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China Railway’s Dollar-Bond Debut Compets With Developers

Jan. 23 (Bloomberg) -- China Railway Group Ltd. plans to sell its debut U.S. dollar-denominated bonds and Fosun International Ltd. has begun marketing debt after Hengdeli Holdings Ltd. offered investors their first Chinese alternative to property companies this year.

China Railway, the nation’s biggest construction company by total assets, has hired six banks to arrange investor meetings starting tomorrow, according to a statement to the Hong Kong stock exchange today. Fosun is marketing seven-year securities at a yield of about 7.25 percent, a person familiar with the matter said. Hengdeli, the Chinese partner of Swatch Group AG, raised $350 million from a sale of five-year debt yesterday, data compiled by Bloomberg show.

Real-estate companies have dominated dollar bond sales by Chinese corporate issuers this year, accounting for 94 percent of the $6.1 billion in note offerings since Dec. 31, the data show. The cost of insuring corporate and sovereign bonds in Asia from non-payment has fallen this year and was little changed today, according to credit-default swap traders.

“We’re seeing more diversification in the pipeline now simply for the fact that so many of the developers have already tapped the window,” said Owen Gallimore, head credit analyst at Australia & New Zealand Banking Group Ltd. in Singapore. “There will however continue to be a steady flow of Chinese property issues.”

Hengdeli, Longfor

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 0.5 basis point to 107 basis points as of 12:10 p.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark has ranged from 102.8 basis points to 110.1 basis points this year, according to data provider CMA.

Hengdeli’s notes, which priced at par, were trading at 100.8 cents on the dollar as of 2:21 p.m. in Hong Kong, Credit Agricole SA prices quoted on Bloomberg show.

Longfor Properties Co. raised $500 million via 6.75 percent 2023 bonds yesterday, the fourth Chinese developer to sell notes in the U.S. currency this week, Bloomberg data show. Greentown China Holdings Ltd. has hired banks to arrange investor meetings as it considers a dollar bond, according to a statement to the Hong Kong stock exchange.

Qatar Telecom (Qtel) QSC is considering pricing 15-year bonds at about 250 basis points more than 10-year Treasuries, a separate person with knowledge of that sale said.

Credit Risk

The Markit iTraxx Japan index stood at 140 basis points as of 9:21 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure dropped to 137.9 basis points earlier this week, its lowest since March, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index was also little changed at 113.5 as of 10:41 a.m. in in Sydney, according to ANZ prices. The gauge has ranged from 111.6 to 127.5 in 2013, CMA prices show.

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 editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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