Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Asian Property Bond Market Update

Finally, the Asian bond market investors saw supply from the Indonesian real estate high yield sector during the week from 18 Mar 2013 to 22 Mar 2013, with Alam Sutera's 7 year bonds being the first issuance from the sector in 2013.

Alam Sutera Realty Tbk PT, an Indonesian residential property developer, issued USD 235 million 7 year maturity (non-callable for 4 years) 6.95% coupon bearing senior notes at 98.37. The notes were sold at an effective yield of 7.25%, which is tighter than the company's initial guidance of 7.625%. Morgan Stanley and UBS were the sales managers. This is the second junk bond issuance by the company. It had issued USD 150 million senior notes in March 2012. Moody's upgraded the company's corporate family and senior unsecured bond ratings to B1 from B2. S&P and Fitch have assigned B and B+ ratings respectively to the issuance. The rating outlook by all the three rating agencies is stable. The bond proceeds would be used for repayment of bank loans, land acquisition and general corporate purposes. The new bonds have opened well in the secondary market, moving up by about three points from the issue price. Given the limited supply of USD-denominated debt from the Indonesian high yield sector, the strong demand for the new issuance from fixed income investors is not surprising. Alam Sutera has a sound credit profile with strong credit metrics and adequate liquidity position. The company reported solid financial results for the year ending 2012. The new issuance extends the company's debt maturity profile and strengthens the liquidity.

Further new supply is expected from Modernland Realty Tbk PT, a property developer based in Indonesia. Modernland Realty is planning to sell USD 150 million bonds in the second quarter of 2013 to fund its capital expenditure for land acquisition. The company had earlier planned to issue IDR 1 trillion of local currency bonds. The company may not go ahead with its earlier plans if it can successfully place its USD-denominated notes.

In the Chinese property space, Yuexiu Real Estate Investment Trust (REIT) hired Bank of China, DBS, HSBC and Morgan Stanley to arrange fixed-income investor meetings in Singapore, Hong Kong and London. Yuexiu has set up USD 1 billion medium-term note (NYSE:MTN) program and plans to issue USD-denominated senior notes under this program. Moody's has assigned its Baa2 rating to the proposed issuance while S&P has assigned its BBB rating. The rating outlook by both the rating agencies is stable.

Zhong An Real Estate Ltd, a Hong Kong listed Chinese property developer, met fixed income investors during the week. The company had hired BNP Paribas, JPMorgan and UBS to arrange these meetings.

Not only the property sector, but also other sectors in Indonesia were active during the week. PT Bank Rakyat Indonesia Tbk placed USD 500 million 2.95% senior unsecured notes with 5 year maturity. Star Energy Geothermal sold 7 year maturity 6.125% USD 350 million bonds at par. Tower Bersama Infrastructure Tbk PT conducted fixed income investor meetings in Hong Kong and Singapore for a planned USD-denominated bond issuance.