Chinese property companies are marketing U.S. dollar-denominated bonds, ending a three-week pause in issuance from the region. Debt risk in Asia fell to the least in almost 20 months.
Country Garden Holdings Co., based in China’s southern Guangdong province, is offering 10-year notes to yield about 7.75 percent, according to a person familiar with the matter. Kaisa Group Holdings Ltd., headquartered in Shenzhen, plans to sell seven-year bonds at 10.25 percent, a person with knowledge of that deal said, also asking not to be identified because the terms aren’t set. Hopson Development Holdings Ltd. meanwhile hired banks to help arrange fixed-income investor update meetings from Jan. 7, a person familiar with the matter said.
The real-estate companies would be the first issuers in Asia to sell debt in the U.S. currency since Zoomlion Heavy Industry Science and Technology Co. issued $600 million of 10-year securities Dec. 13, according to data compiled by Bloomberg. The cost of insuring corporate and sovereign bonds from non-payment in Asia outside of Japan has fallen to the lowest level since April 2011, prices from credit-default swap traders show.
“Sentiment is good so they want to take the chance when the window is still open to raise funds,” said Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc. “We’ve already seen a long pipeline building late last year, so this month will be quite positive.”
Companies in Asia pay an average 3.86 percent to sell dollar bonds, the least in data going back to 1996, according to Bank of America Merrill Lynch indexes as of Dec. 31. That compares with 2.57 percent for companies globally, also the least in 16 years.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 2 basis points to 102.5 basis points as of 2:14 p.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. It last traded around those levels in early April 2011, according to data provider CMA.
Country Garden’s most recent sale of bonds was in February 2011, when it raised $900 million via 11.125 percent notes due February 2018, data compiled by Bloomberg show. The company plans to use the proceeds from this sale of notes to redeem its yuan-denominated convertible bonds which mature in February, and for existing and new property projects, according to a statement to the Hong Kong stock exchange.
Kaisa last sold notes in September when it raised $250 million via 12.875 percent securities due 2017, the data show. The company intends to use more than 90 percent of the proceeds from the sale it’s currently marketing to refinance a $120 million term loan and 2 billion yuan ($321 million) of U.S. dollar-settled bonds due 2014, it said in a Jan. 2 Hong Kong stock exchange statement.
The Markit iTraxx Australia index decreased 7 basis points to 114 basis points as of 5:15 p.m. in Sydney, according to Westpac Banking Corp. The measure is on course for its lowest close in more than 17 months, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Markets in Japan are closed for a public holiday.
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.