Foreign

Caterpillar 'to sell yuan bonds in HK'

By Katrina Nicholas and Henry Sanderson (China Daily/Agencies)
Updated: 2010-11-25 15:37

A passenger looks at hydraulic excavators made by Hitachi Ltd, Liebherr, Caterpillar Inc and Deere & Co before an industrial equipment auction in Dunnigan, California. [Photo/Bloomberg]

Construction equipment firm hires Goldman to help with sale: Source

BEIJING - Caterpillar Inc, the world's biggest maker of construction equipment, hired Goldman Sachs Group Inc to help it sell yuan-denominated bonds in Hong Kong, according to a person familiar with the matter.

The Illinois-based company plans to raise as much as 1 billion yuan ($150 million) from two-year bonds, said the person.

Caterpillar would be the second foreign company to sell yuan bonds in Hong Kong after McDonald's Corp issued 200 million yuan of three-year notes in September, according to data compiled by Bloomberg.

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Wal-Mart Stores Inc said in March it was considering bonds in yuan and United Co Rusal, the world's largest aluminum producer, said in September that officials met bankers to learn about the market.

"There's little doubt these deals will do well so long as the borrower's a reasonable name," said Vijay Chander, Hong Kong-based head of credit strategy at Standard Chartered Plc.

"Any kind of spread over the renminbi deposit rate will attract a lot of investor interest," he said.

The government opened the yuan bond market in Hong Kong to overseas firms in February. The world's fastest-growing economy showed its support for Hong Kong this month when the Ministry of Finance announced plans to sell 8 billion yuan of securities in the city on Nov 30.

The one-year yuan deposit rate was last at 2.5 percent, rising to 3.25 percent for two-year deposits, Bloomberg data show. Yields on yuan bonds sold in Hong Kong have fallen this month, with Bank of China Ltd's 1 billion yuan of 3.4 percent notes due September 2011 declining the most with a drop of 31 basis points, according to the data. A basis point is 0.01 percentage point.

Caterpillar has permission from the Chinese authorities to transfer proceeds from its yuan bonds to the mainland. The Financial Times reported on Wednesday that it will use the money to support a leasing unit there.

Caterpillar will build a manufacturing plant in Tianjin to increase its worldwide capacity for large-engine production, the company said on Friday. "Winning" in China is the top priority, Chief Executive Officer Doug Oberhelman said on Nov 15.

Investor demand for yuan-denominated bonds is strong, in part on expectations the currency will continue to appreciate against the dollar, according to Standard Chartered's Chander.

Hong Kong's yuan bond market "is set to grow in leaps and bounds, however the one critical missing ingredient at the moment is domestic liquidity", Chander said.