Yanzhou Coal Mining Company Limited : Yanzhou Coal Two-Tranche Bond Weaker In Initial Trading

05/10/2012| 04:47am US/Eastern

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-- Yanzhou Coal's new US$1B bond a tad weaker in initial trading

-- Analysts say move reflects subdued market sentiment

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By Natasha Brereton-Fukui

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Yanzhou Coal Mining Co.'s (600188.SH) new US$1 billion dollar bond is slightly weaker in initial trading after pricing at the wide end of guidance, amid subdued market conditions.

The company priced a US$450 million five-year tranche at par to yield 370 basis points over comparable Treasurys, or 4.461%. It also priced a US$550 million 10-year tranche at par to yield 390 basis points over Treasurys, or 5.730%.

By afternoon in Asia, the five-year bond was quoted at 375 basis points over Treasurys. The 10-year bond was trading at 395 basis points over Treasurys, after widening to 398 basis points earlier.

Spreads on the Markit iTraxx Asia ex-Japan investment-grade CDS index were quoted at 180-181 basis points, around a basis point wider than Wednesday's close.

Analysts said the bonds' reception reflected weak sentiment broadly.

"I think it's really a function of the markets," said Guy Stear, head of Asia research at Societe Generale.

"Since the start of this week, problems in Europe have driven all risky markets lower, and as Chinese stocks have slipped, high yield bonds have been dragged in their wake."

Companies across Asia have been taking advantage of super-low rates to fund future spending needs, but the latest bout of euro-zone woes--political stalemate in Greece, Spain nationalizing a major lender, and France's election of austerity critic Francois Hollande--has dampened enthusiasm somewhat.

Guidance had suggested a yield of 360-370 basis points over Treasurys on Yanzhou Coal's five-year bond tranche, and 380-390 basis points over Treasurys on its 10-year tranche.

Initial price thoughts were around 370 basis points over Treasurys for the five-year tranche, and 390 basis points over Treasurys for the 10-year tranche.

The five-year tranche attracted investor orders worth over US$1 billion from 97 accounts, with Asian accounts absorbing 70% of the offering, a person familiar with the matter told Dow Jones Newswires. Fund managers took 44%, private banks and banks' own accounts each took 22%, insurers 7% and others 5%.

The 10-year tranche attracted an orderbook worth over US$1.3 billion from 116 accounts, with Asian investors taking 57%. Fund managers absorbed 55%, while private banks took 19%, banks' own accounts 10%, insurers and corporates 6% each, and others 4%.

The fixed-rate senior unsecured bond was issued by Yancoal International Resources Development Co. Ltd.

Deutsche Bank and UBS were joint lead managers and bookrunners on the Rule 144A/ Reg S offering, which is provisionally rated Baa3 by Moody's Investors Service and triple-B-minus by Fitch Ratings and Standard & Poor's Ratings Services.

-By Natasha Brereton-Fukui, Dow Jones Newswires; +65-6415-4044; natasha.brereton-fukui@dowjones.com

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