Korean Companies Facing Debt Wall Turn to Dollar Bond MarketTanya Angerer
Bond investors are readying for a slew of South Korean deals as companies from Asia’s fourth-biggest economy face the most maturing dollar notes since 1999.
Korea Land & Housing Corp. and Woori Bank Co., a unit of the country’s biggest financial group by assets, are finishing investor-update meetings today ahead of possible U.S. currency note sales next week, people familiar with the matters said. Korea Resources Corp., a state-run minerals explorer, began meeting fund managers in Asia and Europe yesterday.
Korean issuers sold $8.9 billion of dollar bonds last quarter, the most since the second quarter of 2009, according to data compiled by Bloomberg. Won-denominated corporate note sales jumped 39 percent to 8.5 trillion won ($8.2 billion) from the three months ended Dec. 31. Companies in Korea face some $27 billion of dollar bonds maturing this year and a further about $21 billion in 2015, the data show.
“South Korean companies have significant refinancing requirements this year,” said Mark Reade, a Hong Kong-based desk analyst at Mizuho Securities Asia Ltd. “And with low Treasury yields driving inflows into U.S. investment-grade funds, there’s plenty of appetite for high-quality names from Asia.”
Yields on Korean dollar debt averaged 2.74 percent on April 14, the least since May, JPMorgan Chase & Co. indexes show. The debentures have returned 2.42 percent this year, compared with a gain of 3.68 percent for dollar notes in the region as a whole, according to HSBC Holdings Plc.
Mobile telecommunications company Banglalink Digital Communications Ltd. is also considering dollar notes, marketing five-year securities at a yield of about 9 percent.
A sale would be the first dollar issue for a Bangladeshi company, Bloomberg-compiled data show. Dhaka-based Banglalink Digital had some 27 million subscribers as of June, according to its website. Investors should demand a yield of about 9.1 percent to 9.6 percent for the notes, according to Nomura Holdings Inc.
The cost of insuring Asia-Pacific corporate and sovereign bonds declined today. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 120 basis points as of 8:05 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The gauge is poised to drop for a third straight day to match its lowest level since April 10, according to data provider CMA.
The Markit iTraxx Australia index decreased 1 basis point to 98.5 as of 9:25 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark is on track to decline for a second straight day, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index retreated 1.25 basis points to 84.5 basis points as of 8:57 a.m. in Tokyo, Citigroup Inc. prices show. The measure is poised to fall to its lowest level since April 4 after recording its biggest one-day decline since March 4 yesterday, according to CMA.
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.