China Developer Considers Dollar Debt After Rival Sales in Yuan

Xinyuan Real Estate Co. is considering a sale of dollar-denominated bonds as yields on Chinese debt in the U.S. currency fall this month. Two other developers chose to sell yuan notes this week.

Xinyuan Real Estate, which develops residential property for middle-income consumers, plans to meet investors in Hong Kong, Singapore and London from tomorrow to discuss a possible debut offering, according to a person familiar with the matter, who asked not to be identified because the details are private. India’s REI Agro Ltd. and PT Japfa Comfeed Indonesia have also hired banks for possible dollar sales, separate people said.

Kaisa Group Holdings Ltd., based in Shenzhen, and Future Land Development Holdings Ltd., which focuses on projects in the Yangtze River Delta, sold 3.3 billion yuan ($535 million) of so-called Dim Sum bonds this week. Earlier this year the developers sold U.S. currency debt, which offers longer-term tenors than offshore yuan securities. Average yields on dollar debt sold by Chinese companies have slid 158 basis points over the past year to 3.95 percent, down 8 basis points this month, according to HSBC Holdings Plc indexes.

“When they try to secure long term financing, especially when dollar costs are at historically low levels, they prefer to do it in dollar bonds first,” Crystal Zhao, a fixed-income analyst at HSBC. “But after a while when they have done dollar bonds, they will probably think about broadening their investor base and considering Dim Sum bonds as well.”

Kaisa Bond

Issuers pay even less to sell the yuan bonds offshore, with average yields down 32 basis points this year to 3.52 percent, the HSBC indexes show.

Kaisa, which was founded in 1999 and focuses on urban development, priced 1.8 billion yuan of three-year bonds at 6.875 percent, 2 percentage points less than it paid in March for dollar notes due 2018, data compiled by Bloomberg show. Future Land sold 1.5 billion yuan of three-year securities at 9.75 percent, 1/2 a percentage point less than five-year dollar debt it sold in January, the data show.

REI Agro’s unit Ammalay Commoditiess JLT appointed Credit Suisse Group AG, DBS Bank Ltd. and UBS AG to arrange investor meetings in Singapore, Hong Kong and London from today, the person familiar with the matter said.

Japfa Comfeed hired Credit Suisse for a planned five-year dollar note offering, another person with knowledge of the deal said today. As much as $200 million of proposed unsecured notes, guaranteed by Japfa, were awarded a BB- rating by Standard & Poor’s, according to an e-mailed statement from the grading company today.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment declined, according to traders of credit-default swaps.

Default Swaps

The Markit iTraxx Australia index slipped 2 basis points to 112 basis points as of 10:31 a.m. in Sydney, according to National Australia Bank Ltd. prices. The measure is poised to close at its lowest level since April 11, according to data provider CMA.

The Markit iTraxx Japan index dropped 1.5 basis points to 91 as of 9:23 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark has ranged from 90.5 basis points to 148.1 basis points since Dec. 31, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 114.5 as of 8:26 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge had dropped 6.9 basis points this month through yesterday, 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.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE