China Energy issues $400m bond to fund M&A deals

The Chinese midstream oil company has raised $750m from international investors in less than a year.

State-owned China Energy Reserve & Chemicals Group (CERC) has issued $400 million worth of international bonds to fund the potential acquisition of domestic energy assets. 

The proceeds are earmarked for the purchase of a liquefied natural gas re-gasification plant and an oil terminal with storage facilities in China. The acquisition is expected to complete by mid-2016. 

Maturing in 2019 with a 6.125 percent coupon, the bond benefits from a guarantee structure allowing bondholders to sell the securities back to the company at a premium if the acquisition does not take place within the coming 270 days. 

Demand for the bonds topped $800 million, more than doubling the amount targeted through the issuance, according to reports. About 98 percent of the bonds were sold in Asia, with the remaining sliver sold in Europe. Funds and asset managers bought 42 percent of the issued paper while banks acquired 32 percent and private banks 26 percent. 

Initial pricing was pitched at 6.25 percent before being tightened down to 6.125 percent on an issue price of par.
Barclays, China Securities International, Haitong International Securities, Shanghai Pudong Development Bank, and Wing Lung Bank were the joint bookrunners of the transaction. 

This is the second time CERC taps the international bond market. Last May, CERC issued $350 million of dollar-denominated bonds, maturing in 2018 with a 5.25 percent coupon.

Based in Beijing, CERC is an oil and gas trading and logistics group. Its major shareholders include China National Petroleum Corporation and the Beijing Municipal Commission of Commerce.