Feb. 19 (Bloomberg) -- China Properties Group Ltd. has abandoned plans to sell yuan-denominated bonds in favor of dollar notes as the country’s developers return to U.S. currency debt markets.
Hong Kong-based China Properties is marketing three-year notes to yield about 12.75 percent, a person familiar said. The company said earlier this week in a statement to the Hong Kong stock exchange it planned to sell offshore renminbi securities. Those similar-tenor notes were being offered to yield about 11.5 percent. New World Development Co., which operates hotels and restaurants in China, is marketing seven-year dollar debentures at a spread of 320 to 325 basis points.
The last time more than two builders from mainland China raised U.S. dollar debt on the same day was almost a month ago, when Cifi Holdings Group Co., China South City Holdings Ltd. and Greentown China Holdings Ltd. sold a combined $1.1 billion of notes on Jan. 20, according to data compiled by Bloomberg. Dollar borrowing costs in Asia fell to a more than three month low of 4.45 percent yesterday, HSBC Holdings Plc indexes show.
“Supply has started to pick up again as markets have stabilized and rates continue to remain low,” said Michele Barlow, Hong Kong-based head of Asia-Pacific credit and convertible bonds research at Bank of America Corp. “This environment brings out opportunistic issuers, particularly on the investment-grade side.”
Property companies comprise 67 percent of issuance from China and Hong Kong this year, compared with almost 80 percent for the same period of 2013.
Beijing Energy Investment Holding Co., which invests in energy and electric power generation assets, is also marketing three-year notes at a spread of about 220 basis points more than Treasuries, another person familiar with the matter said. The deal size is expected to be $300 million.
The extra yield investors demand to hold Chinese dollar debt over U.S. government securities fell to 301.05 basis points yesterday, the least since Jan. 23, HSBC indexes show. Spreads have averaged 297.70 basis points this year compared with 308.29 basis points in all of 2013.
Hong Kong-based Sun Hung Kai Properties Ltd. sold $400 million of 10-year 3.375 percent bonds at a 205 basis-point spread yesterday. The notes, rated A1 by Moody’s Investors Service, have a fixed coupon for the first five years and then from years five to 10, will pay 103.2 basis points more than the six-month London interbank offered rate for dollars.
The fact the notes switch from fixed to floating allowed them to be priced over five-year Treasuries rather than 10, according to Matthias Knobloch, the head of debt syndicate for Asia-Pacific at HSBC, which managed the sale.
“This innovative structure, a first of its kind in Asia, provides the company with significant flexibility to manage its financing requirements,” he said. “The transaction generated an orderbook of over $2.5 billion, reflecting robust investor demand for this new structure in the current interest rate environment.”
Also marketing dollar bonds today is Indian Railway Finance Corp. The New Delhi-based group is offering five-year fixed-rate securities at a spread of about 265 basis points more than Treasuries, a person familiar said. The company last sold bonds in the U.S. currency in October 2012 when it issued $300 million of notes due 2017, Bloomberg-compiled data show.
The cost of insuring corporate bonds against non-payment in Australia declined today, credit-default swap traders said.
The Markit iTraxx Australia index fell 0.5 of a basis point to 99.5 basis points as of 11:20 a.m. in Sydney, Westpac Banking Corp. prices show. The gauge, which has ranged from 96.7 basis points to 109.6 basis points this year, is falling for a fourth consecutive day, according to data provider CMA.
The Markit iTraxx Japan index was little changed at 78.6 basis points as of 9:25 a.m. in Tokyo, Citigroup Inc. prices show. The measure last closed lower on Feb. 12, and is up 11.1 basis points this year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was also little changed at 132 as of 8:20 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The gauge has ranged from 129.3 basis points to 153.5 basis points this year, 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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