Road King Infrastructure Ltd. (1098), a developer of property and toll roads in China, plans to sell dollar-denominated notes in the Asia-Pacific region’s first high-yield offering this month. Bond risk was little changed.
Road King plans to price the securities as soon as today in the low to mid 10 percent area, said a person familiar with the matter, asking not to be named because the details are private. Guangzhou R&F Properties Co. priced $238 million of notes on Aug. 22 in the last non-investment grade dollar bond sale from Asia, data compiled by Bloomberg show. Road King is rated BB- by Standard & Poor’s, three levels below investment grade, and one grade lower at B1 by Moody’s Investors Service.
“A lack of supply in the high-yield space may probably result in a pretty decent participation from investors, despite the tight guidance,” Agnes Wong, a Hong Kong-based credit strategist at Nomura Holdings Inc., said of the Road King sale. “There are also a few property names that may potentially come to the market.”
Dollar-denominated bonds sold by Chinese companies with a so-called junk rating have given investors a 25 percent return this year following a 13 percent loss in 2011, according to Bank of America Merrill Lynch data. China’s new lending was the highest of any August on record as the government tries to reverse an economic slowdown, the People’s Bank of China said on its website today.
Use of Proceeds
Road King will use the proceeds of its bond sale to repay existing debt and develop property projects, according to a statement to the Hong Kong Stock Exchange today.
Non-investment grade bonds, also known as high-yield or junk, are rated below BBB- at S&P and Fitch Ratings and below Baa3 at Moody’s.
Korea Hydro & Nuclear Power Co. is marketing a benchmark- sized sale of 10-year dollar bonds at about 170 basis points more than similar-maturity Treasuries, a person familiar with the matter said today, also asking not to be identified. The notes are expected to be rated A1 by Moody’s, the fifth-highest investment grade, and A by S&P.
Perceptions of corporate and sovereign creditworthiness in Asia were little changed today as the cost of insuring company bonds in Australia and Japan from non-payment rose.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 132.5 basis points as of 8:34 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge fell for a fifth consecutive day yesterday, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Australia index climbed 4 basis points, or 0.04 percentage point, to 152 as of 10:33 a.m. in Sydney, according to National Australia Bank Ltd. The Markit iTraxx Japan index increased 2 basis points to 202.5 as of 9:16 a.m. in Tokyo, Deutsche Bank AG prices show.
The indexes are benchmarks for protecting bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite. The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.
To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at firstname.lastname@example.org