Asia dollar bond market springs back to life

Franshion Properties, Times Property and Nomura sell dollar debt, and Mizuho is raising Japan’s first bank capital note.

The Asia dollar-denominated market experienced one of its busiest weeks since the week of February 17 with as many as five transactions printing and a few others in the pipeline.

Franshion Properties, Times Property and Nomura came to Asia’s dollar market on Wednesday, while United Overseas Bank and Hyundai Capital Services also issued dollar-denominated debt on Tuesday, according to Dealogic data. The week of February 17 saw 11 deals being issued.

As the earnings season passes, more issuance is likely to come and will be more diversified, according to credit analysts. “The trend we have seen in the last couple of days with more issuance coming through is something we expect will continue for the rest of the month,” said Krishna Hegde, Singapore-based head of Asia credit research at Barclays.

“We don’t expect as much issuance as in January and we believe the proportion of Chinese issuance will be slightly lower,” he added. “So we should get more diversity in the issuer base.”

The biggest weekly issuance for Asia’s US dollar market was the week of January 20, which saw as many as 16 deals come to market, according to Dealogic.

Also, borrowers are likely to catch the window before rates begin trending up in the second half of the year, highlights Hegde. Barclays expects 10-year US Treasuries will touch 3.5% by the end of 2014, from current levels of 2.75%.

On Wednesday, two Chinese property companies accessed the dollar market. Franshion Properties raised a $500 million five-year note at a yield of 5.75%, while Times Property sold a debut $225 million five-year high-yield bond at a yield of 12.875%. The latter is callable in the third year.

Credit analysts have concerns about the performance outlook of the Chinese real estate industry in general as it is prone to oversupply. Morgan Stanley maintains an underweight position on the sector.

“Onshore funding conditions are now fairly tight so it makes the offshore funding environment look that much more attractive,” said Viktor Hjort, credit analyst at Morgan Stanley, adding that new issue premiums are likely to increase in the coming months for property credits. “This helps explain why Chinese corporates want to come to the dollar market to issue bonds.”

Franshion’s bond issuance was a relatively straightforward one, backed by strong state-owned ownership and recent ratings upgrade to BBB- by Standard & Poor’s in December, notes a source close to the transaction. As a result, the deal didn’t require any roadshows.

However, Times Property – a maiden issuance – had two days to execute its dollar-denominated transaction. While it is the norm to close a deal in a day, syndicate bankers gave investors additional time to do extra due diligence.

Lucror Analytics, an independent credit specialist, advised in a note on Thursday that it does not recommend holding the proposed issuance given the company’s short track record and aggressive growth strategy.

Both deals are trading around par in secondary, say sources. DBS Bank, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, OCBC Bank and Royal Bank of Scotland (RBS) were the joint bookrunners of Franshion’s bond.

UBS and Haitong International are joint coordinators and lead managers of Times’ note. Other lead managers include BOC International, Citi and HSBC.

Elsewhere, Nomura raised a $1 billion five-year note at a yield of 2.75%, according to a term sheet. The Japanese bank was the sole bookrunner of the transaction, which closed overnight in the US.


On Thursday, Beijing Infrastructure’s subsidiary, Eastern Creation Investment Holdings, announced a five-year dollar benchmark deal at an initial price guidance of Treasuries plus 225bp area, according to a term sheet. ICBC Asia, ICBC International, Wing Lung Bank and RBS are sale managers of the Reg-S transaction.

Mizuho Financial Group is planning to issue a Basel III-compliant Tier 2 10-year subordinated note under Rule 144a in the US and Reg-S outside the US subject to market conditions, according to a source. The issuance – the first from a Japanese financial institution – will be in dollars and benchmark size. Fixed-income investor meetings will commence on March 17 in the US, Europe and Asia.

Pactera, a Beijing-based IT consulting and outsourcing company, is also about to issue a $275 million seven-year note that is callable in third year, according to a term sheet seen. Proceeds will be used to finance Blackstone Group consortium’s proposed acquisition of Pactera Technology – which will be a subsidiary of the issuer after the merger.

Fixed-income investor meetings for Pactera’s potential deal commenced on Thursday in Asia, Europe and the US. Bank of America Merrill Lynch, Citi and HSBC are joint bookrunners of the transaction.


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