CREDIT SUPPLY: Hubei United Development (HBSLFT, NR/NR/BBB+) - New Issue FV
Supply: Hubei United Development (HBSLFT, NR/NR/BBB+) - New Issue FV
New Issue: $Bmark 3y
IPT: 5.5% area
FV: 5.0%
Hubei United Development is a construction company, majority State owned by the Hubei government. The company is focused on the development of the Wuhan 1+8 city project, which is designed to integrate Wuhan's surrounding 8 cities. Fitch recently affirmed the rating at BBB+.
In terms of relative value, we focus on other bonds issued in Hubei province and also involved in construction, the logic being project risks should be similar for related firms. In this regard, Wuhan Metro (A3/NR), State owned by the Wuhan city government, is a reasonable comp. Wuhan Metro is also involved in the Wuhan 1+8 project.
We see FV for the 3yr HBSLFT at z+90bp (T+65, 5%), which is an extrapolation of the Wuhan Metro curve, and 10bp premium for the rating differential.
