The success of Wynn Macau's [HKG:1128] USD 600m convertible bond has inspired a pilgrimage of Hong Kong-based CB bankers to Macau, hoping to copycat the highly prized deal.
The Macau-based casino priced earlier this week a 2029 4.5% USD 600m paper at the best end for investors. Pretty much checking all buyside boxes, it has been dubbed the best equity-linked bond offer so far this year in Asia.
“It's rare to have a deal that comes with carry, delta, is modeled cheap and also trades well in the secondary," said one banker in Hong Kong. Asian investors are hungry for more paper but the market brought forward many deals prior to Wynn that were “simply mispriced,” he added.
"Apart from ESG view, a very nice deal." Jefferies said in a note. "The CB gives a balanced, delta and exposure to the China opening up/travel theme."
One investor said he made up his mind in a matter of three minutes. "Never gamble against the gamblers," he quipped.
The beauty of the deal is that the six-year maturity/four-year put paper didn't just come cheap at launch, it was even priced at the cheap end throughout – a rare act of generosity for an Asian issuer.
The bond was indicated around 102 in the grey on 3 March, which usually would have triggered an upward repricing but the issuer and the deal arrangers – Deutsche Bank, Goldman Sachs and Moelis – stayed put. The note closed around 105.5 on Wednesday (8 March).
That’s a jackpot for investors.
In the end, around 130 accounts participated in the books that were heavily oversubscribed.
Offered at an initial coupon range of 4%-4.5% and a conversion premium of 37.5%-42.5%, it was fixed at a 4.5% coupon and a 37.5% premium over the HKD 7.45 per share reference price, the price of a delta placement, which translated into an initial conversion price of HKD 10.24. The stock traded in the HKD 2.95-HKD 10.32 band over the past 52 weeks.
Investors and bankers alike said they wouldn't be surprised if more casino CBs get printed. "The challenge here being many of these names are cash rich," said the second banker.
That explains Macau’s largely complete silence in Asia's CB market. The last time Macau made itself seen was in 2009, with two papers priced for a total of USD 858m, based on Dealogic data.
Others could now join Wynn and try their luck.
The game is on for bankers intent on bringing on any more casino CBs. They will have to overcome the high bar set by Wynn Macau, and act swiftly – before the rarity value fades away.