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China Railway Said to Plan $3.3 Billion Bond Sale in Yuan

Sept. 4 (Bloomberg) -- China Railway Corp., which took over operations from the disbanded Ministry of Railways in March, plans to sell 20 billion yuan ($3.3 billion) of bonds next week, two people familiar with the matter said today.

The state-owned company will sell 15 billion yuan of seven-year notes and 5 billion yuan of 20-year notes on Sept. 11, the people said, asking not to be identified because the details are private. The company last issued 20 billion yuan of seven-year notes at 5.06 percent on Aug. 26, the highest for that tenor since 2011, according to a Chinabond statement. It sold 10 billion yuan of 20-year bonds at 5.35 percent on Aug. 13.

Premier Li said in July that railroads are key for the nation “to get rich” as he tries to stimulate an economy growing at the slowest pace in more than a decade. The endorsement hasn’t profited holders of rail bonds, which have lost 1.7 percent this quarter following a record cash crunch. The average yield on seven-year railway bonds has climbed 50 basis points in the same period to 5.33 percent, the highest since November 2011, according to Chinabond data.

The National Development and Reform Commission, the nation’s top planning agency, approved China Railway to sell 150 billion yuan of bonds this year, according to a statement dated July 3 and posted on Chinabond’s website. The train operator, which took over the ministry’s 2.8 trillion yuan debt, has issued 60 billion yuan of the so-called enterprise bonds.

The company is seeking feedback from investors and there’s a chance it may adjust its planned sale accordingly, the people said. China Chengxin International Credit Rating Co. rated the company AAA, its top rating, according to a statement posted on Chinabond’s website on Aug. 16.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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