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Melco Increases Planned Yield on Bond Sale; Asia Debt Risk Rises

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Nov. 16 (Bloomberg) -- Studio City Finance Ltd., which is 60 percent owned by Melco Crown Entertainment Ltd., increased the planned yield on a sale of dollar-denominated notes. Asia bond risk rose.

The Melco unit, which is developing a resort in Macau, intends to price eight-year bonds at 8.5 percent, a person familiar with the matter said. The company was considering pricing the notes at about 8.25 percent, the person said yesterday. An index of Asian default risk is on track to close at the highest level in more than a month, according to prices from Royal Bank of Scotland Group Plc and data provider CMA.

Asia-Pacific bond offerings fell to $3.05 billion this week, down 24 percent from the prior five business days, as companies from Hong Kong to Australia struggled against spreads widening to the most in more than a month. While Indonesia and Export-Import Bank of Korea raised $1 billion each, high-yield issuer BlueScope Steel Ltd. and unrated Far East Consortium International Ltd. canceled offerings, according to data compiled by Bloomberg.

The yield premium on dollar bonds sold by Asian issuers climbed 6 basis points this week to 275 basis points yesterday, the most since Oct. 5, according to JPMorgan Chase & Co.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced three basis points to 130.5 basis points as of 8:50 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is on track for its highest close since Oct. 11 and has advanced 6.3 basis points since Nov. 9 for its second straight weekly rise, CMA data show.

Far East

Far East, a real estate developer, intended to sell about $200 million of five-year notes at 5.5 percent, a person familiar with the matter said last week. A sale isn’t in the company’s interests under current market conditions, Far East said in a statement to the Hong Kong stock exchange on Nov. 12. Australia’s BlueScope Steel scrapped a $300 million offering, saying that terms and conditions didn’t meet expectations.

The Markit iTraxx Australia index increased six basis points to 153 as of 11:48 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark is also set for its highest close since Oct. 11, according to data provider CMA and has climbed 5.8 basis points over the past five days, the second consecutive weekly increase.

The Markit iTraxx Japan index was little changed at 198 as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The measure has fallen 4.3 basis points this week, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The indexes are benchmarks for protecting 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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