Those issuers are Chinese high yield corporate Fosun International Limited along with regional investment grade lenders China Everbright Bank Co. Ltd and Australian heavyweight Westpac Banking Corporation.

Westpac offers senior unsecured & subordinated supply

Headlining the day’s activity in terms of deal size is Westpac Banking Corporation which is offering short-dated senior unsecured paper while at the same time refreshing its subordinated tier 2 curve via a 3-part offering, all of which are SEC-registered global notes.

Initial price guidance on the short 2-year fixed rate senior unsecured tranche (due 20-Oct-2026) is at T+50a while the short 2-year floating rate tranche with the same maturity date is being marketed at SOFR equivalent.

Meanwhile, books on the 11NC10 subordinated tier 2 offering opened at T+150a.

The expected security ratings on the senior unsecured tranches is Aa2/AA- by Moody's/S&P while the sub tier 2 issue is expected to be rated A3(hyb)/A-/A-.

The Australian lender was last in the USD market earlier this year when on 08-May-2024 it placed a US$3bn 4-part senior unsecured fixed and floating rate exercise in the 2- and 5-year parts of the curve.

As a reminder, the US$750m 5.200% 16-Apr-2026 and US$750m SOFR+42 16-Apr-2026 parts of that trade priced at reoffer spreads of T+37.5 and SOFR+42, having been revised from initial thoughts at T+60a and SOFR equivalent.

That was supported by orders of >2.75bn and >2.50bn at reoffer, equating to cover ratios of 3.67x and 3.33x respectively. Those lines provide obvious pricing points of reference for today’s offering.

Westpac has not raised subordinated tier 2 funding in USD since around this time last year when it sold a USD750m 10-year bullet at a reoffer spread of T+223, with that line having performed strongly in the interim at ca. 110.30 (T10+104 / G+105.5) on the screens post announcement on Tuesday morning.

Offering a more recent pricing point of reference from which to determine relative value forb the sub tranche is a US$1.25bn 5.204% 11NC10 tier 2 sub sold by Australian heavyweight peer ANZ on 23-Sep-2024 (also with an issue rating of A3/A-/A-).

As a reminder, the deal, that also made up part of a 3-tranche trade along with two short-dated senior unsecured lines, priced at a reoffer spread of T+147 having been refined from IPTs at T+175a, underpinned by >US$4.5bn of orders at reoffer, giving a cover ratio of 3.60x.

That also allowed ANZ to bolster its capital buffers at an attractive cost of funding as highlighted by the negative new issue concession (NIC) of -2bp. The issue was bid on the screens at an indicative 97.753 (T10+118 / G+118) on Tuesday, illustrating that Westpac is offering an initial pick-up of 32bp on a like-for-like basis.

Potential pricing points of reference (bid levels taken from the screens)

WSTP US$750m 5.200% 16-Apr-2026 @ 100.90 / T2+25 / G+22

WSTP US$750m 6.820% 17-Nov-2033 @ 110.30 / T10+104 / G+105.5

ANZ (A3/A-/A-) US$1.25bn 5.204% 11NC10 @ 97.753 / T10+118 / G+118

Fosun International tests investor sentiment for Chinese HY corporate supply

Chinese conglomerate Fosun International Limited (BB- stable by S&P) is offering some rare Chinese high yield supply with what marks the issuer’s first benchmark offshore transaction since May 2021.

Books on the US$300m (capped) 3.5NC2 senior unsecured RegS offering, which makes up part of a liability management exercise, are open at initial price guidance at 8.875% area. The issuer is Fortune Star (BVI) Limited and the expected issue rating is the same as the parent guarantor at BB- by S&P.

Proceeds from the sale will be used to refinance some of the company’s existing offshore indebtedness including any payment in connection with the concurrent offer to purchase, and for working capital and general corporate purposes.

In conjunction with the new issue, Fosun International Limited has also offered to purchase for cash its outstanding US$700m 5.950% senior notes due 19-Oct-2025 (ISIN: XS2238561794) in an aggregate principle amount of notes up to the aggregate maximum acceptance amount. The tender offer deadline is 4pm London time on 19^th November 2024. For more details of the tender click here.

The issuer’s existing curve looked like this pre-announcement as per the official comps list distributed by sources close to the deal, which includes the existing 2025s that are up for tender.

*** COMPS ***

An interpolation of the existing May 2026 and Jan 2027 lines indicates fair value on the new 3.5NC2 exercise is in the area of 8.32% which in turn implies that the issuer is offering an initial premium of ca. 55-55bp in yield terms versus its curve on the bid side.

China Everbright Bank markets dual-currency offering

Making up today's trio of issuers is China Everbright Bank, rated Baa2/BBB+/BBB+ (all stable) by Moody's/S&P/Fitch, which through its Hong Kong branch is reaching out to both USD and CNH investors on Tuesday with a dual-currency transaction in both fixed and floating rate format.

The floating rate 3-year senior unsecured RegS only USD tranche is being marketed at the familiar SOFR Compounded Index +105a, while the lender has also opened books for a CNH 2-year fixed rate RegS benchmark at initial price guidance at 3.00% area.

This marks the second occasion where the issuer has raised benchmark senior unsecured USD floating rate funding so far this year on the heels of a US$550m SOFR+52 14-May-2027 offering that priced on 07-May-2024.

That line landed at a discount margin of SOFR+52 having been revised from initial price guidance at +100a.

We did not receive confirmation of the final book size at reoffer or the distribution statistics on the deal which is fairly typical on short-dated FRNs from Chinese banks where demand is heavily anchored by the large underwriting group.

Official comps on today's USD tranche are as follows:

*** USD COMPS ***

Both tranches are expected to be rated BBB+ by Fitch with pricing to follow later today.

USD-denominated floating rate notes from Chinese banks in H2 2024 (source: Informa Global Markets)

Snapshot of APAC USD, EUR, CNH, CNY, HKD, SGD, AUD & NZD issues live on 12th Nov 2024 at the time of writing. Click on the links for the most recent updates:

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