Huaneng Power International said yesterday it's been approved
for the mainland's biggest bond issue worth 5 billion yuan, after a
rule change in June.
Publicly listed Huaneng builds and operates large thermal power
plants on the mainland. The company is a major power producer in
China.
The company told the Shanghai exchange it would issue 50 million
bonds at 100 yuan apiece. The issue comprises 1 billion yuan of
five-year bonds, 2 billion yuan in seven-year bonds and 2 billion
yuan of 10-year bonds.
The indicative coupon rate ranges from 5.45 to 5.75 percent for
the five-year bonds, 5.55 to 5.85 for the seven-year bonds and 5.7
to 6 percent for the 10-year bonds.
The Huaneng issue is sponsored by CITIC Securities and
guaranteed by Bank of China and China Construction Bank.
Institutional investor bidding for the bonds, which starts
tomorrow, will determine the actual coupon rates.
The current yield of government bonds with a five-year maturity
is 4.23 percent, with seven-year bonds at 4.34 percent and 10-year
at 4.43 percent.
Financial experts said they expect actual coupon rates to be set
at the lower end of the range due to strong demand. "The market is
flush with liquidity," said Nie Wen, an analyst at Industrial
Securities in Shanghai.
Analysts said Huaneng's coupon rates, even at the lower end of
the indicative range, are priced higher than previous issues to
entice institutional investors.
The coupon rate for China Yangtze bonds with a 10-year maturity
was set at 5.35 percent and China Offshore Oil bonds with the same
maturity were set at 5.77 percent. The China Yangtze and China
Offshore bonds are currently traded at prices with a yield of 5.38
percent and 5.76 percent.
Analysts expect the Huaneng bond issue will be snapped up by
insurers and fund management companies.
"With an enlarging market scale, more and more institutional
investors are expected to become active in the corporate bond
market," said Nie.
"The increase of the corporate bond supply will help improve
market liquidity, as a growing number of companies will issue
corporate bonds next year."
Analysts said the launch of the mainland's largest corporate
bond issue would expand the market scale and bring more companies
as well as a wider choice of fixed-income instruments for
institutional investors.
(China Daily December 21, 2007)
