Chinese oil company CNOOC saw its bonds suffer and stock gain today after opponents of the firm's $18.5 billion bid to buy Unocal Corporation sought to erect political barriers.
Investors lifted CNOOC's shares 0.59 per cent to HK$4.25, outperforming the 0.28 per cent rise in the Hong Kong market.
But the debt that CNOOC must incur to pay for the deal led global ratings agencies to put its credit ratings on review for possible downgrade.
A possible bidding war would make Unocal even more expensive. Spreads on CNOOC's 2013 dollar bonds were quoted at 115/105 basis points over comparable US Treasuries, about 10 bps wider than in Asia yesterday.
Rating agencies Standard & Poor's, Moody's Investors Service and Fitch Ratings placed CNOOC on review, saying a successful bid could strain the state-run company's financial resources.
CNOOC, now in a net cash position, said it would need long-term financing of $16 billion, including $3 billion in bonds and $2.5 billion in equity, to help pay for Unocal.
In Washington, some lawmakers and lobbyists expressed concern that China could gain control of energy resources considered to be American at a time of both record oil prices and rising tension over China's growing trade surplus with the United States.
That increased pressure on the US government to investigate and possibly block the CNOOC proposal. Still, CNOOC is moving quickly to secure its bid, which trumps an earlier $16.5 billion offer from US giant Chevron Corporation and would be by far the largest overseas acquisition by a Chinese company.