Minsheng Bank, Ping An Bank and Bank of
3HANGHAI ûTHEûLISTEDûCOMPANYûSAIDûINûAûlLINGû
to the Shanghai Stock Exchange last
Wednesday.
5NDERûTHEûAGREEMENT ûTHEûlVEûBANKSûWILLû
provide credit lines and offer tailor-made
lNANCIALûSERVICESûTOû7INTIMEû'ROUPûANDûITSû
subsidiaries, it said without giving the
amount of the credit lines.
Wintime Energy triggered an event of
default after failing to repay Rmb1.5bn
(US$225m) of 7.00% 365-day onshore notes
due on July 5.
In the offshore market, Moody’s
downgraded power-plant operator Huachen
Energy’s B1 corporate family rating to Caa1,
and B2 senior unsecured rating to Caa2,
following the default of its parent Wintime
Energy.
ICBC LEASING AMENDS TERMS OF
17 BONDS
ICBC FINANCIAL LEASING, rated A1/A/A, is seeking
bondholders’ approval to amend certain
terms and conditions of 17 of its
outstanding offshore bond issues, to gain
GREATERûmEXIBILITYûINûTHEûMANAGEMENTûOFûTHEû
leasing businesses of ICBC group
subsidiaries.
The amendments will also make the
terms of the old bonds match those on the
bonds it sold in May.
Holders of the bonds that consent to the
changes will receive US$0.40 per US$1,000
principal amount in respect of each series of
the US dollar notes, and Rmb0.40 per
Rmb1,000 principal amount in respect of
the Dim Sum bonds.
The voting deadline for the consent
solicitation is August 2 and bondholder
meetings will be held on August 7.
ICBC, HSBC, Goldman Sachs and ANZ are the
solicitation agents and DF King is the
information and tabulation agent.
4HEûûBONDSûWEREûISSUEDûBYû)#"#),û
&INANCEûANDûHAVEûTHEûBENElTûOFûAûKEEPWELLû
and liquidity support deed and a deed of
asset purchase undertaking provided by
)#"#û&INANCIALû,EASING
)#"#),û&INANCE ûINCORPORATEDûINû(ONGû
Kong, is a sister company of ICBC Financial
,EASINGûANDûACTSûASûTHEûPRIMARYûOVERSEASû
lNANCINGûANDûFUNDRAISINGûPLATFORMûFORû)#"#û
group’s leasing businesses.
CHINA MENGNIU MEETS BOND INVESTORSCHINA MENGNIU DAIRY has mandated Citigroup,
ANZ, Bank of America Merrill Lynch and BOC
InternationalûTOûARRANGEûlXEDûINCOMEû
INVESTORûMEETINGSûINû,ONDON û3INGAPOREûANDû
Hong Kong, starting Monday.
The Hong Kong-listed company is rated
Baa1/BBB+ (Moody’s/S&P).
EMERGING MARKETS ASIA-PACIFICDevelopers won’t be
put upon
CHINA Sector faces refi pressure as investors decline step-ups to hedge
default risksChinese property developers are offering
juicy step-ups on onshore puttable bonds to
relieve growing refinancing pressures, but the
sweeteners are not swaying domestic investors
worried about rising default risks.
TIANJIN SUNAC ZHIDI, an onshore subsidiary
of Hong Kong-listed Sunac China Holdings,
proposed last week to raise the coupon on
Rmb2.5bn (US$367m) of bonds puttable in
August to 6.80% from 4.50%. Bondholders have
until July 24 to register whether they will exercise
the put option and how much they would put.
Since June, 14 developers have announced
that some of their bonds will become puttable
in July and August, according to stock exchange
filings. The glut of puttable bonds has hit a
record this year, according to S&P.
Some Rmb286.5bn of onshore bonds issued
by developers become puttable in the second
half of this year, said S&P, more than double the
Rmb122.14bn in the first half.
The wave of puts follows a flurry of bond
issues from property developers in 2015, when
the regulatory environment was friendly and low
interest rates ensured ample liquidity. Most of
the bonds issued at the time had five-year non-
put three structures.
With regulatory scrutiny and weak primary
markets limiting new bonds from the property
sector, analysts and underwriters said issuers
were willing to offer decent compensation.
SHIMAO PROPERTY HOLDINGS, which has
Rmb9bn of onshore bonds puttable in
September, also plans to discuss with
bondholders the possibility of raising coupons.
“We are preparing to step-up the coupon,
but it depends on the outcome of discussions
with bondholders and the market situation,”
said Eva Lau, an investor relations manager at
Shimao. “But even if all holders put their bonds,
we’ve already prepared the funding for the
redemption.”
Domestic investors are unimpressed by the
step-ups. Earlier this month, GUANGZHOU R&F
PROPERTIES offered a step-up of 205bp, raising
the coupon on Rmb6.5bn five-year non-put
three notes due 2020 from 4.95% to 7%. Still,
bondholders sold back Rmb6.25bn in principal –
nearly all of the notes.
Last month, investors holding about Rmb3bn
principal of EVERGRANDE REAL ESTATE GROUP’s
Rmb5bn five-year non-put three notes due 2020
exercised the put option, rejecting the company’s
offer to hike the coupon by 142bp to 6.80%. Theissuer is an onshore subsidiary of Hong Kong-
listed China Evergrande Group.
“Step-ups of 100bp–200bp are far from
enough to compensate for the potential risks,
taking into account that those bonds were issued
in a low-yield environment in 2015 and that more
notes by developers are set to become puttable
later this year,” said a Beijing-based investor at a
large securities firm.DEFAULT FEARS
Moreover, fears of a first default by a developer
on onshore bonds are on the rise. Although
several developers have defaulted on offshore
notes, none has done so on onshore paper yet.
Last week, ZHONGHONG HOLDING, a small-sized
property developer, said that it had overdue
borrowings of Rmb4.32bn as of July 15 after
its sales in tier-one cities slowed due to policy
tightening. The company said some special
clauses would be triggered on its Rmb2.07bn
onshore bonds, but did not specify what those
were.
Overall, S&P estimates that, in the first half
of this year, nearly 60% of investors holding
puttable bonds from any issuers, not just
developers, chose to exercise their rights. This
was a lot more than 24% in 2017 and 20% in
2016.
Two debt capital markets bankers noted that
the China Securities Regulatory Commission had
accelerated approvals for property developers’
bonds since June after leaving most of their bond
plans on hold in the past two years as part of the
nationwide campaign to tame surging property
prices. Still, more restrictions on the use of
proceeds have been imposed.
“Currently, the regulator prioritises use of
proceeds for repayment of maturing exchange-
traded bonds and for rental housing projects,”
said one of the bankers. “Other uses of proceeds,
including to repay bank loans, make it much
harder to obtain approvals.”
In the primary market, demand for top-tier
developers with low leverage is improving after
onshore liquidity conditions have eased in July,
but smaller developers with aggressive leverage
are still struggling, bankers noted.
CHINA VANKE sold Rmb3bn of three-year notes
at par to yield 4.60% on July 10, while GEMDALE
printed Rmb1bn of five-year non-put-three notes
at 5.0% on July 18. Both are locally AAA rated by
Chinese rating agencies.
Ina Zhou, Carol Chan