CHINA: China Merchants Holdings (International), the port unit of state conglomerate China Merchants Group, issued $700m worth of guaranteed notes on Monday in a bid to further support its port operations.
The notes, to be listed on the Hong Kong Stock Exchange, include a five-year tranche of $200m and a 10-year tranche of $500m, with fixed coupon rates of 3.5% and 4.75% respectively.
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The issue, rated BBB+ by Standard & Poor’s and Baa1 by Moody’s with a stable outlook, is jointly led by several financial institutions, including Merrill Lynch, China Merchants Securities, Deutsche Bank, Mizuho Securities and United Overseas Bank.
CMHI chairman Li Jianhong said Beijing’s initiatives — the ‘One Belt, One Road’ strategy, the launch of the Free Trade Zone in Shenzhen and reforms of the country’s state-owned enterprises — have brought great opportunities for the company to further develop its port business.
“The company will proactively seek to capitalise on these opportunities, while preparing ourselves financially, for the future upgrade and transformation of our ports operation.”
Having its base port in West Shenzhen, the Hong Kong-listed operator has been a frontrunner in expanding its foothold both domestically and globally.
Last September, CHMI inked a deal with the Sri Lanka government to build a second box terminal in the port of Hambantota for $600m, having successfully launched a similar project in Colombo.
The company’s total handling in 2014 increased by 13% year on year to 80m teu, of which 27% was contributed by its overseas terminals. It ranked as the world’s second largest container port operator, according to Containerisation International Top 100 Ports.
Meanwhile, CMHI last year booked a total capital expenditure of HK$3.4bn ($438.6m) in port operations, of which HK$2.5bn was spent outside China with Hong Kong included.
Nevertheless, as of end-2014, its net gearing ratio was reduced to a low level of 13.9% after issuing HK$15.3bn mandatory convertible securities last June.
“Our financial ratios, even after the issuance of the $700m guaranteed notes, will still be at a healthy level, which is in line with the prudent financial policies the company has always adhered to,” Mr Li said.
“In view of the anticipated interest hike of the US-Treasury market, the issuance of the USD-guaranteed notes will help the company to lower its interest cost, and in turn enhance the company’s profitability and derive better shareholders’ return.
“The successful launching of the USD-guaranteed notes also reflects the recognition and confidence of the international investors on the company’s future development,” Mr Li added. CMHI recorded $4.3bn net profit from ports operations, up 10% compared to the year-ago level.
