Bond Risk Falls on Cyprus Accord; Defaulter Suzlon Markets NotesRachel Evans
Bond risk in the Asia-Pacific region dropped after Cyprus reached an accord with creditors on an international bailout. Suzlon Energy Ltd., the Indian wind-turbine maker which defaulted on its convertible bonds last year, and China State Construction International Holdings Ltd. began marketing U.S. dollar-denominated notes.
Suzlon, which needs money to repay foreign creditors and boost equity capital under its liability-restructuring agreement with lenders, is offering five-year debt at a yield of about 5 percent, a person familiar with the matter said. Its outstanding notes due 2016 tumbled to an all-time low of 35 cents in October, when it failed to repay $209 million in India’s biggest convertible-bond default.
A gauge of Asian bond risk is on track to drop for the first time in more than a week as overnight talks in Brussels paved the way for 10 billion euros ($13 billion) of emergency loans to Cyprus, which would make it the fifth country to tap a rescue since the euro debt crisis broke out in Greece in 2009. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 118 basis points as of 8:18 a.m. in Hong Kong, set for its first fall since March 15, Royal Bank of Scotland Group Plc and CMA prices show.
“In the near term, any headlines that come out of Europe which mention working on some kind of bailout solution are going to help sentiment,” Brayan Lai, an analyst in emerging-market credit trading at Jefferies Group Inc. said. “There’s certainly cash on the side that needs to be put to work.”
Suzlon’s new notes are backed by a stand-by letter of credit from State Bank of India, a person familiar with the matter said, asking not to be identified because the details are private. The company, which named Amit Agarwal as its chief financial officer last week, may raise as much as $650 million, a different person said earlier this month.
Proceeds from the latest sale, being offered via wholly-owned subsidiary AE-Rotor Holding BV, will be used to repay loans, that person said. About two thirds of Suzlon’s $2.85 billion total bonds and loans outstanding fall due before 2015, according to data compiled by Bloomberg.
China State Construction, a Hong Kong-based provider of civil engineering works services, is marketing its five-year dollar bonds at a spread of about 262.5 basis points more than similar-maturity Treasuries, another person familiar with that matter said today. PT Tower Bersama Infrastructure is also marketing five-year notes at about 5 percent, another person said.
Other U.S. dollar bond sales in the market include Korea Exchange Bank, which plans to sell five-year securities at about 140 basis points more than Treasuries, and Saudi Electricity Co., which is considering pricing 10- and 30-year sukuk at spreads of about 175 basis points and 210 basis points respectively, according to separate people familiar with the deals.
Bharti Airtel Ltd. is offering more of its 5.125 percent notes due March 2023 at about par, or 100 cents on the dollar, a person familiar with that matter said. Beijing Capital Land Ltd., a builder of luxury residential properties, expects to sell dollar bonds with no fixed maturity, according to a statement to the Hong Kong stock exchange.
The Markit iTraxx Asia index, which has ranged from 100.5 basis points to 120.8 basis points since Dec. 31, is set its lowest close since March 20, according to data provider CMA.
The Markit iTraxx Australia index decreased 3.125 basis points to 117.375 as of 12:46 p.m. in Sydney, Deutsche Bank AG prices show.
The Markit iTraxx Japan index declined 2.5 basis points to 104.5 as of 9:17 a.m. in Tokyo, according to Citigroup Inc. prices. The index has ranged from 101 basis points to 148.1 basis points this year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
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.