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REI Agro Postpones Dollar Bonds; Beijing Enterprises Offers Debt

REI Agro Ltd. has postponed a sale of dollar-denominated bonds more than a week after a rating company raised concerns about leverage. Beijing Enterprises Water Group Ltd. started marketing debt.

REI Agro, an Indian Basmati rice producer, planned to sell five-year bonds at about 12 percent, a person familiar with the matter said April 24, asking not to be identified because the terms weren’t set. That sale has now been postponed, two people with knowledge of the details said today. Beijing Enterprises is meanwhile offering bonds in the U.S. currency that could price as soon as today, a separate person said.

REI Agro’s decision to halt the sale follows an April 17 report from Standard & Poor’s that questioned the company’s liquidity, including reliance on short-term bank loans. The company has the equivalent of $314 million of debt due by the end of 2017, of which 38 percent comprises loans, Bloomberg data show.

“When you get B rated issuers like REI Agro tapping international markets, that gets a bit trickier,” said Bharat Shettigar, Singapore-based senior credit analyst at Standard Chartered Plc, the top underwriter for foreign-currency Indian corporate bonds this year, according to data compiled by Bloomberg. “They’re less familiar among investors and are relatively small companies.”

Basmati Revenue

REI Agro’s Chief Financial Officer Ranjan Majumder declined to comment on any bond sale when called at his office in the eastern Indian city of Kolkata. The company had planned to sell the notes through its Ammalay Commoditiess JLT unit, a person familiar with the matter said April 24.

The company is the largest Basmati producer in India and gets about 90 percent of its revenue from the rice, according to S&P’s April 17 report. The proposed notes were assigned a B rating by the company.

“High leverage and debt servicing will continue to weaken REI Agro’s cash flows,” analysts led by Singapore-based Xavier Jean wrote. “We believe REI Agro’s financial risk profile is unlikely to improve materially over the next 12 months.”

Fitch Ratings Ltd. assigned the planned notes a B+ grade, noting the company has a well-known brand, moderate liquidity and that a bond sale would probably reduce its cost of funds, according to an e-mailed report dated April 16.

Yingde Sale

Beijing Enterprises, a developer of water-treatment systems, plans to sell five-year bonds at about 5 percent, according to a person familiar with the matter, who asked not to be identified because the terms aren’t set. Yingde Gases Group Co., an industrial gas manufacturer, is also marketing more of its 8.125 percent securities due April 2018, a separate person said.

Chinese companies pay an average 5.41 percent to sell dollar debt after costs slid 5 basis points this week, the biggest decline since the period ending April 5, according to JPMorgan Chase & Co. indexes. Issuers from Hong Kong and China have raised $10.5 billion this month, near the record $12.9 billion in January, data compiled by Bloomberg show.

“Yields will remain steady,” said Louisa Lam, a credit analyst at HSBC Holdings Plc in Hong Kong. “For May, I still see the supply coming.”

Beijing Enterprises last sold dollar notes in April 2012 when it raised $800 million from a sale of 4.5 percent 10-year bonds, data compiled by Bloomberg show. The company has the equivalent of $299 million of debt due before the end of 2015, the data show.

Yingde Gases is marketing more of its 2018 notes at about 103.125 cents on the dollar, a person familiar with the matter said. The bonds priced at 99.496 cents on April 12, data compiled by Bloomberg show.

Bond Risk

The cost of insuring Asia-Pacific corporate and sovereign bonds from default declined, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan retreated 1 to 111 as of 8:25 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark is also set for its lowest close since March 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index slid 1.5 basis points to 109.5 basis points as of 10:59 a.m. in Sydney, according to Westpac Banking Corp. The gauge is on course for its lowest close since March 19, according to data provider CMA. Markets in Australia were closed yesterday for a public holiday.

The Markit iTraxx Japan index was little changed at 86 basis points as of 9:36 a.m. in Tokyo, Citigroup Inc. prices show. The last time the measure closed lower was in April 2010, according to CMA.

Credit-default swap 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.

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