Hong Long targets US$200m bond sale
Hong Long, a Hong Kong-listed small mainland developer, plans to raise as much as US$200 million in its first international bond sale to refinance existing debt and buy land, market sources and credit rating agencies disclosed.
Hong Long raised HK$450 million in February in an initial public offering on the local bourse.
Citigroup and Lehman Brothers are arranging the sale of bonds worth US$175 million to US$200 million.
With a maturity of five to seven years, the proposed issue was rated B2 by Moody's Investors Service, five notches below an investment grade. Standard & Poor's gave it a similar B rating.
Moody's analyst Kaven Tsang said: 'The company's asset size and land bank are the smallest compared with other B-rated peers and its relatively small and geographically focused operation constrains its ability to contain new project execution risks, given inherent volatilities in China's property market.'
With this global bond issue, it is tapping a market that has been spooked in recent months by the troubled US sub-prime mortgage-backed securities. Although the Asian offshore bond market is relatively less affected than counterparts in the United States and Europe, new bond issuers still need to pay a higher premium to lure investors.
Asian bond yields have firmed around 30 basis points since early June, a bond fund manager noted.
Some issuers, including Kia Motors of South Korea and Malaysia's MISC, have delayed their planned bond sales, hoping that financing costs will fall later.
Another concern facing any bond issuer is saturated demand. In recent months, several mainland property bonds - including those issued by larger developers such as Shanghai Zendai Property, Neo-China Group, Greentown China, Agile Property and Shimao Property - have come on stream, flooding the market.
'Given the uncertainty in the market, I don't want to add any new bond name to my portfolio except for those issued by well-known and good companies that already exist in the secondary market,' said a fund manager at a Japanese firm.
Hong Long will hold investor presentations here today before moving to Singapore tomorrow. Its roadshow in London is set for next Monday.