Some private Chinese property developers including CIFI Holdings Group, Midea Real Estate and Longfor Group issed issued a total of 6.2 billion yuan ($873 million) worth of bonds that have been granted ‘full, unconditional and irrevocable’ guarantees by a state-owned credit enhancement body.
CIFI raised 1.2 billion yuan by issuing three-year bills on Sept. 21 at a coupon rate of 3.22%, the lowest rate that the developers has ever get on the open market, according to information disclosed by the company. The notes are fully guaranteed by state-owned China Bond Issuance.
China Bond Issuance, backed by the National Association of Financial Market Institutional Investors, helps low-grade credit issuers, especially smaller companies, solve financing difficulties.
In late August, the NAFMII met a number of private homebuilders about issuing bonds guaranteed by China Bond Issuance and it’s reported at the time that developers including Lonfor Group, Country Garden, CIFI Holdings, Seazen Holdings, etc.were selected for the pilot of bond issuance.
After the meeting, four other private developers Longfor, Midea Real Estate Holding, Seazen Holdings and Country Garden, have each issued medium-term bonds worth between 1 billion yuan and 1.5 billion yuan in the past month, with coupon rates ranging between 3.2% and 3.33%. Combined with the bonds issued by CIFI Holdings, the five developers have issued a total of 6.2 billion yuan of bonds will fully guarantee.
Agile Group, Excellence Group, China SCE Group Holdings and some other private developers are also in talks with China Bond Issuance to get similar fundraising support, according to industry insiders.
A spokesperson of Excellence Group confirmed the plan for bond issuance, but said the size of issuance and the coupon rates have been finalized yet.
China SCE Group said that “it has been in active communication about the issue, but so far there is no detail about implementation of the plan.”
Agile Group’s spokesperson said that “the company has been actively communicating about fundraising,” but didn’t confirmed the bond issuance plan.
Compared to property developers’ CRMW, China Bond Issuance’s involvement enables high-quality developers to secure reasonable financing, prevent the companies from slipping into a vicious cycles for financing and will help rebuild market confidence, said Zhang Jiqiang, a fixed income analyst at Huatai Securities.
According to data from China Real Estate Information Corporation, the real estate sector’s total fundraising reached about 374.5 billion yuan in the first eight months of the year, falling by 9.4% from a year earlier, expanding by 4.1 percentage points from the decline for the first seven months. In August alone, their fundraising reached about 29.7 billion yuan, slumping 33.3% from the previous month and tumbling 39.5% from a year earlier to hit the lowest level so far this year, showed the data.