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Sinopec, San Miguel Market Dollar Bonds as Issuers Extend Tenors

China Petroleum & Chemical Corp. is marketing its first sale of U.S. dollar-denominated bonds in almost a year, joining San Miguel Corp. in offering notes as the companies seek money to repay debt and fund investment.

Sinopec, as the Chinese petroleum refiner and crude oil producer is known, plans to sell three-, five-, 10- and 30-year securities at spreads of about 125 basis points, 145 basis points, 180 basis points and 170 basis points over Treasuries respectively, a person familiar with the matter said. San Miguel is offering 10-year bonds, which the food and beverages group can buy back after five years, at about 5.125 percent, another person said.

Bond sales in the U.S. currency by issuers from Asia outside Japan have soared, with record offerings last quarter as yield premiums fell to a 1 1/2-year low in January, according to data compiled by Bloomberg and JPMorgan Chase & Co. indexes. Dollar bonds from India have handed investors a 3.1 percent return this year compared with 2 percent in Hong Kong and 0.9 percent in Singapore, the indexes show.

“Companies are looking to issue longer-tenor debt at attractive yields to extend the maturity profile of their capital structure,” said Raja Mukherji, the Hong Kong-based head of credit research for Asia at Pacific Investment Management Co., manager of the world’s largest bond fund. Some proceeds are being used to finance mergers and acquisitions and capital investments, he said.

Longer Tenors

More than 43 percent of bonds sold this year had a tenor of 10 years or more, compared with 35 percent in the same period of 2012, according to data compiled by Bloomberg.

San Miguel plans to use the proceeds from its sale to fund working capital and refinance debt including a bridge loan arranged by Deutsche Bank AG and Standard Chartered Plc, the person said, asking not to be identified because the terms aren’t final.

The Philippines’ biggest company by sales signed a $650 million loan in January that matures in July, Bloomberg data show. The company last sold dollar bonds in April 2011, when it raised $600 million from equity-linked notes.

Sinopec last sold notes in the U.S. currency in May, the data show. Proceeds from its latest offering will be used to acquire offshore assets, fund overseas investment and repay bank debt, the person said.

Credit Risk

Ageas Insurance International NV’s Asia unit is also offering dollar notes. Ageas Insurance Co. Asia Ltd., which sells life, accident and medical insurance in Hong Kong, plans to sell 10-year bonds at about 250 basis points more than similar-maturity Treasuries, a person with knowledge of that matter said.

The cost of insuring corporate and sovereign bonds in the region against non-payment is increasing today, according to traders of credit-default swaps.

The Markit iTraxx Australia index rose 2 basis points to 115 basis points as of 10:25 a.m. in Sydney, according to Westpac Banking Corp. prices. The measure, which has ranged from 102.3 to 127.5 this year, is poised to close at its highest level since April 8, according to data provider CMA.

The Markit iTraxx Japan index advanced 2 basis points to 94 as of 9:29 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark is set to pare its decline to 19 basis points so far this month, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 114.5 basis points as of 8:22 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is set to rise for a fifth consecutive day, 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.

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