Citic Resources raises US$1b in bond market

PUBLISHED : Wednesday, 16 May, 2007, 12:00am
UPDATED : Wednesday, 16 May, 2007, 12:00am

Citic Resources Holdings, the listed resources unit of state-owned Citic Group, raised US$1 billion in a bond sale that featured the tightest pricing of any mainland high-yield deal, highlighting the demand for exposure to China.

In what was the largest sale of high-yield corporate paper in Asia, the seven-year bond was priced to yield 6.8 per cent, tighter than the about 7 per cent originally marketed to investors. The deal was four times covered, a source said.

The money was raised in part to fund Citic Resources' purchase from its parent company of a stake in a large Kazakh oil field.

The coupon was set at 6.5 per cent and was sold at 99.726 US cents to the US dollar.

'It's been trading flat because it was priced very finely, with not much left on the table for investors,' said Dilip Parameswaran, a credit analyst at Calyon. 'That such a huge deal got covered four times is remarkable and shows a bit of the China scarcity issue.'

Moody's Investors Service rated the bonds Ba2, two steps below investment grade, while Standard & Poor's rated them a similar BB.

Morgan Stanley and Bear Stearns arranged the deal.

Investors in the United States took up half the order book, Asian investors took 35 per cent and the rest was sold into Europe.

Shares in Citic Resources surged 14.95 per cent last week after it announced that it agreed to buy from its parent a 47.3 per cent stake in Kazakhstan's state oil and gas firm Karazhanbasmunai and related oilfield engineering and logistics services assets for US$1 billion.

Shimao Property Holdings, controlled by the mainland's second-richest man Hui Wing-mau, had previously sold the largest high-yield paper from China, according to Dealogic. That offer raised US$600 million in November last year.

Three of the five largest China deals come from the property sector. Agile Property Holdings, a Guangdong developer of large-scale residential projects, raised US$400 million in September, which ranked No3 on the list of largest deals. Greentown China Holdings, a Zhejiang-based property developer, also raised US$400 in November.

Mainland developers are eager to raise funds as the government is taking steps to cool the property market, such as raising taxes to curb speculation and restricting lending to developers.

Developers with big land banks and cash on hand are expected to weather any slowdown better than their less well-off peers.