Banks circle Sinopec for dollar bond

Bankers are pitching Sinopec for a potential dollar bond as its bridge loan falls due for refinancing. Elsewhere, the Republic of Indonesia has kicked off a roadshow.

Banks have been circling China Petroleum and Chemical Corp, better known as Sinopec, for a potential US dollar bond. There are rumours that the company is eyeing a dollar bond with tenors of five, 10 and 30 years.

The state-linked company is China’s largest producer and supplier of refined oil products and major petrochemical products. It is an obvious candidate to tap the US dollar bond market after it bought a 9.03% equity interest in Syncrude, a ConocoPhillips oil-sands project, for $4.65 billion last year. Its bridge loan, which was done on a bilateral basis, is due for refinancing.

But, for now, it is still unclear when or if Sinopec will launch a deal. “We have been pitching but have not heard back from the company as yet,” said one DCM banker.

According to another DCM banker, the company might focus on refinancing its bridge loan through the loan markets first, where it has access to cheap financing thanks to its status as a state-linked company – it has close relationships with lenders such as China Eximbank and China Development Bank. Sinopec might tap the dollar bond market after that, at which point banks will be keen to win the mandate to bring a debut issuer to the dollar market.

Other Chinese issuers harbouring ambitions to make offshore acquisitions are also expected to borrow dollars this year as funding levels are looking attractive thanks to low US Treasury yields. “We expect more Chinese issuers to tap the US dollar bond market to fund potential M&A activity,” said a DCM banker.

Indonesia starts roadshow
Away from Sinopec, the G3 bond markets are expected to be quiet during the next few days as investors take stock of the impact of the earthquake in Japan on global financial markets.

However, despite volatile markets, the Republic of Indonesia yesterday started a roadshow for its US dollar global benchmark, holding investor meetings in Zurich yesterday, in London today, Boston on Wednesday and New York on Thursday.

The sovereign is said to have decided against holding a roadshow in Asia because investors here are already familiar with its credit, but another interpretation of that decision is that it is keen to wrap up its global bond quickly, ahead of the Republic of the Philippines, which last week issued an RFP for a dollar bond.

Indonesia typically borrows 10-year money and is expected to do the same this time. It is also expected to attempt a long-dated 30-year bond; last year it tried to tap investors for a similar tenor but was unsuccessful. Deutsche Bank, J.P. Morgan and UBS are joint bookrunners.

Elsewhere, Korean lender Shinhan Bank has mandated Bank of America Merrill Lynch, BNP Paribas, HSBC, ING, J.P. Morgan, Mizuho, The Royal Bank of Scotland and Shinhan Investment Corp to arrange investor meetings globally starting March 17.

Two small offshore renminbi bonds are in the market, including one for leasing company Orix, which is ironically the first Japanese company to tap the dim sum bond market.

Orix held roadshows in Hong Kong yesterday and it is eyeing a Rmb500 million ($76 million) dim sum bond. Standard Chartered, ANZ, BNP Paribas, Mizuho Securities and Boom Securities are handling the deal. Elsewhere, TPV Technology is also in the market with its offshore renminbi bond, which is also expected to raise about Rmb500 million. The Royal Bank of Scotland is a global co-ordinator and joint bookrunner alongside ICBC.

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