MagnaChip Semiconductor Corp., a Korean electrical components maker, sold Asia’s first corporate junk bonds in the U.S. currency since May as yields fall.
The company, which is listed in the U.S. and makes parts for televisions, mobile phones and tablets, raised $225 million from 6.625 percent notes due 2021, according to data compiled by Bloomberg. Non-investment grade companies from Asia outside Japan pay an average 7.63 percent to sell debt, 37 basis points down from a four-year high on June 25, JPMorgan Chase & Co. indexes show.
Chinese developer Central China Real Estate Ltd. and India’s Vedanta Resources Plc were the last companies rated below investment grade in the region to sell notes, Bloomberg data show. Sales stalled amid surging yields after Federal Reserve Chairman Ben S. Bernanke said the U.S. may taper stimulus as early as this quarter if the economy improves as forecast. Bernanke is due to testify to Congress later today.
“Everyone is keeping their eye on Bernanke’s testimony later today,” Louisa Lam, a credit analyst at HSBC Holdings Plc said. “There are quite a number of new issues, especially from Indonesia, planning to come. So once the market is more stable, the primary market will pick up.”
Central China Real Estate sold $400 million of 6.5 percent notes on May 22, data compiled by Bloomberg show. The securities, issued at par, were trading at 92.59 cents on the dollar yesterday. Vedanta borrowed $1.7 billion in a two-part sale of 10-year 7.125 percent notes and six-year 6 percent notes that same day.
MagnaChip, which is graded BB- by Standard & Poor’s, its third-highest high-yield rating, placed all of its notes to U.S.-based institutional investors, a person familiar with the matter said, asking not to be identified because the details are private. The debentures priced to yield 6.707 percent and can be called after four years, the data show.
High-yield companies have ratings below BBB- from Fitch Ratings Ltd. and S&P, or the equivalent Baa3 from Moody’s Investors Service.
Indian Oil Corp. plans to meet investors from today regarding a possible sale of U.S. dollar-denominated debt, a person familiar with that matter said yesterday. PT Multipolar concludes marketing talks regarding its own possible dollar bond offering today, another person said.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 137.5 basis points as of 8:32 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge has ranged from 136.6 basis points to 163 basis points this month, according to data provider CMA.
The cost of insuring Japanese corporate bonds from non-payment rose with the Markit iTraxx Japan index gaining 1 basis point to 92 as of 9:28 a.m. in Tokyo, Deutsche Bank AG prices show. The index is on track for its highest close since July 12, 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 was also little changed at 126 basis points as of 10:29 a.m. in Sydney, according to National Australia Bank Ltd. The index has ranged from 125.5 to 139.8 this month, according to CMA.
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.