Far East Horizon Plans Perpetual Sale as Long-Dated Costs Slump

Far East Horizon Ltd. is marketing a U.S. dollar-denominated bond as the cost of borrowing longer-dated debt sinks to the lowest in a year.

The Hong Kong-listed company, which provides financial services to industries including health care and education, is offering an undated security at a yield of about 6 percent, said a person familiar with the matter. Yields on Asian dollar notes dated 10 years or longer have averaged 5.21 percent since April, and are poised to be the lowest for a three-month period since the second quarter of last year, according to Bank of America Merrill Lynch indexes.

Companies in Asia have sold $3.1 billion of perpetual securities this quarter, the most since the first three months of 2013, as issuers seek to lock in long-term costs amid expectations of rising interest rates. The securities typically pay higher yields to compensate investors for their having no fixed maturity date. Borrowers meanwhile are allowed to treat them as equity on their balance sheets.

“Companies will try to raise funds with long tenor at lower costs before interest rates start moving up,” said A.S. Thiyaga Rajan, a senior managing director at Aquarius Investment Advisors Pte in Singapore. “We will see more Asian names drawing dollar funds of between seven- and 12-year tenors.”

Noble Group Ltd., Asia’s biggest commodity trader by sales, is holding investor meetings from today ahead of a planned issue of dollar-denominated perpetual notes, according to a person familiar with the matter.

Fed Considers

The U.S. economy expanded at a modest pace last month as Federal Reserve officials move to complete their bond-purchase program later this year and start considering the timing of the first interest-rate increase since 2006, the central bank said in a June 4 report. There’s about a 58 percent chance it will raise the benchmark to 0.5 percent or more by July 2015, federal funds futures data compiled by Bloomberg show.

Toll road investor Cheung Kong Infrastructure Holdings Ltd. and aluminum product manufacturer China Hongqiao Group Ltd. have hired banks for possible dollar-denominated bond sales, separate people familiar with the matters said today.

The cost of insuring corporate and sovereign bonds against non-payment in Asia rose today, credit-default swap prices show.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 0.5 basis point to 105.5 basis points as of 12:04 p.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The measure is extending gains from last week, after increasing for the first time since the five days ended April 25, according to CMA data.

Japan Risk

The Markit iTraxx Japan index increased 0.5 basis point to 67.5 as of 9:51 a.m. in Tokyo, Citigroup Inc. prices show. The measure dropped 4 basis points last week in its third consecutive weekly decline, CMA data show.

The Markit iTraxx Australia index fell 0.5 basis point to 83.25 as of 10:32 a.m. in Sydney, Citigroup prices show. The benchmark, on track for its biggest one-day drop since June 9, rose 1 basis point last week, CMA data show.

The 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.

To contact the reporters on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net; Anurag Joshi in Mumbai at ajoshi53@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Chris Bourke, Ken McCallum

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