Domestic companies rush to raise dollar-denominated debt

Corporate bond issuers are expected to borrow a record amount overseas this year amid tightened liquidity at home, reports Gao Changxin in Shanghai

Chinese companies are on an unprecedented overseas borrowing drive this year as domestic funding costs edge up,

London sees more yuan bonds on offer

Yuan among most-used currencies

Led by banks and property developers, domestic issuers had sold as much as $20 billion worth of dollar-denominated debt as of May 6, according to calculations by the newspaper National Business News.

Issuers don't seem too concerned about a weaker yuan, which may push up the cost of repaying dollar-denominated debt, or about higher international interest rates as the United States Federal Reserve Board scales back bond purchases.

Analysts forecast that total issues of dollar-denominated bonds this year will surpass last year's total of $50 billion.

China Cinda Asset Management Co Ltd, one of the nation's top four bad-debt managers, is one of the most recent issuers. Cinda sold $1.5 billion in dollar bonds last month in Hong Kong in its debut in the international bond market. The issue had two tranches: five-year debt with a coupon of 4 percent and 10-year debt with a coupon of 5.625 percent.

In late April, Cnooc Ltd, one of China's three biggest oil companies, raised $4 billion in a dollar bond offering in the United States that was five times oversubscribed. And Tencent Holdings Ltd, the Internet giant that owns the messaging service WeChat, raised $2.5 billion in a dollar bond sale in the US.

Another Internet company, Baidu Inc, will sell dollar-denominated debt as well, according to a term sheet seen by The Wall Street Journal on Wednesday. Baidu is seeking to offer a yield for the five-year bond of about 1.5 percentage points above five-year US Treasury debt, or about 3.1 percent, the term sheet said.

The newspaper quoted "a person familiar with the matter" as saying that Baidu could raise about $1 billion with the bond sale, although the exact size of the issue will depend on market demand.

Baidu is rated A3 by Moody's Investors Service Inc and has an A classification from Fitch Ratings Inc. The bond will be sold to international investors, including those in the US, since it is registered with the Securities and Exchange Commission, according to the term sheet.

In China, domestic funding costs are relatively high at present, with the government keeping a tight hold on liquidity in a bid to deleverage the economy.

The People's Bank of China, the central bank, announced that aggregate financing in April was 1.55 trillion yuan ($242 billion), down from 1.76 trillion yuan a year earlier.