Nine Dragons offers to buy back bonds

Nine Dragons Paper, a China-based manufacturer of paper and linerboard for packaging products, yesterday launched a tender to buy back the remainder of its $300 million bond issue maturing in 2013, offering to pay 53 cents to the dollar. The move is in line with a trend seen in the Asian straight debt and convertible bond markets over the past few months as companies take advantage of the sharp drop in bond prices, while at the same time offering investors an exit route. But the fact that Nine Dragons' offer comes less than 10 months after the bonds were issued -- and aims to take back the entire issue -- makes it stand out.

The value destruction of Nine Dragons' Singapore-listed bonds has been remarkable with market participants saying they were offered in the "low 30s" at the end of last week -- meaning that investors were willing to sell every $100 worth of bonds for just $30. One banker said yesterday that the bonds have been quoted as low as 25.