Some Chinese property developers recently announced plans to issue debts, fuelling market expectations for easing financing amid a sector-wide cash crunch.
China Merchants Shekou Industrial Zone Holdings Co., Ltd, an industrial property developer, plans to issue 3 billion yuan of medium-term notes in the interbank market, including 1.5 billion yuan of 3-year notes and 1.5 billion yuan of 5-year notes and the proceeds will all be used to repay maturing bank loans, according to information disclosed on the website of the Beijing Financial Assets Exchange on Friday.
Last time the company issued medium-term notes was December 1 last year, when the company issued 1.6 billion yuan of notes, according to information from the National Association of Financial Market Institutional Investors (NAFMII), an interbank bond regulator.
Also on Friday, Bright Real Estate Group Co.,Ltd, announced that it will issue up to 580 million yuan of 3-year notes in the interbank market on November 16 – 17, the proceeds of which will all be used to repay maturing debt, according to information from the Beijing Financial Assets Exchange.
The announcements came after Chinese media reported this week that the NAFMII hosted a meeting with some property developers in Beijing on Tuesday to discuss the real estate sector’s financing issue.
The latest statements confirmed the report saying that developers including Country Garden, Longfor Group Holdings Ltd, China Merchants Shekou and Poly Developments disclosed plans to issue notes in the interbank market in the near term at the meeting.
Analysts took the meeting to signal that certain policies for real estate companies’ domestic debt issuance could be relaxed, and high quality property compnanies will be able to issue debt financing in the open market, allowing banks and other institutions to participate.
“The financing environment for real estate developers is gradually “thawing”, but it will take time for them to feel the recovery of financing,” the state-run Securities Times said.
The easing will center on the interbank bond market, which has seen issuance from developers fall in the past year, said Securities Time.
While the report didn’t specify which rules would be loosened, Chinese junk-rated dollar bonds surged the most in three weeks, and an index of developer shares saw the biggest jump since February.
The latest announcement of interbank note issuance sent quite a signal, indicating relaxation on property developers’ bond issuance after loosening bank loans to the sector, said Yan Yuejin, research director at the E-House China Real Estate Institute.
More real estate companies are expected to issue bonds in coming days, he said.
Xiao Yunxiang, analyst at Tongce Academy, said that “the latest debt issuance should not be interpreted as an overall relaxation in real estate sector’s financing environment. It’s just a signal that the authority may open a small window for developers under the tough condition.”
Public information, showed that, so far in November, several developers including Shanghai Urban Development (Holding) Co.Ltd. and Nanjing Chixia Development Co., Ltd have registered for medium-term note issuance. Jinke Property Group Co.,Ltd and Guangzhou Pearl River Industrial Development Co., Ltd. have registered to issue ultra-short bills.
“Going forward, financing environment will be slightly relaxed, but the capital market remains cautious to property developer. It will remain difficulty for developers whose credit ratings were lowered in the cash strains to raise funds,” said Liang Nan, analyst at Zhege Zhaofang.
“We are likely to seem more state-owned property developers to take the lead in promoting financing activities. The developers mostly have higher credit ratings. Leading private developers may all join,” said Liu Shui, analysts at the China Index Academy, one of the largest independent real estate research firms in China.