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Star Energy, Wheelock Plan Bonds as Debt Risk Heads for 2011 Low

Wheelock (20) & Co. and Star Energy Geothermal (Wayang Windu) Ltd. are planning U.S. dollar- denominated bond sales as a gauge of debt risk in Asia heads for the lowest close in more than two years.

Star Energy, a junk-rated operator of geothermal power stations in Indonesia, hired Barclays Plc and DBS Group Holdings Ltd. to arrange investor meetings in Asia, London and the U.S. from tomorrow, said a person familiar with the matter. Wheelock, which is unrated, is marketing five-year notes at about 240 basis points more than Treasuries, another person said, asking not to be identified because the terms aren’t set.

High-yield dollar bond sales in Asia outside of Japan jumped more than fivefold to $1.26 billion last week, the most since the period beginning Jan. 28, according to data compiled by Bloomberg. India’s Bharti Airtel Ltd., graded BB+ by Standard & Poor’s, led offerings with $1 billion of 5.125 percent securities due 2023. The cost of insuring company and sovereign notes in the region fell today to the least since January 2011, prices from credit-default swap traders show.

“We expect Asian high-yield bond issuance to increase substantially this year,” said Michele Barlow, the Hong Kong- based head of Asia-Pacific credit and convertible bonds research at Bank of America Corp. “While refinancing requirements remain low, the rally in high-yield credit has brought yields down to a more attractive level for funding. Growth is also picking up, which is conducive for companies to start expanding.”

Borrowing Costs

Borrowing costs for speculative-grade companies in Asia fell to 6.147 percent on March 8, the least in five weeks, according to HSBC Holdings Plc indexes. Star Energy is rated B2 by Moody’s Investors Service, five levels below investment- grade. Fitch Ratings ranks the company one step higher at B+.

Wheelock’s subsidiary company, Wharf Holdings Ltd., is rated A- by Fitch, the fourth-lowest investment-grade.

Wheelock, based in Hong Kong, last sold dollar bonds in February 2012 when it issued $535 million of 4.75 percent notes due 2017 at a spread of 400 basis points more than Treasuries, Bloomberg data show. The securities were trading at a 229.6 basis-point spread as of 11:52 a.m. in Singapore, ING Groep NV prices on Bloomberg show.

Credit Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 3 basis points to 100 as of 8:55 a.m. in Hong Kong, according to Australia & New Zealand Banking Group Ltd. prices.

The Markit iTraxx Japan index retreated 3 basis points to 102.3 basis points as of 9:11 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is falling for a ninth straight day and heading for its lowest level since March 2011, according to data provider CMA.

The Markit iTraxx Australia index dropped 3 basis points to 106 as of 11:32 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge is on course for its lowest close since May 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated 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.

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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