Chicken Breeder Japfa Shrugs Off Bird Flu to Market Dollar BondsRachel Evans and Kristine Aquino
PT Japfa Comfeed Indonesia, the animal feed maker and chicken breeder, is marketing a sale of U.S. dollar-denominated bonds as China tackles an outbreak of avian flu. Credit risk in the Asia-Pacific region fell.
The company is considering selling five-year securities at about 6.5 percent, according to a person familiar with the matter, who asked not to be identified because the details are private. Sinochem Group, China’s biggest supplier of chemical products, is offering dollar perpetual notes, while Xinyuan Real Estate Co., REI Agro Ltd., and BOC Aviation Pte also plan sales in the U.S. currency, separate people said.
Chinese authorities are battling to control the spread of bird flu, which has so far killed 22 in the country, according to data compiled by Bloomberg from reports released by the national and provincial governments, and the World Health Organization in Geneva. Market responses have been muted. The cost of insuring Asia-Pacific corporate and sovereign bonds from non-payment fell, with a measure of company risk in Japan declining to the least in three years, according to traders of credit-default swaps.
“I don’t see much impact so far from avian flu concerns on corporate issuance as a whole,” said Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc. “We’re still seeing good demand from the primary market and a long pending supply pipeline.”
Japfa Comfeed plans to raise $200 million to refinance existing debt and for capital expenditure and general corporate purposes, the person with knowledge of the details said. The company has the equivalent of $231 million of debt outstanding, and this is its first sale in the U.S. currency, data compiled by Bloomberg show.
Most of Japfa Comfeed’s revenue last year came from sales of animal feed, according to its 2012 annual report. About 29 percent was from commercial farming, which includes chicken and cattle breeding, and 12 percent from day-old chicks, the report shows.
Sinochem, which is marketing securities via unit Sinochem Global Capital Co. at about 5.375 percent, hired Citigroup Inc., Credit Agricole CIB, Goldman Sachs Group Inc., HSBC Holdings Plc, Morgan Stanley, Standard Chartered Plc, Societe Generale CIB and UBS AG to manage the sale, the person familiar with the matter said.
Beijing-based developer Xinyuan Real Estate is considering selling its notes at a yield of about low-to-mid 13 percent, a separate person said. The issue may be given a B+ grade by Standard & Poor’s and Fitch Ratings Ltd., the person said, asking not to be identified because the terms aren’t set.
REI Agro, an Indian rice processor, is marketing five-year bonds at about 12 percent via unit Ammalay Commodities JLT, according to a person familiar with that matter. BOC Aviation, which leases aircraft, plans to sell 10-year notes at about 285 basis points more than similar-maturity Treasuries, another person said.
The Markit iTraxx Japan index, comprised of default swaps for 50 companies, was at 88.5 basis points at 4:44 p.m. in Tokyo, according to Citigroup. The level is the lowest since 85.63 basis points on April 16, 2010, CMA prices show.
The Markit iTraxx Australia index declined 2.5 basis points to 110.9 basis points as of 11:03 a.m. in Sydney, according to Deutsche Bank AG. The benchmark is on track for its lowest close since March 19, according to CMA.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 111 as of 8:29 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is also set for its lowest close since March 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated 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.