Asia Primary Debt:Issuers Eye Low US Rates, Tight Spreads
June 18, 2001
Dow Jones Newswires
HONG KONG -- Falling U.S. interest rates and the slowdown in the tightening of Asian spreads may push many Asian issuers to tap the international bond market before the summer is out.
As the U.S. Federal Reserve continues to cut its key interest rates, pushing U.S. yields lower, a growing number of Asian issuers are taking a closer look at the international bond market, bankers said.
"A lot of issuers are looking because yields are very attractive," said a U.S. banker who has been busy "pitching with issuers throughout the region."
One of those companies, Hong Kong's Pacific Century CyberWorks, would otherwise seem a most unlikely issuer. But the company is said to be seeking to raise at least US$2 billion through an international bond issuance. It plans to use the funds to refinance syndicated loans, the shortest of which doesn't mature for another three years.
Market reaction over the news has been mixed, with many participants pointing out that PCCW is currently under no pressure to refinance any debt.
However, others contend that PCCW is eager to extend the maturity of its debt. Refinancing part of its loans will also allow the company to "free some credit lines with its banks," the U.S. banker noted.
Freeing up the credit lines would give PCCW some room to maneuver should the company require additional funding for operational needs, the banker added. But for the time being, PCCW still hasn't made any firm decision.
Investors will have to look elsewhere for more concrete issuance news. Singapore's Oversea-Chinese Banking Corp. (P.OCB) and Hong Kong's CITIC Ka Wah Bank (H.CKW) are both on the market for subordinated debt issues.
OCBC is starting a road show Thursday in Singapore to sell a four tranche sub-debt worth the equivalent of US$1.7 billion, denominated in U.S. dollars, Singapore dollars, euro and Sterling.
UBS Warburg is the sole lead manager on the deal. With road shows expected to end June 29, the deal will likely be priced early July. The "very ambitious size" of OCBC's expected offering has already "put a damp on Asian spreads," said a trader.
Observers said that if OCBC's bond sale goes as planned, Singapore will be the most active Asian market in terms of international bond issuance volume so far this year.
CITIC Ka Wah is also on a road show to market its upcoming offer for US$200 million of subordinated debt to refinance maturing debt.
Elsewhere, South Korean oil company LG Caltex is said to be preparing to issue US$300 million of 10-year bonds via bookrunner Credit Suisse First Boston and joint lead managers Deutsche Bank and Goldman Sachs.
In Southeast Asia, after exploring the possibility of raising funds through an international bond issue last year, the Sultanate of Brunei Darussalam is now in talks with ABN Amro (N.AMB), BNP Paribas (F.BNP) and HSBC to arrange a US$200 million three- to five-year syndicated loan.
In the equity-linked market, Shanghai Industrial Holdings (H.SGH) confirmed its parent company is talking with several banks about issuing bonds convertible into its shares. Proceeds would go toward refinancing a US$250 million bond coming due.
-By Mia Trinephi, Dow Jones Newswires; (+852) 2832 2339; mia.trinephi@dowjones.com
-0- 18/06/01 05-59G
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