March 9, 2011 / 11:51 PM / 6 years ago

Hutchison Port Holdings' $5.8 billion IPO

SINGAPORE (Reuters) - Bankers are bringing an early close to the institutional book of Hong Kong tycoon Li Ka-shing's $5.8 billion ports unit's initial public offering in Singapore because it is oversubscribed, sources said.

Hutchison Port Holdings Trust, a unit of Li Ka-shing's Hutchison Whampoa 0013.HK, is aiming to cash in on a recovery in global trade and provide investors with access to China's booming infrastructure business.

The listing is set to exceed Petronas Chemicals' (PCGB.KL) $4.1 billion deal, the biggest IPO in Southeast Asia.

"This (oversubscription) shows the demand is very strong," one of the sources told Reuters on Wednesday. "The book is closing tomorrow," a day ahead of schedule.

But the pricing may prove tricky as investors turn defensive in the wake of greater volatility in financial markets due to tensions in the Middle East and higher oil prices.

The official price range of $0.91-$1.08 translates into a yield of 6.5 to 5.5 percent, respectively.

Traders close to institutional bankers said Hutchison's book generated institutional orders at a price range of $0.99- $1.03 a unit or slightly above the middle of the range, reflecting investors' demand to seek a higher yield.

Volatile markets have also hurt some recent deals.

A planned S$1.1 billion Singapore initial public offering of Perennial China Retail Trust, managed by former CapitaLand (CATL.SI) shopping mall chief Pua Seck Guan, was deferred due to unfavourable market conditions.

But a source with direct knowledge of the deal told Reuters that strong demand means that the IPO could have "tighter pricing."

The yield offered by Hutchison is lower compared with an average of around 7 percent offered by Singapore-listed business and property trusts.

Singapore is home to property trusts owned by Southeast Asia's biggest property firm CapitaLand (CATL.SI) as well as shipping, infrastructure and logistics' trusts from China to Australia.

China Assets

Hutchison Port Holdings Trust's assets are located in Hong Kong and Shenzhen, two of the world's busiest container ports in 2009 with a total throughput of 39.2 million twenty-foot equivalent units, the prospectus showed.

"Container ports is a more defensive way to play gain exposure into an improvement in global trade. Its earnings are more defensive given its high margins and lack of exposure to oil price," said Sarasin in a report.

The deal has attracted big names including Singapore state investor Temasek Holdings TEM.UL, U.S. hedge fund manager Paulson & Co, fund manager Capital Research and Management and Cathay Life Insurance, who will be putting in $1.6 billion as cornerstone investors, according to its prospectus.

DBS (DBSM.SI), Deutsche Bank (DBKGn.DE) and Goldman Sachs (GS.N) are joint bookrunners and issue managers.

JPMorgan (JPM.N), UBS UBSN.VX, Barclays (BARC.L), Morgan Stanley (MS.N) are among co-lead managers. The company was not available to comment, while the banks declined to comment.

Reporting by Charmian Kok and Saeed Azhar; Editing by David Cowell and Erica Billingham

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