is building up as more high-
yield companies try to tap the
market.
Some recent new issues
have traded under water and
investors have been asking
for higher premiums, a sign
that they are becoming more
selective.WEAKENING APPETITE
“Investors are increasing
picky due to the heavy supply,
especially those Single B first-
time issuers,” said another DCM
banker.
Two Chinese high-yield
issuers, unrated INNER MONGOLIA
BAOTOU STEEL UNION and BB/
BB– rated (S&P/Fitch) CONCORD
NEW ENERGY, called off dollar
bond sales earlier this month
after demand fell short of
expectations in choppy market
conditions.
Even a repeat issuer like
Chinese property developer
OCEANWIDE HOLDINGS also changed
its plans. After announcing
a public offering of three or
five-year bonds, the B–/B (S&P/
Fitch) rated company priced
US$300m of 1.5-year US dollarsenior bonds last Tuesday at
par to yield 8.50% via a private
placement.
An Oceanwide official told
IFR the company still had some
offshore debt issuance quota
after the latest trade and would
look into opportunities to issue
more offshore bonds this year,
subject to market conditions.
High-yield bond sales
from China have surged
to US$32.9bn year-to-date,
up 170% from the same
period in 2016, according to
Thomson Reuters data tracking
international issues in G
currencies.
Despite a softening market,
bankers expect more issuers
to launch their deals ahead of
next month’s FOMC meeting
and before offshore debt quotas
expire at the end of the year.
The list of Chinese
companies planning high-yield
or unrated bonds includes
ANTON OILFIELD SERVICES, BLUEFOCUS
COMMUNICATION GROUP, CHINA
FORESTRY GROUP, LIAONING FANGDA
GROUP INDUSTRIAL, TSINGHUA
TONGFANG, TAHOE GROUP and
SHANDONG SNTON GROUP. China adds new layer
to IPO reviews
Equities A-share IPO candidates face tougher examinationBy KEN WANG, FIONA LAUChina’s securities regulator has
established a new regulatory
body to supervise the IPO
approval process, in a move
seen as a further sign of tighter
scrutiny on domestic listings.
The CHINA SECURITIES REGULATORY
COMMISSION will set up a
supervisory committee with
comprehensive oversight
of its issuance examination
committee, which is
responsible for reviewing IPOs,
follow-ons, as well as mergers
and acquisitions.
CSRC chairman Liu Shiyu
promised zero tolerance for any
misbehaviour of the members
of the issuance examination
committee, according to
comments published on the
bureau’s website on November
20.
The CSRC’s decision got
mixed reviews. While some
bankers have hailed the move
as likely to deter corruption
and restrict the power of
the issuance examination
committee, others argue that
the enhanced supervision may
make it harder for companies
to win IPO approvals.
“The supervisory committee
will become the sword of
Damocles for IPO examinators,”
said a banker, “My concern,
however, is that some
examinators may tend to vote
against an IPO rather than
to vote pass, because of the
potential risks of liabilities if any
IPO they approved goes wrong.”
The CSRC has significantly
tightened approvals of A-share
IPOs since the new panel took
over at the end of September. In
the first half of November, 10 of
27 IPO applications were denied,
representing a rejection rate of
37%. In contrast, only 13.49% of
applications were rejected in
the first 10 months of the year,
according to a research report of
Huajin Securities.As a result, some bankers are
advising issuers to postpone
their IPO applications, so as to
make better preparations for
CSRC reviews.
“We suggest not rushing
to file IPO applications in
the tightening regulatory
environment, but to carry out
thorough self-checks first,
based on key questions the
regulators raised in recent
rejected cases, so as to get
listing approval,” said another
banker.
Liu said that the CSRC
should strictly examine the
quality of issuers and prevent
weak candidates from getting
approvals. His comments
came during the inauguration
ceremony of the 17th session
of the issuance examination
committee.
Wang Huimin, the secretary
of CSRC Discipline Inspection
Committee, also said during the
ceremony that IPO examinators
should be brave enough to vote
against unqualified companies.
In April, the CSRC fined
former IPO reviewer Feng
Xiaoshu a total of Rmb499m
(US$76m) for illegal stock-
trading activities.
The tightened review of
IPOs is also a blow to private-
equity investors, who face new
hurdles to exit through IPOs.
“PE funds have benefited a
lot from the accelerated pace
of IPOs since last year, but the
rising rejection rate recently
has sounded the alarm to our
business model,” said a senior
executive with a large-scale PE
firm.
“As the enhanced IPO
scrutiny will be a long-term
trend, on the one hand, we
have to adjust investment
strategy to be more selective
on our target companies. On
the other hand, we also need
to diversify exit channels to
reduce the dependence onIPOs.” (^)
International Financing Review Asia November 25 2017 9
For daily news stories
visit http://www.ifrasia.com
(^)
acquisition binges in the past
few years.
ASSET SALES
Meanwhile, Wanda denied a
report last week in the South
China Morning Post that it
was looking to sell US$5bn of
overseas properties to a single
buyer.
“The company has not
entered into negotiations with
any third party regarding the
sale of the group’s property
projects for US$5bn,” said
Wanda Hotel Development, a
Hong Kong-listed unit of the
group.
“Following the recent
changes in some directors of
the company, the company is
undertaking a strategic review
of its property projects and
will consider any business
opportunities which can create
value for shareholders.”
Disposal of offshore assets
was one of the options some
lenders had discussed earlier
with Wanda.
“If Wanda can sell some of its
overseas projects, it is a piece
of good news for the offshore
creditors,” said a second banker.
Wanda’s landmark projects
overseas include the One Nine
Elms in London, One Circular
Quay in Sydney, a Gold Coast
development near Surfers
Paradise and the Vista Tower
in Chicago. All are under
development, according to a
November 21 Reuters report.
Wanda sold an onshore
portfolio of tourism and hotels
for Rmb63.7bn (US$9.3bn) in
July. However, some lenders
had asked lawyers to look
into whether or not the sale
had breached the terms of the
December 2016 loan.
The abrupt asset disposal
was one of the reasons for
S&P’s downgrade of Wanda as
the agency grew concerned
about the uncertainty over the
company’s change in business
model.
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