Cofco Plans Debut Dollar Debt as Bond Risk, Interest Costs DropTanya Angerer
Cofco Corp. is considering its first sale of dollar-denominated bonds as credit risk in the region heads for its biggest monthly drop since June last year and amid projections the Federal Reserve will announce it is maintaining monetary stimulus.
Cofco Hong Kong Ltd., a unit of China’s largest grains trader, hired banks to help arrange fixed-income investor meetings in Hong Kong, Singapore and London starting from today, a person familiar with the matter said. Korea East-West Power Co. will meet bond investors starting next week while Anton Oilfield Services Group is marketing five-year dollar bonds to yield about 8 percent and may complete the sale today, other people familiar with those matters said.
Dollar borrowing costs in Asia dropped to a four-month low of 4.324 percent on Oct. 29, HSBC Holdings Plc indexes show. The Fed concludes its two-day meeting today and economists expect it to maintain its $85 billion in monthly bond purchases which have buoyed emerging-market assets globally. The Markit iTraxx Asia index outside Japan is poised to decline 23.4 basis points since Sept. 30, the most since June 2012.
“Everyone assumes tapering will be pushed back,” said Annisa Lee, a Hong Kong-based credit analyst at Nomura Holdings Inc. “That’s why everyone is rushing to sell debt and new bond sales will probably be even more robust in the coming weeks.”
Offerings in the region jumped by more than 14 times to about $5 billion last week compared with $350 million the five business days prior, according to data compiled by Bloomberg.
Standard & Poor’s issued a proposed A- rating to Cofco’s expected note sale. “We see a very high likelihood of extraordinary support from the Chinese government to Cofco HK through Cofco group in the event of financial distress,” the ratings company said today.
Korea East-West Power, a South Korean electricity generator, last sold securities in the U.S. currency in July 2012, according to data compiled by Bloomberg. Those $500 million of 2.5 percent notes due 2017 are yielding 2.301 percent, Bloomberg prices show.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 1 basis point to 133 basis points as of 9:03 a.m. in Hong Kong, Westpac Banking Corp. prices show.
The Markit iTraxx Australia index slid 1 basis point to 105 as of 11:52 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices. The benchmark is set to fall for a third day and is at a level unseen since Oct. 22, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index declined 1 basis point to 86.75 basis points as of 9:47 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is on track to post its first decline since Oct. 23, 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.