Private Property Developers Step up Medium-Term Note Financing

BEIJING, May 10 (TMTPOST) – Based on preliminary statistics, the total approved amount of registered medium-term notes for real estate enterprises has reached 112.6 billion yuan since February 1 of this year.

Since last November, there has been a relaxation in the financing policies for property developers. As a result, while the financing conditions have improved for top property developers, many high-quality private real estate enterprises have been receiving financing support.

Country Garden Holdings was the first among its peers to successfully complete the issuance of medium-term notes in May. The company announced the  issuance of its first and second tranches of medium-term notes (23 Country Garden MTN001 and 23 Country Garden MTN002) on Monday for the year 2023. The first tranche amounted to 800 million yuan, while the second tranche amounted to 900 million yuan, both with a maturity period of 2 years and coupon rates of 3.8% and 3.95% respectively.

With approval received on January 31 this year to issue medium-term notes worth 20 billion yuan, the company has now issued a total of 21.7 billion yuan, indicating a promising outlook for its financing.

China Vanke also unveiled the prospectus for its second tranche of medium-term notes for 2023 on Monday. The registered amount for this bond stands at 28 billion yuan, with the issue amount limited to 2 billion yuan. The notes have a maturity of 3 years and do not entail any credit enhancement. The company received a top-notch AAA rating for its overall creditworthiness and debt, as evaluated by United Credit Rating Co., Ltd.

Two state-owned real estate enterprises, Yuexiu Property Co., Ltd. (00123.HK) and China Overseas Land & Investment Ltd. (COLI) (00688.HK), also released medium-term note announcements  on the same day with the two private real estate companies mentioned above. Yuexiu Property announced Monday the proposed issuance of 1.40 billion yuan guaranteed notes, carrying an interest rate of 3.8% and maturing in 2026. Meanwhile, COLI also issued an interest payment announcement for the 2022 Public Offering of Corporate Bonds (Phase II) (Variety II) 2023. The total value of this bond issuance amounts to 1.5 billion yuan, with a maturity period of 5 years.

Shanghai Shimao Co., Ltd. (600823.SH) disclosed on the same day the “21 Shanghai Shimao MTN002” medium-term note on Beijing Financial Assets Exchange, within the grace period. The bond has an issuance amount and balance of 640 million yuan, with a 2-year term. Investors can expect an interest rate of 5.5% on this bond. The principal and interest payment date is scheduled for May 6, 2023.

High-quality private real estate firms are becoming key players in medium-term note issuance  based on recent transactions. Alongside Country Garden, China Vanke, and Shanghai Shimao, numerous other private real estate companies have also secured approval to register their medium-term notes.

Experts have highlighted the increasing diversification of credit bond issuers thanks to the ongoing favorable policy. Private real estate enterprises, in particular, have obtained the irrevocable joint and several liability guarantees from China Bond Insurance Co., Ltd, facilitating the issuance of medium-term notes.

According to a research report by Soochow Securities Co., Ltd. (601555.SS), significant improvements have been observed in the balance sheets of real estate enterprises around the release of the 2023 interim reports, indicating a recovery in their financing capacity. Central-government backed state-owned real estate enterprises (SOEs) and other real estate SOEs, benefiting from credit strengths, exhibit stronger financing capabilities, and their relative advantage is expected to further grow. However, the confidence recovery of private enterprises lags behind the real estate industry as a whole, necessitating more time for balance sheet repair.

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