RI firms hit the road for $350m

RI firms hit the road for $350m

Oliver Biggadike and Karen Lane, Dow Jones/Singapore

Asia's international bond pipeline is looking stronger after the only deal scheduled last week was canceled, with issuance from a handful of companies likely to top US$1 billion over the next fortnight.

Indonesian tire company PT Gajah Tunggal will start roadshows on its B-rated $250 million five-year bond on Tuesday in Hong Kong, finishing in London on Thursday.

Ratings agencies say that while Gajah Tunggal is highly leveraged, its costs are low and it has a strong position in the Indonesian tire market.

In a press release, Standard & Poor's Ratings Services noted that around 50 percent of Gajah Tunggal's revenue comes from exports, "providing a hedge against its U.S. dollar denominated debts."

The proceeds from the bond will be used to refinance around $220 million in existing debt, with the remainder used for investment.

Another Indonesian company seeking to tap the dollar bond market is Bank Niaga which is aiming to raise $100 million in 10- year subordinated bonds with a five-year call. It is roadshowing in Hong Kong on Tuesday and, pending demand, in London on Wednesday.

Moody's Investors Service rates the bonds at B2 with a positive outlook, while Fitch Ratings is one notch higher at B+.

In a press release, Fitch said that Bank Niaga's target for 40 percent annual loans growth lifts the risk that the bank's lending to weaker credits will increase. While competition will narrow the company's margins, "this should be offset by greater efficiency as revenue growth begins to outstrip cost growth," Fitch added.

Recent issues have had a mixed reception as issuers rushed to market, trying to take advantage of low interest rates while they're still around.

"The past few weeks have seen too many issues in a short period, with the last few deals either underperforming (Thai Olefins 2015), reduced in size (Hynix from $750 million to $500 million), or pulled from the market (Thai Aromatics)," wrote Lehman Brothers analysts in a research report.

Still, investors have digested the supply, and secondary market spreads should tighten as the summer issuance pipeline volume drops, Lehman said.

Also heading out on the road this week are the Export Import Bank of China and South Korean telecommunications company KT Corp. Both are set to price next week.

The A-/A3-rated KT Corp. is looking to raise $300 million in 10-year bonds, and is holding roadshows in Hong Kong, London and New York.

Moody's upgraded KT Corp. to A3 from Baa1 in mid-June this year, noting the company is "well positioned to benefit from growth in broadband technologies."

Chexim, a BBB+/A2-rated borrower, is looking to sell a benchmark U.S. dollar-denominated bond with a 10-year maturity in a move it will be hoping turns out to be smoother than last year's foray. It hasn't set the size yet, but it will likely be at least $500 million.

In July last year, Chexim approached the market for the first time in five years with a view to raising $1 billion. However, it subsequently cut the size of the deal due to the borrower's high price sensitivity amid lower-than-expected demand. It then reopened the bond and sold a further $250 million a month later.

Those bonds are now trading at around 70 basis points over U.S. Treasurys versus the 93-basis-point spread it paid a year ago.

Managing the deal this time are BNP Paribas, Citigroup Inc., HSBC Markets and Merrill Lynch with Bank of China International and Goldman Sachs as joint leads.