Logan Property Tests Dollar Demand as Developer Bond Sales SlideTanya Angerer
Logan Property Holdings Co. is marketing a sale of dollar-denominated bonds as new issues by Chinese developers dwindle amid expectations defaults in the sector may rise.
The Shenzhen-based real-estate company is offering five-year notes to yield about 11.25 to 11.375 percent, a person familiar with the matter said. Logan Property’s sale would be the seventh by a Chinese developer this quarter versus 14 the first three months of the year, according to data compiled by Bloomberg.
Moody’s Investors Service earlier this month revised its credit outlook for Chinese developers to negative from stable after home sales slowed and Zhejiang Xingrun Real Estate Co., a Zhejiang-based developer, collapsed in April. Coupons paid by property companies from the nation which have sold dollar bonds this year average 7.975 percent and range between 4.25 percent for China Overseas Land & Investment Ltd.’s $550 million of 2019 notes and 12.625 percent, for Times Property Holdings Ltd.’s $305 million of similar-tenor securities issued in March.
“Investors may take confidence in the fact that China’s central bank has decided to accelerate mortgage growth,” said Frank Huang, the Hong Kong-based head of trading at SinoPac Securities Asia Ltd. “It shows the government is willing to support the market.”
New home prices in China rose in April in the fewest cities in 18 months. After four years of government restrictions to cool the housing market, home sales and property construction are sliding, dragging on the country’s economy. In a bid to reverse the slump, the People’s Bank of China on May 13 called on the nation’s biggest lenders to speed up the granting of mortgages.
Dollar bonds in Asia outside Japan yield an average 4.803 percent, close to an 11-month low of 4.799 percent reached May 16, JPMorgan Chase & Co. indexes show. Five-year corporate bonds rated BB-, as Fitch Ratings Ltd. expects Logan’s to be, were paying an average 6.734 percent today, the least in more than three weeks, HSBC Holdings Plc indexes show.
Borrowers from the region refrained from selling debt yesterday with markets in the U.S. and U.K. closed for a holiday.
South Korea’s Kookmin Bank and Korea National Oil Corp. are considering dollar bond sales in coming days. Kookmin Bank hired Bank of America Corp., Barclays Plc, BNP Paribas SA, Citigroup Inc. and Standard Chartered Plc to help arrange a 144A/Reg S offering, a person familiar with the matter said today. KNOC also hired sale managers and may issue notes in dollars or euros, a separate person said.
An increasing number of borrowers from the region are examining euro-denominated debt sales as speculation the European Central Bank will ease policy cuts funding costs to an all-time low. KNOC last sold bonds in Europe’s common currency in June 2013, according to data compiled by Bloomberg.
The cost of insuring the region’s corporate and sovereign bonds against non-payment declined today.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 112 basis points as of 8:16 a.m. in Hong Kong, according to Westpac Banking Corp. prices. The gauge is poised for its lowest close since May 29, 2013, according to data provider CMA. It fell 4.8 basis points last week, the biggest weekly decline since the five days ended March 28.
The Markit iTraxx Australia index decreased 0.5 basis points to 88.5 as of 10:18 a.m. in Sydney, National Australia Bank Ltd. pricing indicates. The benchmark, falling for a third day, is set to match the May 15 level that was the lowest since May 2010, CMA data shows.
The Markit iTraxx Japan index declined 0.25 basis points to 81.25 basis points as of 9:15 a.m. in Tokyo, Citigroup prices show. The measure, dropping for a fourth day, is at its lowest level since March 19.