CDB leasing may set cornerstone record with US$978m IPO

[HONG KONG] China Development Bank Financial Leasing Co could set a record with the cornerstone tranche for its Hong Kong initial public offering, which is seeking to raise as much as US$978 million.

The Shenzhen-based lessor will sell as much as 79 per cent of the base deal to cornerstone investors, who commit to hold their shares for six months in return for earlier and guaranteed allocation, according to terms for the deal obtained by Bloomberg. That would be the biggest proportion for any major Hong Kong listing over the past five years, data compiled by Bloomberg show.

A single investor, state-owned power generator China Three Gorges Corp, agreed to purchase about 42 per cent of CDB Leasing's IPO shares. China Reinsurance Group Corp. and China State Shipbuilding Corp will also buy stock in the offering, the terms show.

CDB Leasing, an arm of China's biggest policy lender, is leaning on other government-backed companies to complete its offering amid Hong Kong's slowest market for new listings in three years. The city has hosted only three IPOs this year of more than US$500 million, which are all trading below their offer prices, according to data compiled by Bloomberg.

"Capital markets around the world have been fickle over the last few months, and there's a lot of volatility out there," Keith Pogson, a senior partner for Asia Pacific financial services at EY, said by phone Tuesday. "A higher proportion of cornerstone investors would give you more certainty of getting the IPO done."

Selling 79 per cent of the offering to cornerstone investors would be the biggest proportion for a Hong Kong first-time share sale of at least US$500 million over the past five years, according to the Bloomberg-compiled data. The previous record was set by bad-loan manager China Huarong Asset Management Co., which sold 70 per cent of its US$2.5 billion IPO last year to such stock buyers, the data show. CDB Leasing, which leases aircraft, infrastructure and ships, is offering 3.1 billion new shares at HK$1.90(0.33 SGD) to HK$2.45 apiece. The company aims to price the deal on June 29 US time and start trading July 11, the terms show.

First-time share sales in Hong Kong have raised US$5.6 billion this year, less than half the US$14.4 billion of deals priced during the same period in 2015, according to data compiled by Bloomberg. Hong Kong's main board recorded an average US$8.6 billion of daily turnover this year, down from US$15.9 billion during the same period last year.

Bank of America Corp, Citic CLSA Capital Markets Ltd, Deutsche Bank AG, HSBC Holdings Plc and UBS Group AG are joint global coordinators of the CDB Leasing IPO.

BLOOMBERG