BT : Asian firms revive debt plans as markets calm

Business Times - 13 May 2010

Asian firms revive debt plans as markets calm

(HONG KONG) China's underground mall developer Renhe Commercial Holdings was expected to price its bonds as early as yesterday, sources said, a few days after it was deferred, in a sign that debt markets are stabilising.

Renhe last Friday delayed its plan to price its benchmark-sized five-year dollar bonds, citing poor market conditions. It postponed pricing after debt spreads widened to 10-month highs on fears that the sovereign debt crisis in the eurozone would prompt investors to pull their funds out of Asia.

But issuers may have to pay more to attract wary investors, who remain sceptical whether Greece and other European countries can muster enough political will to cut swelling budget deficits and mounting debt.

'The market is stabilising, for sure, but if you look at the price that the issuers are getting, it is still optimal compared to where they would have liked it to be a few weeks ago,' a banker involved in recent deals said.

'Accounts are slowly prepared to be involved in new issues, but clearly the size they are prepared to put to work is less and the pricing that they expect now is higher.'

For instance, Renhe's indicated pricing terms in a range of between 11.75 and 12.25 per cent for its bonds were at least 25 basis points (bps) higher than what the market had expected a few days before it was put on hold, the banker said.

Another issuer, Macau casino operator Melco Crown Entertainment, was expected to price up to US$600 million of bonds later yesterday.

The issuer has set a guidance of 10.5 per cent for the eight-year bonds.

The deal has so far attracted US$1.1 billion in orders, indicating that despite the concerns about Europe's sovereign credits, demand for Asia's high-yielding bonds was still intact.

'There is a lot of demand for issuers who want to raise funds in the market, but ultimately it depends on how much flexibility the borrowers have in terms of pricing,' one trader said here. 'For Chinese names that are concerned about the tightening of credits at home, they will come at whatever price.' - Reuters

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