Tencent’s Reg S/144A Offering
Tencent achieves lowest bond coupon ever from private Chinese corporate
Chinese online games and internet portal company Tencent Holdings returned to the US dollar bond market as it priced on August 28 a US$600 million offering that achieved the lowest bond coupon ever from a private Chinese corporate issuer.
The Reg S/144A 5-1/2 year deal was priced at 99.771% with a coupon of 3.375% to offer a yield of 3.421%. This is equivalent to a spread of 275bp over the US treasuries or at the tight end of the final guidance of between 275bp and 285bp. The final pricing represented a negative new issue premium over the curve-adjusted outstanding 2016 bonds.
Tencent launched its maiden US dollar bond transaction in December 2011 with a similar US$600 million issue, paying a coupon of 4.625% to yield 4.684%.
The latest transaction was swiftly executed with accelerated bookbuilding and pricing within same day of deal announcement, with the arrangers coming out with an initial price guidance of 300bp area. It exhibited strong order book momentum, garnering a total demand of US$6.27 billion from 307 accounts.
In terms of geographic distribution, 40% of the bonds were sold in the US, 37% in Asia and 23% in Europe. Fund managers accounted for the bulk of the paper with 67%, while retail investors took 12%, banks 6%, insurance and pension funds 6%, official institutions 4% and other investors 5%.
Barclays, Deutsche Bank and Goldman Sachs were the joint global coordinators for the transaction, as well as joint bookrunners along with ANZ, Citi, Credit Suisse and J.P. Morgan.
Proceeds from the bond issue will be used for general corporate purposes. Moody’s Investors Service, which assigned a Baa1 rating to the bonds, says the issuance will further enhance Tencent’s already strong balance sheet liquidity, which includes cash on hand of over 27 billion renminbi (US$4.29 billion) as of end-June 2012.