HONG KONG, Nov 2 (Reuters) - China’s HNA Group is issuing a high coupon, short-dated bond to global investors in a sign that the acquisitive, airline-to-property conglomerate is under pressure to refinance its debt-laden balance sheet, analysts said.
The group is selling a 363-day bond at a coupon of 9 percent in a deal expected to be priced later on Thursday. The amount is yet to be decided.
“This is a scary number but they have to pay up as the cost of funds has gone up given the levels where their 2018 bonds are trading,” said Dilip Parameswaran, chief executive at Asia Investment Advisors.
The coupon offered is higher than the 8 percent yield indicated on its December 2018 bond, according to Thomson Reuters data.
The “high coupon” reflected the market’s concerns about the high levels of debt at some Chinese companies, said Banny Lam, head of research at CEB International.
HNA Group did not respond to an emailed request for comment.
Bonds of less than one year maturity do not require approval from National Development and Reform Commission (NDRC), China’s top economic planner, bankers said and HNA Group was increasingly tapping this instrument in recent times.
Thursday’s bond offering follows group company Hainan Airlines 364-day note issue last week which raised $300 million at a yield of 6.35 percent.
That marked Hainan Airlines’ second sale of dollar bonds in 2017 with a maturity of less than a year. It was at a higher cost too - in June, it sold 364-day bonds yielding 5.5 percent.
HNA Group, which is under scrutiny following Beijing’s clampdown on highly-leveraged foreign investments, faces a wall of maturity in coming months as investment banks such as Goldman Sachs and Bank of America Merrill Lynch grow wary of working with the company.
HNA Group has maturing bonds of $643 million in the rest of the year and $2.2 billion of bonds due in 2018, according to Thomson Reuters data.
The group has unveiled $50 billion of acquisitions in the past two years, much of it debt-financed.
The bond offering which pays an additional 25 cents to private banking investors as incentive has CCB International, China International Capital Corp, Citic CLSA Securities and Guotai Junan International as joint global coordinators.
“The commission indicates they are trying to get some private bank customers to buy a part of the bond. This coupon is roughly equal to where CCC-rated bonds are trading and close to the 10 percent thumb rule for distressed credits,” said Parameswaran. (Reporting by Umesh Desai; Editing by Amrutha Gayathri)