Gajah Tunggal Offers Dollar Debt as Sales Drop to Three-Week Low

PT Gajah Tunggal is marketing U.S. dollar-denominated notes as sales in Asia outside of Japan slid to a three-week low. Debt risk in the region fell.

The Indonesian tire maker is offering five-year securities at a yield of about 8 percent, a person familiar with the matter said, asking not to be identified because the terms aren’t set. Hainan Airlines Co. is also planning a note in the currency, a separate person said. Companies in Asia have sold $3.1 billion of bonds this week, down from a 17-week high of $6 billion for the five days ended Jan. 11, according to data compiled by Bloomberg.

Issuance in Asia excluding Japan accounts for 47 percent of dollar debt sold in all emerging markets this year, compared with 36 percent for the same period of 2012, the data show. Flows into emerging-market bond funds reached a 50-week high in the week to Jan. 18, according to data provider EPFR Global.

“We’ve seen a strong start to the year from an issuance standpoint which is creating a temporary indigestion, in high-yield particularly,” said Kaushik Rudra, the Singapore-based global head of credit research at Standard Chartered Plc. “But this is a small consolidation as we still expect volumes this quarter to be particularly strong.”

Mingfa Group International Co., a Chinese property developer, is offering five-year notes at a yield of about 13.25 percent, a person familiar with the matter said today. DBA Telecommunication (Asia) Holdings Ltd., a smart payment terminal operator in China, is marketing similar-maturity bonds at about 12 percent, another person said earlier this week.

Gajah Tunggal, based in Jakarta, last sold dollar debt in June 2009, when it issued about $435 million of 8 percent notes, Bloomberg data show.

Bond Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell one basis point to 109 basis points as of 8:21 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark has ranged from 102.8 to 110.1 this year, according to data provider CMA.

The Markit iTraxx Japan index decreased five basis points to 134.5 basis points as of 9:19 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure is on course for its lowest close since August 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index increased one basis point to 116 as of 10:36 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices. The gauge has fallen 11 basis points this year after a 53 basis-point drop in 2012, CMA prices 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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