Vingroup Markets High-Yield Dollar Debt as Sales Steady

Vingroup JSC (VIC) is marketing the second offering of dollar-denominated bonds from Vietnam in 2012, as high-yield note sales from Asia outside of Japan inch past last year’s total. Bond risk in Japan and Australia rose.

Vietnam’s biggest property developer is seeking to price five-year debt, which the company can buy back after the third year, to yield 12 percent to 12.5 percent, said a person familiar with the deal. Citic Pacific Ltd.’s $250 million offering last week pushed non-investment grade bond sales from the region to $14.2 billion for the year, compared with $14.1 billion in the prior period, data compiled by Bloomberg show.

The steady pace of sales in Asia’s dollar junk bond market contrasts with high-yield issuance in the U.S. and with investment-grade offerings from the region, which have both surged to records this year. Junk-rated real estate developers in China, which accounted for 28 percent of the market in 2011, reduced sales in the first half versus the same period prior as investor confidence faltered amid curbs to lower house prices in the world’s second-biggest economy, the data show.

Chinese property developers “had a difficult start in 2012,” Luc Froehlich, a portfolio manager with Manulife Asset Management’s Asia fixed-income team, which oversees more than $39 billion, said in a phone interview from Hong Kong. “Stronger domestic regulations and higher land prices tempered new issuance.”

Investment-grade borrowers boosted debt sales as it became harder to get funding through syndicated loans, decreasing high-yield companies’ share of Asian offerings, Froehlich said.

Vingroup Bonds

Junk-rated borrowers have raised $337.3 billion in the U.S., the most in data compiled by Bloomberg since 1999. Asian investment-grade offerings total $87.7 billion, close to double the previous record of $44 billion set in 2010, the data show.

Vietnam Joint Stock Commercial Bank For Industry and Trade (CTG), the country’s second-largest lender by market value, raised $250 million from its debut bond in May.

Investment-grade debt is rated at least Baa3 by Moody’s Investors Service or BBB- by Standard & Poor’s. Bonds with lower ratings are typically known as junk, speculative-grade, or high- yield.

Vingroup has a B+ rating from Fitch Ratings, four steps below investment grade, and is rated one level lower at B by S&P. Credit Suisse Group AG and Citigroup Inc. are helping manage its bond sale, the person familiar said, asking not to be named because the details are private.

Credit Risk

The Markit iTraxx Japan index increased 1.5 basis points to 170.5 basis points as of 9:16 a.m. in Tokyo, Citigroup prices show. The index, which has ranged from 165 basis points to 229.5 basis points since June 30, advanced 4.8 basis points last week, according to data provider CMA.

The Markit iTraxx Australia index climbed 0.5 of a basis point to 127.5 as of 11:16 a.m. in Sydney, according to Westpac Banking Corp. The measure has ranged from 126.6 to 186 this half, according to CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 114 basis points as of 8:15 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge rose 2.4 basis points last week, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

Credit-default swap indexes are benchmarks for insuring 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. A basis point is 0.01 percentage point.

To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net

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

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