Bloomberg News

Asian Dollar Bonds to Get M&A Boost as Citic Telecom Plans Notes

February 17, 2013

Citic Telecom International Holdings Ltd. is planning a U.S. dollar-denominated bond sale to help pay for a stake in Macau’s monopoly landline operator.

Citic Telecom, a unit of China’s largest state-owned investment firm, hired Deutsche Bank AG, Standard Chartered Plc and UBS AG to arrange the offering, according to a regulatory filing today. The Hong Kong-based borrower is buying a 79 percent stake in Companhia de Telecomunicacoes de Macau, S.A.R.L. from Cable & Wireless Communications Plc and Portugal Telecom SGPS SA, according to a Jan. 13 statement.

Sales of notes denominated in the U.S. currency in Asia may receive a boost in 2013 as more companies seek financing for acquisitions, according to Credit Agricole CIB. Dealmaking globally surged this year to $290 billion led by H.J. Heinz Co.’s $23 billion takeover by Berkshire Hathaway Inc. and 3G Capital Inc., a 19 percent jump from the same period of 2012, data compiled by Bloomberg show.

“Conditions are ripe for a mergers and acquisitions boom,” said Mark Reade, a Hong Kong-based credit desk analyst at Credit Agricole. “If that trend continues globally, we’re sure to see more M&A involving Asian corporates and M&A-driven bond issuance will surely follow.”

China’s Cnooc Ltd. may sell debt to refinance a bridge loan used to pay for its $15.1 billion takeover of Nexen Inc., Australia & New Zealand Banking Group Ltd. analyst Owen Gallimore said in December.

Bond Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose one basis point to 111.5 basis points as of 8:10 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc prices. The benchmark is set to pare its drop this month to five basis points, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index increased 1.5 basis points to 115 as of 11:33 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge is headed for its second straight daily rise after falling to its lowest in more than a month at 112.5 on Feb. 14, according to CMA.

The Markit iTraxx Japan index fell 2.5 basis points to 121.5 as of 9:18 a.m. in Tokyo, Citigroup Inc. prices show. The measure ended last month at 135.2, according to CMA data.

Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.

The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.

To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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