Bloomberg- Citigroup Inc., the world’s second- biggest bond underwriter, is arranging more private offerings of Asian high-risk, high-yield debt to meet increased demand from hedge funds.
Companies in Asia outside Japan will, for the first time, raise more from high-yield bonds through private placements than public sales this year, said Jeremy Amias, head of fixed income, currencies and commodities for the Asia-Pacific at Citigroup.
Asian companies sold about $2 billion of bonds rated below investment grade through public offerings last year, Amias said. It is easier for banks such as Citigroup and ING Holding NV to arrange private bond sales, which allow companies to raise money while avoiding regulations imposed on publicly traded securities.
“There is less due diligence work to be done which makes it easier for banks to bring these deals to hedge funds,” said Eugene Kim, chief investment officer of Hong Kong-based Tribridge Investment Partners Ltd., a hedge fund managing about $100 million. “There are a lot more activities in the private space than in the public space now.”
Hedge funds are willing to forgo the regulatory oversight in their search for riskier bets and higher returns.
“There is a shortage in public high-yield bond deals in Asia,” said Amias, who’s based in Hong Kong. “Some issuers never make it to execution or given liquidity in the bank market, raise money via the loan market. We can satisfy some of this demand via the private-placement market.”
