A growing pipeline of borrowers are meeting with investors and preparing to launch bond deals, but the pace of issuance has slackened from January. According to Dealogic data, Asian issuers have raised $54 billion through US dollar bonds year-to-date, compared to $48.6 billion during the same period in 2012, which is a pretty torrid pace considering 2012 was a record year for debt markets.
In January alone, Asian borrowers raised $23 billion, but issuance has tapered slightly this month with $8 billion raised so far. “It is still busy but in terms of absolute volumes, we are not going to see the same pace as we did in January,” said one debt head. “It is more difficult to execute deals now than at the start of the year. People are trying to make sense of Japan’s quantitative easing and much of the data out of China, and the US has been underwhelming.”
And while China property high-yield dominated bond issuance in January, investment-grade volumes have also picked up, partly as a result of falling US Treasury yields, which are used to price most high-grade bonds.
“Investment grade has made a bit of a comeback,” said the debt head. “The 10-year US Treasury backed up from 1.7% to 2.1% in January but is now back down to 1.7%, so a lot of investment-grade borrowers that were kept at bay are looking at the market.”
And while the pace of issuance is not as frantic, there are still legs left in the bond market. “There is still pretty decent demand, although so far this week, we have yet to see a dollar bond,” said one investor. “There are some 15 to 20 borrowers that could potentially come to market.”
One of the companies lining up to tap the market is the world’s biggest basmati rice processor, REI Agro, which started meeting investors in Singapore, Hong Kong and London on Wednesday. DBS, Credit Suisse and UBS are the arrangers. Roadshows conclude on Monday.
Chinese residential property developer Xinyuan Real Estate kicks off investor meetings to Hong Kong, Singapore and London today. Barclays and Morgan Stanley are joint global coordinators and bookrunners. Bank of America Merrill Lynch is also a bookrunner. A US dollar debut bond might follow.
Xinyuan Real Estate is rated B+ by Standard & Poor’s and Fitch. Unlike most of the China property companies that have tapped the dollar market this year (which are listed in Hong Kong), Xinyuan Real Estate is listed on the New York Stock Exchange.
Japfa Comfeed Indonesia, an Indonesia-based poultry feed and commercial farming company kicks off meetings with investors today. Credit Suisse is the arranger.
Out of China, state owned petroleum and petrochemical giant China Petroleum & Chemical Corp (Sinopec) concluded roadshows on Wednesday. Bank of America Merrill Lynch, Citi, CICC, Citic, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Morgan Stanley, Nomura, Societe Generale and UBS are the arrangers. Sinopec, which is eyeing a bond with more than one tranche, is following shortly after another major state-owned company, CNPC issued a triple-tranche bond.
Meanwhile, water treatment company Beijing Enterprises Water concludes roadshows with investors this week. DBS, Deutsche Bank, Standard Chartered, HSBC and UBS are the arrangers.
In the Philippines, beer brewer turned power company San Miguel concluded investor meetings in Singapore and Hong Kong on Wednesday. A dollar bond offering is expected to follow subject to market conditions. ANZ, Bank of America Merrill Lynch, DBS, Deutsche Bank and Standard Chartered are arrangers.
Sovereigns are also looking at the market. Vietnam is holding non-deal roadshows arranged by Deutsche Bank, HSBC and Standard Chartered were the arrangers. There is some surprise that the Vietnam sovereign is returning. Vietnamese issuers have had a hard time coming to market since Vinashin defaulted on its debt and country is struggling to keep its inflations down. But a source said that it is a “non-deal roadshow” and a deal may not materialise immediately. Elsewhere, the Korean sovereign is also planning to tap the US dollar bond market.
