S&P ended flat while Nasdaq fell 0.3% with Tesla dropping 4.5% despite strong earnings. US 10Y Treasury yields were 5bp higher to 1.62% even after a decent 7Y Treasury auction ahead of the FOMC meeting scheduled for later today. European equities were modestly lower with the FTSE and DAX down 0.3% each. US IG CDS spreads were 0.4bp wider and HY widened 1bp. EU main CDS spreads were 0.2bp wider and crossover spreads widened 0.7bp. Asian equity markets are trading mixed today and Asia ex-Japan CDS spreads tightened 0.4bp.
Kaisa Group raised $500mn via a 4.5Y non-call 2.5Y (4.5NC2.5) bond at a yield of 11.7%, 42.5bp inside initial guidance of 12.125% area. The bonds have expected ratings of B2/B, and received orders over $2.7bn, 5.4x issue size. The bonds were issued alongside an exchange offer of their 2024s with proceeds being used for the refinancing of their 9.375% 2024s and other offshore debt. Under the exchange offer, bondholders will receive the new 4.5NC2.5 bonds on a par-to-par basis. Under the tender offer, Kaisa will purchase outstanding bonds for cash at a price to be determined through an unmodified Dutch auction (Term of the Day, explained below). Nomura’s trading desk said in a note that Kaisa’s 2016 restructuring left it with sizeable debt coming due in 2024, and that it has recently received a $1.4bn offshore bond issuance quota that can only be used to refinance its 2024s, as reported by IFR.
Shanxi Securities raised $200mn via a debut 3Y bond at a yield of 3.4%, 35bp inside initial guidance of 3.75% area. The bonds have expected ratings of and received orders over $605mn, ~3x issue size. Proceeds will be used for general corporate funding purposes, including refinancing offshore debt.
Hyundai Motor Manufacturing Indonesia $300mn via a 5Y guaranteed bond at a yield of 1.834%, 35bp inside initial guidance of T+135bp area. The bonds have expected ratings of Baa1/BBB+. Proceeds will be used for general corporate purposes, primarily for the construction of the issuer’s manufacturing plant in Indonesia.
China Water Affairs Group $ green bond
There are also ‘Modified Dutch Auctions’. When an issuer bids to repurchase securities for example, they can use Modified Dutch Auction Tender Offers (MDATOs) – here the issuer sets prices in a falling structure at which a holder can tender the securities. The buying price will be the highest at which the issuer can buy all securities it has offered to purchase, or a smaller amount if there isn’t a tender of all securities. With MDATOs, the issuer pays one fixed price for the tendered securities. Due to this, some holders will receive more than they bid while others will receive less.
Kaisa Group plans to purchase its outstanding 2024s for cash at a price to be determined through an unmodified Dutch auction.