| HONG KONG
HONG KONG Mid-sized lender China Everbright Bank Co Ltd (601818.SS) plans to raise about $6 billion in a Hong Kong initial public offering, Asia's biggest so far this year, braving choppy equity markets that have dampened demand for new issuances.
China's smaller banks are in need of funds to replenish their balance sheets after strong lending growth over the past year has thinned their core capital ratios. Several other banks, including Guandong Development Bank and Citic Bank (0998.HK), are also planning to raise capital later this year.
"It's certainly a difficult time to raise funds, but we have seen some pretty good launches," said Alexander Lee, an analyst with DBS Vickers. "For Everbright, it has a good brand so it would not be impossible to get the deal done. But the valuation they can get will not be attractive," he added.
Everbright Bank, the nation's 11th biggest lender, is the only mid-sized bank in which China's central government holds a direct ownership stake via Central Huijin, according to Fitch. That stake fell to 52 percent by end 2010 from 71 percent a year before that, following the bank's A-share IPO.
The offer comes at a time market sentiment has turned weak. Hong Kong's benchmark share index .HSI has dropped about 5 percent this month amid global market jitters and on concerns that China may continue to tighten monetary policy to get inflation under control. Some offers have struggled as a result.
Australian mining startup Resourcehouse pulled its planned $3.6 billion IPO earlier this month, while CVC-backed luggage maker Samsonite International (1910.HK) priced its $1.5 billion IPO at the bottom end of a revised price range.
Everbright Bank was established in 1992 as the banking division of conglomerate China Everbright Group, and has $224 billion in assets and 605 outlets, according to Fitch.
Its assets grew 74 percent between 2008 and 2010, which was 21 percentage points above its peers, Fitch said, adding that Everbright Bank's funding and liquidity were at the weaker end of the Chinese banks under its coverage.
Everbright Bank, which raised $3.2 billion through a Shanghai listing last year, plans to issue 10.5 billion new shares, according to a term sheet seen by Reuters on Tuesday. The stock sale would be equivalent to 23.6 percent of Everbright's enlarged capital.
Everbright Bank's planned IPO would top the $5.5 billion raised by Hutchison Port Holdings Trust (HPHT.SI) in Singapore in March.
It will use the proceeds to boost capital and lending in coming months, the term sheet said.
The bank started pre-marketing the deal on Tuesday, with a roadshow to gauge investor demand slated for June 27. Pricing is set for July 8, and stock is slated to start trading in Hong Kong on July 15, the term sheet showed.
Everbright Securities Co Ltd (601788.SS), China International Capital Corp, Morgan Stanley (MS.N), JP Morgan Chase & Co (JPM.N), UBS AG UBSN.VX, BNP Paribas SA (BNPP.PA), BOC International, HSBC Holdings Plc (HSBA.L) (0005.HK) and Shenyin Wanguo were hired to manage the offering, the term sheet said.
(Writing by Denny Thomas; Editing by Chris Lewis and Muralikumar Anantharaman)