Reliance Industries Ltd. (RIL) is poised to become the third company in Asia to sell U.S. dollar- denominated perpetual bonds this year as investors seek higher returns amid near record-low yields. Debt risk in Asia outside of Japan fell.
The Mumbai-based operator of the world’s biggest refining complex is considering pricing the debt, which can be bought back after five years, at about 6 percent, according to a person familiar with the matter. Korea Southern Power Co. and Greentown China Holdings Ltd. are marketing five-year notes, as is Japan Finance Organization for Municipalities, or JFM, separate people with knowledge of the matters said.
Reliance Industries’ plan to sell undated notes follows similar issues by Agile Property Holdings Ltd. and Cheung Kong Holdings Ltd. this month, according to data compiled by Bloomberg. Dollar bonds in Asia were yielding an average 4.095 percent Jan. 25, 16 basis points higher than the record low of 3.936 percent on Nov. 29, JPMorgan Chase & Co. indexes show. The cost of insuring Asian corporate and sovereign bonds against non-payment is headed for the least in two weeks after falling in the five days ending Jan. 25, credit-default swap traders said.
“Investors are more cautious and more selective on bonds,” Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc, said. “They still prefer senior bonds, but if a perpetual bond’s pricing is attractive, they’ll definitely consider it.”
Agile, Cheung Kong
The coupon on Reliance’s bond will be fixed for the life of the note, the person familiar with the matter said, asking not to be identified because the terms aren’t set.
Agile’s 8.25 percent notes, which priced at par, were trading at 94.25 cents on the dollar as of 12:14 p.m. in Hong Kong, according to prices quoted by Royal Bank of Scotland Group Plc. Cheung Kong’s notes were trading at 96.5 cents on the dollar as of 12:14 p.m. in Hong Kong, prices quoted by RBS show.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1.5 basis point to 106 basis points as of 3:59 p.m. in Hong Kong, RBS prices show. The gauge is headed for its lowest close since Jan. 14, according to data provider CMA.
Korea Southern Power is marketing its notes at a spread of about 140 basis points more than Treasuries, a person familiar with the matter said. Greentown China Holdings, which builds residential villas and high-rise apartments on the mainland, plans to sell its securities at a yield of about 9 percent, another person said. JFM is offering its notes in the high 40 basis-point area over mid-swaps, a separate person said.
International Container Terminal Services Inc., a Manila- based cargo handling service provider, sold $100 million more of its 4.625 percent notes due 2023 at 101.25 cents on the dollar, a separate person familiar with that matter said.
European Bank for Reconstruction & Development, a supranational based in the U.K., has hired HSBC, JPMorgan, Morgan Stanley and RBC Capital Markets LLC to arrange a sale of seven-year global notes, a person familiar said.
The Markit iTraxx Japan index gained 1 basis point to 136 basis points as of 4:58 p.m. in Tokyo, according to Deutsche Bank AG prices. The measure is on track for its highest close since Jan. 24, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Markets in Australia are closed for a national holiday.
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.
To contact the reporter on this story: Rachel Evans in Hong Kong at email@example.com