REG S: Disaster on the syndicate desk!

The overwhelming response to an enterprise bond auction by one of China’s top oil companies has underlined a growing awareness of credit risk in the country’s fast-growing debt markets. China National Petroleum Corp last week received orders totalling a staggering Rmb680bn (US$107.5bn) for a Rmb20bn deal, reflecting Chinese investors’ hunger for good credits. The surge in demand for top-rated bonds comes as a number of smaller issuers and local government-linked entities are struggling to repay their obligations, sparking fears of a wave of...

Source: Reuters/Siu Chiu Hong Kong tycoon Li Ka-shing attends a news conference to announce his companies’ interim results in Hong Kong. Asian issuers are likely to come under pressure to offer sweeter terms on new US dollar bonds after a spate of poor secondary performances. Of the five new deals priced in the first four days of last week, it was the US$1.5bn two-part Global from Hong Kong conglomerate Hutchison Whampoa that surprised the market as its new notes weakened on the break. Syndicate bankers suggest that the week’s new issues were...

Taiwan-based IT firm Wistron revealed the challenges facing the equity-linked capital markets with a modest US$180m convertible bond – Asia’s first of the year. With regulatory approval for a three-year zero coupon convertible of up to US$500m set to expire on February 1, Wistron was forced to scale back its target in order to complete the deal in a risk-averse environment. Sources said hedge funds were only willing to buy if there were asset swaps available upfront for at least 75% of the deal size – far more than is typical in the Taiwanese...

Source: Reuters/Enny Nuraheni Indonesian President Susilo Bambang Yudhoyono speaks to reporters at the presidential office in Jakarta. A pair of new bonds from two South-East Asian neighbours in the past fortnight has underlined investors’ confidence in the fast-growing region. The solid response to a long-dated bond from the Republic of Indonesia last week followed an enthusiastic reception for the Republic of the Philippines a week earlier, highlighting a dramatic change in attitude towards two countries that have traditionally struggled...

Source: Reuters/Jerry Lampen RABO Bank’s Chief Financial Officer Bert Bruggink speaks to Reuters during an exclusive interview in Utrecht, April 21, 2011.   Rabobank and BMW Finance printed the first two Australian dollar bonds of the New Year, targeting European investors’ growing appetite for Aussie risk. This retail-led appetite stems from the expanding euro “carry trade”, where investors borrow in euros and invest in high-yielding Australian and New Zealand dollars. Participants gain from the higher interest rates on offer in Australia...

Source: Reuters/Bazuki Muhammad Philippines International Container Terminal Services Chairman and President Enrique Razon speaks to Reuters during interview on the sidelines of Forbes Global CEO Conference in Kuala Lumpur. Philippines port operator International Container Terminal Services seized the moment with a tap of its perpetual bonds last Monday, adding US$150m to the hybrid notes. ICTSI’s success hinted at a full-fledged return of risk appetite, raising hopes for the stalled pipeline of corporate hybrids. However, the message from...

Source: Reuters/Bobby Yip Vincent Lo, chairman of Shui On Group, speaks during an interview in Hong Kong. Shui On Land last week priced a rare high-yield bond in the Singapore dollar market, opening an alternative market for the cash-strapped Chinese property sector. Shui On Land is owned by Hong Kong-listed Shui On Group but has all its assets in China, making it the first pure China property play to sell bonds in Singapore. Although unrated, it is widely regarded as a high-yield credit. “The deal shows that the Singapore bond market continues...

Source: Reuters Mongolia’s high plains herders warily eye coal truck road. The Stock Exchange of Hong Kong is to miss out on another high-profile IPO following the decision by Mongolia’s Erdenes-Tavan Tolgoi to drop the Hong Kong tranche of its US$3bn IPO. Erdenes-TT, which operates Mongolia’s biggest coal mine, will instead list GDRs on the London Stock Exchange and float on the Mongolian Stock Exchange, sources said. The company made such a decision as it is keen on remaining incorporated in Mongolia, rather than re-domiciling in the UK,...

Private equity giant KKR made an unsolicited bid for Australian underwear manufacturer Pacific Brands last week in a further sign the country remains attractive for financial sponsors looking to put their funds to work. Although the acquisition is far from certain, KKR’s move comes as welcome news for leveraged finance bankers, hinting that the LBO momentum generated in Australia promises to remain strong into 2012. KKR’s bid for PacBrands is an indication that cyclical businesses – particularly those in the retail sector – are again becoming...

A fresh round of job cuts last week shattered any hopes that Asian investment banking might be somehow immune from the belt-tightening already well under way in other parts of the world. Scores of bankers across Asia are facing the axe. The deepest cuts last week came at Bank of America Merrill Lynch, which is to trim up to a fifth of its Asia-based managing directors, and at RBS, which announced plans to exit equities and merger advisory businesses globally as it refocuses on debt. Cuts also came last week at Morgan Stanley, while rival...

Nomura and its plans for global dominance face an uncertain future after last week’s surprise resignation of two top executives. Jasjit “Jesse” Bhattal, president and chief executive of Nomura’s wholesale division, stepped down last Tuesday with immediate effect, bringing an end to a failed bid to turn around the stuttering global expansion of Japan’s largest investment bank. Nomura’s group chief operating officer and chairman for wholesale, Takumi Shibata, will assume Bhattal’s responsibilities on an interim basis. The firm declined to comment...

Jonathan Rogers, IFR Asia Senior Credit Analyst THIRTY-YEAR BONDS anyone? If you’re an issuer looking at US dollars, the answer probably is a big “yes”. Refinancing risk is one of the central concerns of treasurers and chief financial officers right now, so locking in cash for long periods might be seen as a good strategy. Still, with dollar swap spreads a negative 27bp at this tenor, and the 30-year swap market less than liquid, hedging this back into a floating basis is costly. As a result, most 30-year issuance remains unhedged, and when...