Sinopec Group sells US$4.8 billion of bonds after euro-debt issue

[NEW YORK] China Petroleum Corp, which owns China's largest oil refiner, sold US$4.8 billion of bonds in three parts, hours after issuing euro-denominated debt.

The state-owned energy company known as Sinopec Group issued US$2.5 billion of 2.5 per cent five-year notes, the largest portion of the dollar offering, to yield 1.25 percentage points more than similar-maturity US Treasuries, according to data compiled by Bloomberg. Sinopec raised 1.5 billion euros (US$1.6 billion) in investment-grade debt Tuesday in its second tap of European capital markets.

Proceeds will be used to refinance the company's existing debt and for Sinopec's overseas business, according to Moody's Investors Service.

While lower oil prices will weaken credit metrics and cut profits at the company, its "business diversity, conservative capital spending and strong access to liquidity will help preserve" its finances, Moody's analyst Chenyi Lu wrote.

Moody's graded the notes Aa3 Yields on dollar bonds sold by high-grade Asian borrowers have fallen 51 basis points to 3.01 per cent since the company last issued in US markets a year ago, Bank of America Merrill Lynch indexes show. Sinopec's US$5 billion issue in April 2014 was the biggest dollar offering by an Asian issuer in more than a decade.

The Chinese company's euro-denominated issue places it among foreign borrowers including Coca-Cola that have capitalised on demand for corporate debt from investors who've seen euro-area yields quashed amid unprecedented stimulus from the European Central Bank. The average yield to maturity on investment-grade debt in euros was 0.94 per cent Monday, compared with 2.89 per cent for equivalent dollar-denominated securities, according to Bank of America Merrill Lynch index data.

"It's definitely a trend, and there's no doubt we will see more," said Geraud Charpin, a London-based money manager at BlueBay Asset Management, which oversees more than US$65.8 billion. "If it makes sense for a US company, why wouldn't it make sense for a Brazilian, Russian or Chinese company?" Sinopec also sold US$800 million of 4.10 per cent 30-year notes at a yield of 1.52 percentage points more than government debt and US$1.5 billion of 3.25 percent 10-year bonds Tuesday, Bloomberg data show.

BLOOMBERG