Asian debt market: KDB, CDB lining up September bonds

Asian debt market: KDB, CDB lining up September bonds

Karen Lane, Dow Jones/Singapore

There may still be two weeks before the end of the August
hiatus in Asian international bond issuance but borrowers and
bankers alike are working hard on the welter of paper expected to
emerge in coming months.

"By my reckoning, there will be US$8 billion to $9 billion of
supply in September and October," said one syndicate banker with
four deals in the works for the couple of months. "Timing is
everything. It will be a matter of being the first one out the
door."

A couple of quasi sovereigns are among the big guns to be
tapping the market. Korea Development Bank last week sent out
requests for proposals for a $500 million bond while China
Development Bank is working with its eight lead managers on a
deal double that size.

KDB has asked investment banks to submit ideas by Tuesday and
has said it is keen on paper with a five- to 10-year tenor.

Rumors are already doing the rounds on the potential shape of
the offering - with some suggesting it is favoring a five-year
floating rate note to tap into the same bank investor base that
sucked up its 500 million euro in five-year floating-rate paper
in January.

If it turns out to be a floating rate deal, bankers suggest
something around 27-29 basis points over the London Interbank
Offered Rate would be suitable.

Either way, the borrower could well usher in a flurry of South
Korean issuance from the likes of the South Korean sovereign,
Woori Bank and the Export Import Bank of Korea.

Meanwhile, the $1 billion offering from China Development Bank
is taking longer to get off the ground in large part, complain
some, because of the hefty number of banks involved in the deal.

"Everybody thinks that someone else is driving the bus while
they sit at the back relaxing," said one.

CDB last month mandated BNP Paribas, Barclays Capital,
Citigroup Inc., Goldman Sachs, HSBC, Merrill Lynch, JPMorgan
Chase & Co. and UBS for what is expected to be a 10-year long
deal and roadshows are now expected to take place in late
September.

In terms of pricing the US$1 billion 2015 bonds from Export
Import Bank of China - sold in mid July - are a good yardstick,
say bankers. That paper is trading at spreads around 10 basis
points wider than its 2014 bonds.

Nevertheless, although both are rated at A2/BBB+, CDB may need
to go out with spreads a little wider, said one: "People might be
a little fuller on CDB than on Chexim so I would say that 10-15
basis points (wider than the 2014 bonds) would be the right
starting point."

This time last year, CDB sold $600 million in 10-year paper,
which is currently trading at around 79 basis points over
corresponding U.S. Treasurys, making for potential spreads on the
upcoming offering of 89-94 basis points.

Other names in the pipeline for coming months include diverse
names like the Philippines, Macau's Galaxy casino and a handful
of high-yield deals. Among them are the long-awaited
International Nickel Indonesia deal via Morgan Stanley and
JPMorgan and several out of China. Among the names touted are
Baoshan Iron & Steel Co. Ltd. - reckoned to be mandated to Morgan
Stanley and, possibly, Deutsche Bank - and Anshan Steel.

Manila, for one, will be taking some heart from last week's
sale of $300 million in paper by the National Power Corp. The
offering was sold at what many said was a cheap price but came
after the state-owned power company had failed for several years
to sell paper publicly under its own name.

The government looks set to finally hold what it will almost
certainly call non-deal roadshows next month. However, most
bankers widely expect the borrower - who still needs to raise
$850 million from the market this year - to follow the marketing
up with a bond offering.

"Yields for the Philippines look better than they have in a
really long time," said a banker.

Spreads on Philippine paper ballooned in June after
accusations of vote rigging were leveled at President Gloria
Macapagal Arroyo and amid fears of large street protests to force
her resignation. That forced the government to postpone a
roadshow from the originally anticipated June 21-29.

However since then, the markets have been soothed by the
smooth court process mulling the charges against her and by the
prospect that Arroyo will be able to hang on to power with little
trouble.

The government will also want to ride on the expected Supreme
Court ruling in favor of the value added tax. The tax -
considered crucial to mending the country's dire finances - was
suspended July 1 but could be given the nod in the next few
weeks.

Bankers said the government will be meeting with investment
banks in the next few days to appoint managers for the roadshow.
Previously, ABN Amro, Deutsche Bank AG and UBS AG were appointed
to run a European leg to London, Frankfurt, Geneva and Zurich
with Citigroup and Goldman Sachs managing a U.S. leg.