By Fiona Law and Mike Cherney
Buyers lined up for Cnooc Ltd.'s sale of dollar-denominated
bonds, placing more than $20 billion in orders for a $4 billion
deal, according to investors following the sale.
Proceeds from the bond sale will be used to partly repay loans
related to Cnooc's $15.1 billion purchase of Canadian oil-sands
operator Nexen Inc. last year. Wednesday's sale ties a $4 billion
bond deal in May 2013 for Cnooc's largest debt sale in the U.S.,
according to data provider Dealogic.
The debt deal by Cnooc, China's biggest offshore producer of oil
and gas by output, comes on the heels of Tencent Holdings Ltd.'s
$2.5 billion bond sale Tuesday, which was targeting U.S. money
managers. Cnooc's bonds are also being marketed to U.S. investors,
who are clamoring for highly rated bonds offering more lucrative
yields than U.S.-based companies.
Matthew Duch, portfolio manager at Calvert Investments, said his
firm put in an order for the Cnooc bonds because they are
"definitely cheap for the ratings." Mr. Duch said he was attracted
to Cnooc since the company became more diversified after the Nexen
acquisition. "I think it is an interesting story, a little bit
different from some of the other Chinese oil companies," he said.
Calvert Investments oversees more than $12 billion.
Cnooc sold bonds with maturities of three, 10 and 30 years, and
offered yields at 0.85, 1.60 and 1.50 percentage points above
comparable U.S. Treasurys, respectively, according to term sheets
seen by The Wall Street Journal on Wednesday. Yields were lowered
throughout the day, reflecting the high demand for the deal.
Cnooc's new three-year bonds yielded 1.757%, 10-year bonds
yielded 4.304% and 30-year bonds yielded 4.981%, according to
investors.
A 10-year bond from French oil giant Total SA recently traded to
yield 0.74 percentage points over comparable Treasurys, according
to MarketAxess. Total is rated Aa1 by Moody's Investors Service.
State-owned Cnooc is rated Aa3, two notches lower but still in the
same double-A category.
"Most new-issue corporates are garnering a lot of attention,"
said John Majoros, managing director at Wasmer Schroeder & Co.,
which oversees $4.7 billion and put in an order for Cnooc bonds.
"This is going to get even more than normal, because of who they
are, the size, the liquidity and the quality."
The proceeds from Cnooc's bonds will be used to repay its unit's
outstanding borrowings under a $2 billion loan facility related to
its purchase of Nexen, as well as for general corporate purposes,
the term sheets said.
BOC International, Citigroup Inc., Credit Suisse Group AG,
Deutsche Bank AG, Goldman Sachs Group Inc., J.P. Morgan Chase &
Co., Morgan Stanley and UBS AG arranged the debt deal, according to
the term sheets.
Cnooc said Tuesday that its revenue from oil-and-gas output in
the first quarter rose 6.9% from a year earlier, thanks to its
acquisition of Nexen. Its net crude oil and natural-gas output also
rose 16%, boosted by a surge in production from Nexen assets in
Canada and Europe.
Write to Fiona Law at fiona.law@wsj.com and Mike Cherney at
mike.cherney@wsj.com
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