The borrower raised $120m from a 10.75% April 2023 transaction during the first week of the new year. But since then, the notes have widened with other B rated names, pressured by market volatility and liquidity challenges faced by low rated property companies.
Against that backdrop, China South City, rated B2/B/B, made a bond comeback on Tuesday.
Global co-ordinators Credit Suisse, Deutsche Bank, Guotai Junan International, Haitong International and UBS, with bookrunners and lead managers Admiralty Harbour, BOC International, CCB International, China Citic Bank International, HeungKong Financial and Vision Capital International, opened orders for the one year 11 month bond at the 14.5% area on Tuesday morning local time.
The company had $530m of offshore issuance quota left, but only wanted to raise $150m-$200m with this deal.
As comparables, China South City’s 10.875% 2022 notes were used, seen at a bid yield of 13.629%, and its 10.75% 2023 bonds trading at 14.115%.
Analysts at Nomura voiced caution around the credit in a pre-pricing note on Tuesday, despite what appeared to be a juicy yield on offer.
"We are in general cautious on small developers with tight liquidity, viewing them as volatile under the current unfavourable financing environment," wrote analysts Iris Chen. "[We] are not convinced to buy at [initial guidance]."
The order book hit $750m, including $125m from the leads, around 10:30am local time. When final price guidance was set at 14.375% before 5:30pm, the book stood at $900m. Final deal statistics were not released.
The $175m transaction was closed with a 11.95% coupon. The 2023 notes were sold at 96.081, or a yield of 14.375%. The bonds were trading down around 93/94 just before noon on Wednesday.
China South City’s senior notes were guaranteed by its offshore subsidiaries. The notes will be rated B by Fitch.
The Reg S trade will be listed in Singapore. The proceeds will be used for refinancing and general corporate purposes.