ASIA PRIMARY DEBT: Issuers Jostle For Investor Attention
January 21, 2002
Dow Jones Newswires
By MIA TRINEPHI
Of DOW JONES NEWSWIRES
HONG KONG -- Hong Kong and Singapore investors have barely digested the lunches offered by JG Summit Holdings (Q.JGS) of the Philippines last week, and they're back at the table to hear about another bond offer - this time from Hong Kong's Hysan Development Co. (H.HYD).
The current activity in the primary market isn't unexpected as potential issuers - both corporate and sovereign - are likely to take advantage of low interest rates to tap the market for funds.
Hysan hosted a luncheon Monday at Hong Kong's Island Shangri-La Hotel to explain the merits of its US$200 million 10-year Eurobond to investors. Together with joint-lead managers Merrill Lynch and Morgan Stanley, it will have another luncheon presentation on Wednesday, this time in Singapore at the Ritz Carlton Hotel. And in between on Tuesday, it will hold a conference call with European investors.
A price guidance is expected this week after Hysan officials finish meeting Singapore-based investors. A pricing date has been tentatively set for Jan. 29.
Investors said that Hysan will likely price off Hongkong Land's 7.0% bond due 2011, rated 'A-' by credit rating agency Standard & Poor's Corp., and currently trading at bid-offer spreads of 162-154 basis points over U.S. Treasurys.
One market participant expects Hysan's indicative pricing to be around 190 basis points over U.S. Treasurys, around 30 basis points wider than Hongkong Land.
Hysan's deal is rated one notch below Hongkong Land, at BBB+ by Standard & Poor's and Baa1 by Moody's Investors Service Inc. Hysan's offer, its first international bond, will be issued under its new US$1-billion Euro Medium Term Note program.
PCCW Could Still Seek Euro, Sterling Bonds
Still in Hong Kong, telecommunications group Pacific Century CyberWorks Ltd. (PCW) made headlines last week when it launched US$450 million of five-year convertible bonds through Morgan Stanley.
A bond offer has been talked about since late last year, with expectations for EUR500 million of 10-year Eurobonds and GBP150 million of 15-year bonds to be issued by its Hong Kong fixed line unit, PCCW-HKT.
Those are still on the cards as the convertible bond will help PCCW to save on debt costs, but not to extend the maturity of its debt.
Another Hong Kong corporate said to be mulling another extension of its debt is conglomerate Hutchison Whampoa Ltd. (H.HUW). The talk though was short on details apart from saying Hutchison was considering a 30-year bond.
JG Summit, the Philippine food and agroindustrial group, meanwhile, launches its US$100 million of four-year bonds on Wednesday, with pricing expected Friday.
According to early indications, JG Summit's bond could be priced around 75 basis points over the average of the spreads on the Philippine Central Bank's bond due 2005 and the Republic's bond due 2006. At current market levels, JG's bond will likely come out at a spread of about 500 basis points, noted one market source familiar with the deal.
The deal, which isn't rated, is targeted at high-yield investors and private banking investors.
In South Korea, Hyundai Motor Co. (Q.HMT) is said to be preparing a U.S. dollar deal via J.P. Morgan, after it went on a non-deal road show in the U.S. and Europe with Goldman Sachs and ABN Amro.
One market source said J.P. Morgan has had the mandate since before the 1997 financial crisis, although no deal resulted. A bond offer from Hyundai Motor now would likely meet a "very enthusiastic reception" from investors as it would attract a large pool of investors looking for higher returns, he said. The company could easily raise between US$300 million and US$500 million in the U.S.
A primary dealer noted that Hyundai Heavy Industries Co. (Q.HHI) and Hyundai Motor are both looking at the market for potential offers of at least US$500 million each. Many banks are still in talks with the issuers and an official mandate has yet to be given out, the primary dealer said.
Napocor Bond Shouldn't Be Affected By Explosion
South Korean oil refiner SK Corp. (Q.SKP) is reconsidering the launch of a U.S. dollar-denominated bond exchangeable into shares of its wireless unit SK Telecom (Q.KMT), bankers said last week.
They suggested that the offer, originally planned for launch and pricing in February, won't likely now be offered before April, if at all. SK Corp. is waiting for SK Telecom shares to improve before launching any deal.
SK Corp. has been seeking to sell its 26.8% stake in SK Telecom in order to lower total debt of about KRW6.7 trillion.
In the Philippines, state-owned National Power Corp. (Q.NAP), or Napocor, is finalizing details of a proposed bond offer and a road show that it is preparing with lead manager Bear Stearns.
Edgardo del Fonso, president of the Power Sector Assets & Liabilities Management Corp. - the state agency that will take over Napocor's disposable assets and financial obligations - said last Tuesday in Manila that "we have tentatively set the start of the road show on Jan. 23."
Napocor mandated Bear Stearns in September for the sale of US$400 million to US$500 million of seven- to 10-year bonds. The final size and maturity of the deal will likely be depend on the cost of the political risk insurance that Napocor will include in its bond offer.
An explosion on Monday damaged Napocor's main transmission line and caused an outage on the island of Luzon. Such power outages in the Philippines frequently trigger speculation of coup rumors, with Monday's incident coinciding with the first anniversary of the Jan. 20 "people power" uprising that ousted former president Joseph Estrada.
It is still unclear what caused the explosion.
However, a primary dealer said that the explosion won't likely affect Napocor's planned bond sale.
The Philippine government's successful bond sale earlier this month will likely bode well for Napocor's sale which will also likely capture investor demand for higher yielding bonds.
Following the Philippines' success, Malaysia is another sovereign bond issuer which could tap the international bond market, according to participants.
Malaysia is said to be considering reopening its 2011 bond. According to one primary dealer, Salomon Smith Barney and J.P. Morgan would be the two likely banks to win the mandate for the deal.
The benchmark bond, which Malaysia sold on July 9, 2001, had a size of US$1.0 billion and is currently trading at bid-offer spreads of 186-178 basis points over U.S. Treasurys.
-By Mia Trinephi, Dow Jones Newswires; (+852) 2832 2339;
mia.trinephidowjones.com
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