China Firms Seek to Sell as Much as $2 Billion in Dollar Bonds

Chinese and Hong Kong companies are seeking to sell as much as $2 billion in dollar-denominated bonds as borrowers take advantage of record-low interest rates.

China National Petroleum Corp. is marketing $650 million of five-year notes and $500 million of 10-year securities, according to a person familiar with the matter who asked not to be identified because the details are private. Shenzhen International Holdings Ltd. (152) and PCCW Ltd. are in talks with investors for benchmark-sized offerings, other people familiar with the matters said. Benchmark typically means at least $500 million.

Dollar-bond sales by companies in China, including Hong Kong, jumped 27 percent this year to $13.84 billion from the same period a year earlier, according to data compiled by Bloomberg. Borrowing costs for dollar debt by Asian companies has fallen 40 basis points to 4.92 percent since the end of December as the U.S. Federal Reserve keeps its plan to hold interest rates near zero at least through late 2014.

“Dollar funding costs are so much cheaper than onshore as nominal yields are lower and the market is deeper for dollars,” Becky Liu, an analyst at HSBC Holdings Plc, the biggest underwriter of bonds denominated in the U.S. currency by Chinese and Hong Kong-based companies this year, said. “So far the credit quality of the issuers has been pretty decent and some are even top-tier quality, like CNPC. We’re likely to see more issuance out of China, including first-time issuers.”

China National Petroleum

The yield on top-rated 10-year yuan-denominated corporate notes was 5.15 percent at the end of March, 165 basis points more than the rate on similar-maturity Chinese government securities, Chinabond indexes show. That was the biggest gap since Jan. 9.

CNPC (CNPZ), a state-owned energy producer and the parent of PetroChina Co., is marketing the five-year bonds to yield about 205 basis points, or 2.05 percentage points, more than similar- maturity Treasuries and the 10-year bonds at a spread of 210 basis points, according to the person familiar with the matter.

The bonds will be sold by CNPC General Capital Ltd., and guaranteed by CNPC Finance (HK) Ltd., a unit of CNPC. Li Runsheng, CNPC’s Beijing-based spokesman, didn’t answer two calls to his office seeking comment on the sale.

Shenzhen International’s sale of Reg S, fixed-rate senior unsecured notes may yield about 375 basis points more than similar-maturity Treasuries, according to the other person. The offering will be the infrastructure company’s first in the U.S. currency.

No one was immediately available for comment at Rikes Hill & Knowlton Ltd., the public relations firm which handles media inquiries for Hong Kong-listed Shenzhen International, when contacted by phone today.

PCCW (8), Hong Kong’s biggest telecommunications operator, is in talks with investors to price the Reg S, fixed-rate notes to yield in the high-300 basis points area more than similar- maturity Treasuries, according to the person. The sale is the company’s first in 20 months. CK Chan, a spokesman at PCCW in Hong Kong, declined to comment when contacted.

To contact the reporters on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net; Rachel Evans in Hong Kong at revans43@bloomberg.net; Shiyin Chen in Singapore at schen37@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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