Analysis: CALC returns to the bond market
China Aircraft Leasing Group (CALC) returned to the bond market with a $300 million five-year deal on 15 August, off the back of a $1.2 billion orderbook.
The unrated bonds, CALC Bond 2, have a maturity date of 22 August 2021.
China Everbright Bank's Hong Kong branch and DBS Bank are acting as the joint global co-ordinators, joint bookrunners and joint lead managers. China Everbright Group has a 34.6% shareholding in CALC.
The bonds bear interest at the rate of 4.9% per annum, payable semi-annually, commencing on 22 February 2017.
The lead managers launched the offering with an initial guidance in the 5.25% area, which was slashed to guidance of 4.95% plus/minus 5 basis points, before the offering was priced at the tight end, according to GlobalCapital, a sister publication of Airfinance Journal.
This was possible as the five-year deal received a warm welcome from the market, with books quickly building to $500 million within hours of opening, and ending in excess of $1.2 billion. In comparison, CALC's April debt bond deal attracted bids worth just $550 million.
The issuer decided to cap the size of the new transaction at $300 million, and the 4.9% deal was sold at par. The Reg S deal was strongly backed by Chinese investors, with those in Hong Kong and China taking 82% of the notes. Singapore took 10% and the remaining 8% went to other countries.
Given April’s trade was CALC’s debut in the market, the leads managers — also China Everbright Bank and DBS — struggled to find a direct comparable at the time, GlobalCapital adds.
But things were easier this time around, as the existing April offering was the main reference. The bonds were trading at a yield of 4.42% before the new deal went live.
Those close to the transaction tell GlobalCapital that the reoffer yield was slightly inside fair value, which was seen at around 5% by investors. This was reflected in the bond's trading level in the aftermarket, with the new senior unsecured notes spotted at a cash price of 100.35-100.45 around lunch time on 16 August.
CALC’s debut offering, on the other hand, had experienced a substantial price swing in the aftermarket immediately after the trade. Also sold at par, the three-year bonds traded to 5.262% the following day — a hefty 63.8bp tighter than the reoffer price of 5.9%, GlobalCapital reported at the time.
The Hong Kong-based leasing company says the estimated net proceeds of the bonds issue, after deducting underwriting commission and other expenses, will be approximately $297.4 million.
CALC will pay China Everbright Bank an underwriting commission that is not expected to exceed $1.95 million in aggregate.
The lessor says it is issuing the bonds because they “will allow the company to obtain longer term financing from international investors and to improve its capital structure so that the company is able to develop its business in aircraft leasing and related businesses in the PRC and globally.”
Barry Mok, deputy chief executive officer and chief financial officer of CALC, says his company has always explored diversified financing channels in the capital market to enhance its working capital, improve liquidity, reduce costs and extend its debt maturity profile.
Mok adds that this deal takes advantage of "favourable market conditions" and that the yield of this latest issuance has been priced "significantly lower" than the previous one. He says that CALC has built a peak order book of more than $1.2 billion, of which 42% of contributions came from fund management companies, 28% from banks, 22% from retail and 8% from corporate investors.