China ZhengTong Auto Services Holdings Ltd. (1728), a Chinese luxury auto dealer, postponed a planned sale of dollar-denominated bonds as yields on Chinese debt in the U.S. currency surge.
ZhengTong Auto, which sells BMW and Jaguar cars in China, delayed its sale because of “current market conditions,” it said in a statement to the Hong Kong stock exchange today. Average yields on Chinese dollar bonds jumped 24 basis points to 7.44 percent yesterday from 7.2 percent on May 11, already headed for the biggest weekly increase since the period ending Nov. 25, according to JPMorgan Chase & Co’s Asia Credit Index. Yields have risen for five straight days, the longest stretch since December.
No Asian companies have publicly sold dollar debt this week and stocks in the region fell for a sixth day as talks to form a new Greek government failed, deepening Europe’s sovereign debt crisis. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan, which typically rises as investor confidence deteriorates and falls as it improves, is poised to close at the highest level since Jan. 19, according to prices from Royal Bank of Scotland Group Plc and data provider CMA.
“The confluence of Greece’s inability to form a coalition government along with declining world equity markets and other global economic concerns sent the credit market into a panic earlier this week and spreads blew out,” said Scott Bennett, Singapore-based head of Asian credit at Aberdeen Asset Management Plc, which manages $295 billion globally.
ZhengTong Auto planned to sell as much as $300 million of five-year notes, a person familiar with the matter said May 9, asking not to be identified because the details are private. The bonds were being marketed to investors to yield in the high 11 percent area, the person said.
The Hong Kong-listed company had earmarked some of the proceeds from the sale to help refinance the equivalent of about $315 million of loans maturing this year, according to an April 26 company statement.
ZhengTong Auto’s shares fell as much as 6.03 percent today, the most since March 6, according to data compiled by Bloomberg. The company has a HK$1.218 billion ($157 million) loan from Bank of Communications Co. that matures in August and 1 billion yuan ($158 million) of outstanding debt due in December this year, according to the statement last month.
“The company will closely monitor the development of market conditions and will reconsider the proposed notes issue at a later date,” ZhengTong Auto said in today’s statement.