Blow out bond deal for Sinopec
The state-owned China Petroleum and Chemical Corporation (Sinopec) demonstrated its massive appeal from the global investors when it garnered an overwhelming order book of USD19 billion for its three-tranche bond offering totaling USD3 billion.
This was the largest order book generated by a Chinese issuer in the international bond market, exceeding the USD17 billion attracted by CNOOC and US12.3 billion by China National Petroleum Corporation (CNPC), which both priced their deals in April. The offering, issued through Sinopec Group Overseas Development (2012) Limited, was the largest global bond issue among the Chinese state-owned enterprises.
Equally split at USD1 billion, Sinopec priced on May 10 a Reg S/144A five-, 10- and 30-year tranches well inside their initial guidance. The five-year tranche was priced at 99.717 percent with a coupon of 2.75 percent to offer a yield of 2.811 percent. This represented a 205bp over the US treasuries, or 20bp tighter than the initial guidance of 225bp.
The 10-year tranche was priced at 99.697 percent with a coupon of 3.90 percent to offer a yield of 3.937 percent. This was equivalent to a spread of 210bp over the US treasuries, likewise 20bp inside the initial guidance of 230bp. The 30-year tranche was priced at 99.672 percent with a coupon of 4.875 percent to offer a yield of 4.896 percent. This represented a spread of 185bp over the US treasuries, similarly 20bp tighter than the initial guidance of 205bp.
The deal represented Sinopec’s debut in the straight bond market, having sold a USD200 million convertible note in 1996.
“Sinopec is a great name to bring to the market and it is a top flight global player,” says a banker familiar with the deal. “There was a lot of focus during the roadshow from key accounts, which indicated their interest to participate in the transaction.”
Sinopec held a global roadshow that ended on May 9 in New York. The deal was announced during Asia hours on May 10 with an initial guidance of 225bp for five years, 230bp for 10 years and 205bp for 30 years, with the order book building steadily and was in excess of USD4.5 billion by lunch time. The book continued to grow in the afternoon and by Asia close, it was more than USD14 billion, with a healthy split across the three tranches.
On that basis, the arrangers revised the price guidance pretty aggressively and the deal was printed 20bp tighter than the initial guidance across all tenors. Sinopec was nimble during the process as the bond offering was executed within 24 hours. There was a lot of market volatility during the week, which saw some deals out of Asia really struggled.
In terms of comparables, Sinopec’s all-in yield was 2bp tighter than CNPC on 10 years and 15bp tighter than CNOOC on 30 years. The bonds performed in the secondary market, with the 2017s quoted at 199bp, the 2022s at 205bp and the 2042s at 183bp in the afternoon of May 11.
The five-year tranche attracted a total demand of USD6 billion from 354 accounts. The bonds were allocated 38 percent in Asia, 37 percent in the US and 25 percent in Europe. More than half of the paper, or 53 percent, was sold to asset and fund managers, 18 percent to banks, 10 percent to private banks, five percent to insurance companies, and 14 percent to public institutions and other investors.
The 10-year tranche generated a total demand of USD5 billion from 308 accounts with 46 percent of the bonds distributed in the US, 32 percent in Asia and 22 percent in Europe. Asset and fund managers bought 70 percent of the bonds, banks 11 percent, insurance companies seven percent, private banks five percent, and public institutions and other investors seven percent.
The 30-year tranche had the biggest slice of the order book at USD8 billion from 317 accounts, manifesting the increasing investor interest on longer dated paper. Asia accounted for 51 percent of the paper, the US 34 percent and Europe 15 percent. Asset and fund managers were allocated 57 percent, insurance companies 25 percent, private banks 10 percent, banks five percent, and public institutions and other investors three percent.
Citi, HSBC and BOC International acted as the joint global coordinators for the transactions, as well as joint bookrunners along with Barclays, Goldman Sachs, J.P. Morgan, Mizuho Securities and UBS.