Texhong Textile Group Ltd. is marketing U.S. dollar-denominated bonds after borrowing costs for Asian high-yield issuers fell to a six-week low. Debt risk in the region decreased.
The Shanghai-based fabric manufacturer is planning to sell January 2019 notes at a yield of about 6.75 percent, a person familiar with the matter said. The securities have a provisional Ba3 rating by Moody’s Investors Service, three steps below investment grade, according to an April 5 statement from the risk assessor. A unit of Yingde Gases Group Co. is offering a five-year bond for a yield in the mid to high 8 percent area, a second person said.
Texhong’s offering is the second high-yield sale from Asia in the U.S. currency this week after Shanghai-based developer CIFI Holdings Group Co. raised $275 million on April 8, data compiled by Bloomberg show. Borrowing costs for the region’s riskier issuers fell to 5.62 percent yesterday, the lowest since Feb. 27, according to JPMorgan Chase & Co. indexes.
Lower funding costs and economic recovery have encouraged high-yield issuers to sell dollar debt, said Michele Barlow, Hong Kong-based head of Asia-Pacific credit and convertible bonds research at Bank of America Corp. “In February we revised up our issuance forecast for high-yield corporates on the back of the strong supply in January.”
State Bank of India, the nation’s largest lender by assets, is marketing five-year bonds rated Baa2 by Moody’s at about 275 basis points more than Treasuries.
Asian speculative-grade offerings, rated lower than BBB- by Standard & Poor’s and Fitch Ratings or the equivalent Baa3 by Moody’s, surged to a record $14.5 billion in the first quarter, Bloomberg-compiled data show.
Moody’s assigned a Ba3 rating for Yingde’s securities, according to an e-mail on April 2.
Texhong’s $200 million of bonds due January 2016 were trading at a yield of 5.26 percent at 4:26 p.m. in Hong Kong, according to BNP Paribas SA prices.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 3 basis points to 115 basis points as of 1:41 p.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since before the current series began trading on March 20, according to data provider CMA.
The Markit iTraxx Australia index slid 2 basis points to 112 as of 3:45 p.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark is poised for its sixth consecutive day of declines, based on data from CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index dropped 4 to 90 as of 2:41 p.m. in Tokyo, according to Citigroup Inc. prices. The measure was last lower in April 2010, CMA data 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.