Busy start to 2016 for Asian bond markets

Four regional companies are seeking to end the recent hiatus by coming to market in the wake of the Federal Reserve's end-of-an-era US interest rate rise.

Asian bond markets are having a busy start to the year, with Ping An Insurance Group among the chief protagonists as the Chinese insurance giant prepares to make its US dollar bond debut.

At least four companies in the region have announced fundraising plans since the Federal Reserve put an end to the era of near-zero dollar borrowing costs on December 16 by raising US interest rates for the first time in nearly a decade. 

Ping An Life, the life insurance arm of China’s second-largest insurance group by premiums, has hired HSBC, Bank of America Merrill Lynch, and CICC to work on its first-ever US dollar denominated debt sale, according to a sale document seen by FinanceAsia.

It forms part of Ping An Life’s $1.2 billion medium-term note programme, which is rated A3 by Moody’s, one notch below Ping An Insurance Group’s A2 rating. 

Ping An executives will start meeting investors in Hong Kong, Singapore, and London from Tuesday. The size and pricing of the bond will depend on investor feedback following the roadshow.

Shenzhen-based Ping An, through its various subsidiaries, is a frequent domestic borrower. As a household name in China it raised a combined $5.7 billion across 10 renminbi-denominated offerings last year, according to data-tracking firm Dealogic. 

Apart from selling insurance policies, Ping An owns other valuable assets including a controlling stake in peer-to-peer lender Lufax, which is valued at about $18 billion based on its latest round of pre-IPO investment.

Ping An aims to build its business around wealth management and health management, using online platform tools to sell its services and products to reach more customers, according to analysts.  

“Ping An believes that its health management strategy will be highly supplementary to its core insurance operation lines, especially health insurance business,” Baron Nie, an insurance analyst at Jefferies, wrote in a note last month.

Nie said Ping An expects commercial health insurance to cover 40% of China's medical expenses in the foreseeable future, up from 5% currently.

Swire, SOEs

Elsewhere, Hong Kong-listed Swire Properties said it mandated HSBC and JP Morgan as joint bookrunners to work on a Reg S offering as part of its medium-term note programme. The notes are expected to be rated A2/A- by Moody’s and Standard and Poor's.

Swire Properties is one of the biggest commercial property developers in Hong Kong and owns upscale shopping malls Pacific Place and Taikoo Place.

Meanwhile, two state-owned enterprises are looking to raise funds at the time when China’s economy is stalling.

China Energy Reserve & Chemicals Group is looking to raise fresh bond capital having raised more than $600 million in three debt deals last year.

The midstream oil company plans to use the net proceeds from the bond offering to fund the potential strategic acquisition of a liquefied natural gas re-gasification plant and a refined oil terminal with related storage facilities in China, according to a person familiar with the company who declined to be named because the discussions are still ongoing.

Under the terms of the proposed bond offering, the company expects to complete the acquisition in the first half of this year. If the deal doesn't get completed as planned, investors have the option to sell back the bonds to the company at a cash price of 101%.

Investors are also protected by a covenant in case of a material change of ownership of the company, allowing them to sell back their bonds to China Energy Reserve & Chemicals at a cash price of 101%. Currently the Chinese government owns 100% of the company.

Even with a solid state background, investors generally require a higher coupon from the oil company to compensate for risks associated with its unique business operations and relatively short dated fundraising history.

“A lack of direct comparables to China Energy Reserve & Chemicals is one of the major hurdles for investors accessing the true value of its assets,” the person familiar with the company said. 

Barclays and Wing Lung Bank are joint bookrunners on the deal.

In addition, Jiangsu NewHeadline Development, a municipal level of a state-owned company in Jiangsu province, has started premarketing for its proposed dollar bond sale, offering investors a return of 6% to 7%, according to people familiar with the company.

Guotai Junan International is the global coordinator of the deal.

¬ Haymarket Media Limited. All rights reserved.

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