Mitsubishi UFJ Offers Dollar Debt as China Trust Concerns Rise
Mitsubishi UFJ Lease & Finance Co. is planning a sale of dollar-denominated bonds, set to become the first Japanese issuer to sell debt in the U.S. currency in the Asia-Pacific region in three weeks.
Tokyo-based Mitsubishi UFJ Lease & Finance is marketing the five-year notes at a spread of about 115 basis points more than the three-month London interbank offered rate, according to a person familiar with the matter who asked not to be identified because the matter is private. Development Bank of Japan Inc. was the last company from the nation to sell dollar bonds in Asia, raising $500 million via a sale of 2.125 percent notes due 2019 on Jan. 23, Bloomberg-compiled data show.
“The market is open for non-Chinese names,” said Krishna Hegde, Barclays Plc’s Singapore-based head of Asia credit research. “But for borrowers in China, the news about one more trust facing repayment difficulties is adding to the negative views about the country.”
China averted its first trust default in at least a decade last month as investors in a 3 billion-yuan ($495 million) high-yield product issued by China Credit Trust Co. were bailed out days before it matured. About 5.3 trillion yuan of trust products will be due this year, up from 3.5 trillion yuan in 2013, Haitong Securities Co. estimated last month, warning firms can no longer shoulder all the risks tied to offering implicit guarantees.
An investment product created by Jilin Province Trust Co. failed to repay investors when some tranches matured, Shanghai Securities News reported yesterday, while the China Trustee Association said in a statement on its website today that about 20 billion yuan of trust products had repayment difficulties in 2012.
Chinese issuers, including companies in Hong Kong, make up 41 percent of bond sales in Asia outside Japan this year, after constituting 54 percent of issuance last year, according to data compiled by Bloomberg.
The $300 million of 10.625 percent notes sold by mainland property developer Fantasia Holdings Group Co. last month at par are trading at 99.034 cents on the dollar today to yield 10.789 percent, Bloomberg-compiled prices show. China Aoyuan Property Group Ltd.’s $300 million of bonds due 2019 are yielding 11.016 percent compared with 10.939 percent a month ago.
Dollar borrowing costs in Asia averaged 5.199 percent on Feb. 11, the least since Nov. 26, JPMorgan Chase & Co. indexes show. Federal Reserve Chair Janet Yellen, in her first report to Congress since being sworn in last week, pledged to maintain the policies of her predecessor Ben S. Bernanke by scaling back stimulus in “measured steps.”
The Federal Open Market Committee has twice reduced the size of its monthly asset-purchase program, cutting bond buying to $65 billion from $85 billion.
Credit risk in Asia rose today. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 1 basis point to 139 basis points as of 8:28 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge rose 1.3 basis points yesterday after five consecutive days of declines, according to prices from data provider CMA.
The Markit iTraxx Australia index advanced 1 basis point to 100.5 as of 11:29 a.m. in Sydney, according to Westpac Banking Corp. The gauge is on course for its first increase this week and its biggest one-day gain since Feb. 3, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index increased by 0.5 of a basis point to 76.75 basis points as of 9:28 a.m. in Tokyo, Citigroup Inc. prices show. The measure slid 7.3 basis points last week, its biggest decline since the five business days ended Nov. 15.
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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