China Huarong's US$3.2b bond issue almost five times subscribed

STATE-OWNED China Huarong's US$3.2 billion bond issue has sold well, indicating that demand from investors remains solid despite volatile markets.

Singapore-based investors were among those who clamoured for the bonds, which received orders reaching US$15.5 billion, almost five times the issue.

"It was the first Asian corporate to do a public, USD bond in 2015," said Clifford Lee, DBS Bank head of fixed income, on Friday. DBS was a bookrunner for the deal.

He said Singapore investors "demonstrated an appetite for the bonds with around 15 to 30 per cent of the bonds going to them in each of the tranches".

China Huarong's US$3.2 billion issue was in three tranches - three-year, five-year and 10-year bonds.

"A 3-tranche deal offered investors a wider choice of tenured bonds with the longer-dated papers (5- and 10-year) attracting bigger demand," said Mr Lee.

Institutional investors such as banks, fund managers and insurers dominated the transaction.

The three-year bonds raised US$600 million, five-year bonds US$1.2 billion and 10-year bonds US$1.4 billion.

The deal came amid spooked markets. Chinese developer Kaisa this week defaulted on a HK$400 million (S$69 million) bank loan and has missed a bond coupon payment.

China Huarong, an asset fund manager, is the country's second-largest bad debt manager; it was established by the Ministry of Finance in 1999 to buy over non-performing loans from the country's banks.

The last time China Huarong tapped the markets in July 2014, it did with a dual-tranche issue (US$300 million, three-year and a US$1.2 billion, five-year).

"This time round, they were able to raise a bond issue more than twice the size despite a very volatile week where 10-year US Treasury yields have fallen just over 10 basis points since the start of 2015," Mr Lee said. DBS was also involved as bookrunner for the July bonds.