China Resources Land Trims Dollar Costs After Executive Resigns

China Resources Land Ltd. (1109) trimmed its dollar-denominated borrowing costs yesterday, as the company regroups after an executive director resigned last month and China began a graft probe into its parent’s former chairman.

The developer, which is controlled by China Resources Holdings Co., priced an additional $350 million of its existing 2019 bonds at 275 basis points more than Treasuries, 15 basis points less than the company paid for the notes in February, data compiled by Bloomberg show. Average spreads on securities sold by Chinese issuers widened 1 basis point in the same period to 358.5 basis points, JPMorgan Chase & Co. indexes show.

China Resources Land’s Vice Chairman Wang Hongkun resigned on April 22, 10 months after his appointment, citing his health, the company said in an exchange filing. His departure will have a limited impact on growth, Standard & Poor’s wrote in a report dated May 2 as it lifted its outlook for the developer to positive from stable. The parent company appointed a new chairman to replace Song Lin last month after China’s anti-corruption agency said it was investigating him.

“It’s not the first name that comes to my mind if I’m going to invest in a BBB+ credit,” said Agnes Wong, a Hong Kong-based analyst at Nomura Holdings Inc. “China Overseas has a much better profile in terms of size, leverage and management background. And if you look at the yield, it doesn’t seem like the differential is big enough.” China Overseas Land & Investment Ltd. sold 2019 bonds at a spread of 255 basis points last week, Bloomberg compiled data show.

‘Disciplinary Violations’

Song is being probed for “suspected disciplinary violations,” the Communist Party’s Central Commission for Discipline Inspection said in a statement on its website April 17. Domestic media have accused China Resources Power Holdings Co., which China Resources Holdings also controls, of paying too much for three coal mines in Shanxi province in 2010.

China Resources Land issued 82 percent of its latest notes to fund managers, with all the bonds placed to investors in Asia, a person familiar with the matter said yesterday, asking not to be identified because the details are private. The company is ultimately owned by the Chinese government.

State-owned enterprises were the only issuers of U.S. currency debt in Asia this week, data compiled by Bloomberg show. China Cinda Asset Management Co., one of four managers of bad loans, raised $1.5 billion from a sale of five- and 10-year notes while China National Petroleum Corp. offered fixed- and floating-rate bonds, the data show.

Bond Risk

The cost of insuring Asia-Pacific corporate and sovereign bonds from default fell today, credit-default swap traders said.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan slipped 1 basis point to 121.5 basis points as of 8:30 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since April 10 and a fall of 3.3 basis points this week, the biggest decline since the period ended April 4, according to data provider CMA.

The Markit iTraxx Australia index lost 2 basis points to 91.5 as of 10:32 a.m. in Sydney, according to Citigroup Inc. The measure is on course for its lowest close since May 2010 and a drop of 3.1 basis points this week, the fourth straight week of declines, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index slid 0.25 of a basis point to 85.25 basis points as of 9:34 a.m. in Tokyo, Citigroup prices show. The benchmark is on track for its lowest close since April 29 and a 0.8 basis-point slide this week, the biggest decrease since the period ended April 18.

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 editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Ken McCallum

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