Hong Kong’s PCCW Markets U.S. Dollar Debt With AIA, Swiss Re

PCCW Ltd. (8), the telecommunications company chaired by Hong Kong billionaire Richard Li, is selling dollar-denominated notes as two insurers also market offerings in Asia. Bond risk fell in Japan and Australia.

PCCW units HKT Group Holdings Ltd. and Hong Kong Telecommunications HKT Ltd. will guarantee the sale of the 10- year securities, according to a person familiar with the matter. AIA Group Ltd. (1299), which was founded in Shanghai, and Zurich-based Swiss Reinsurance Co. are also marketing notes in the U.S. currency, separate people said. The cost of insuring corporate bonds from non-payment in Japan and Australia fell today, according to traders of credit-default swaps.

Asia-Pacific borrowers sold the most debt yesterday since Feb. 19, after issuance slumped last month due in part to market holidays across the region for the Lunar New Year. Income at HKT Ltd., which controls the guarantors on PCCW’s offering, rose 32 percent in 2012 from a year earlier, partly due to higher mobile revenue, the company said last week.

“This should print certainly, and if the lead managers don’t tighten pricing too much, it should perform,” Brayan Lai, an analyst in emerging-market credit trading at Jefferies Group Inc., said about PCCW’s sale. “The assets they have are fine.”

PCCW plans to sell its securities at about 220 basis points more than similar maturity Treasuries, the person with knowledge of the details said.

Insurer Offerings

AIA is offering five-year notes at about 120 basis points more than U.S. government debt and 10-year securities at about 135 basis points more than the benchmark, another person said. Swiss Reinsurance is considering pricing 11.5-year contingent- capital bonds in the high 6 percent area, according to a separate person.

Asian companies pay an average 285 basis points more than government debt to sell dollar-denominated bonds, 5 basis points less than at the beginning of the year, according to Bank of America Merrill Lynch indexes. That compares with 151 basis points to issue debt in the currency globally, the indexes show.

The Markit iTraxx Japan index decreased 2.5 basis points to 117.5 basis points as of 9:41 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is on course for its lowest close since Feb. 13, according to data provider CMA.

The Markit iTraxx Australia index declined 1 basis point to 115 as of 11:59 a.m. in Sydney, according to Westpac Banking Corp. (WBC) The benchmark has fallen 12.5 basis points this year, according to Westpac and CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 109.5 basis points as of 8:53 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. (ANZ) prices show. The measure has increased 1.7 basis point this month, according to prices from ANZ and CMA.

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 revans43@bloomberg.net

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

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