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China Vanke Markets Debut Dollar Bond Sale Amid Government Curbs

China Vanke Co. (200002) is marketing its debut sale of U.S. dollar-denominated bonds after Fitch Ratings Ltd. said the country’s largest property developer by market value is better placed than its peers to cope with government measures to cool house prices.

China Vanke is offering five-year notes at a yield of about 220 basis points more than Treasuries, a person familiar with the deal said. The notes are expected to carry a BBB rating from Standard & Poor’s, one level lower than the Shenzhen-based borrower’s corporate credit grade, according to a March 4 statement from S&P. Five-year BBB rated dollar bonds from Asian companies offer an average spread of 221 basis points, according to HSBC Holdings Plc indexes.

Cities with “excessively fast” price gains must raise down-payment requirements and interest rates on second-home mortgages, China’s cabinet said on March 1, as policy makers in the world’s second-biggest economy seek to curb house-price increases. Larger nationwide players including Vanke will probably be less affected by the new guidelines given their broad project mix, geographical coverage and high margins, according to Fitch.

“The curbs, if implemented strictly, will affect every property developer,” said Annisa Lee, a Hong Kong-based credit analyst at Nomura Holdings Inc. “But Vanke is one of the largest in the country so the proposed bond should get done based on current pricing guidance.”

Average yield premiums Chinese companies pay for dollar debt rose to a 15-week high of 403 basis points on March 4, according to JPMorgan Chase & Co. indexes.

Bond Risk

China Overseas Land & Investment Ltd.’s $750 million of 4.875 percent securities due February 2017, rated BBB by S&P, offered 181.8 basis points more than Treasuries as of 12:24 p.m. in Hong Kong, ING Groep NV prices on Bloomberg show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 103.5 basis points as of 8:50 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark is on track for its lowest close since Jan. 7, according to data provider CMA.

The Markit iTraxx Japan index slid 2 basis points to 111.5 as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is dropping for a seventh straight day, a streak of declines that has taken it to the lowest close since March 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index dropped 1 basis point to 111 basis points as of 11:27 a.m. in Sydney, according to National Australia Bank Ltd. The measure has fallen 16.5 basis points this year, according to NAB 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: 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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