COUNTRY REPORT CHINAThe pricing was within the indicative
range of 4.10%–4.70%.
Both the issuer and the notes have
received AAA ratings from China Chengxin
International.
Proceeds will be used for a commercial
complex project in Changsha, Hunan
province.
Bank of China and ICBC were lead
underwriters.
› CIFI HOLDINGS PRINTS ONSHORE BONDS
Chinese property developer CIFI HOLDINGS
(GROUP) has issued Rmb875m four-year
onshore bonds at 6.39%, according to a
filing to the Shanghai Stock Exchange last
Wednesday.
The issue size was smaller than initial
target, which was set at no more than
Rmb995m. The notes are puttable by
investors after three years.
Although CIFI’s latest onshore bonds
priced near the high end of the initial range
of 4.50%-6.40%, the funding cost was much
lower than what it could have been in the
offshore market.
The Hong Kong-listed company on
September 13 priced Rmb1bn two-year Dim
Sum bonds in the offshore market at 7.75%.
The company on August 9 issued Rmb2.5bn
three-year onshore bonds at 5.46%. The notes
are puttable by investors after two years.› LIYUAN WARNS OF POSSIBLE DEFAULTJILIN LIYUAN PRECISION MANUFACTURING’s bonds
plunged last Thursday after the Chinese
aluminium producer said it would be
unable to make a Rmb51.8m coupon
payment on its 7% onshore bonds maturing
in 2019 on time because of a cash crunch.
The coupon payment on the 7% 2019s
will be due on September 25, according to
a filing to the Shenzhen Stock Exchange.
The outstanding amount of the notes is
Rmb740m.
The 7% 2019s fell to as low as 9.00 and
were last quoted at 13.50 versus Wednesday’s
close of 81.00, according to sina.com data.Liyuan said it is actively finding ways to
raise funds in order to make the payment
“as soon as possible”. The company
had overdue debt of Rmb2.16bn as of
September 19, according to the filing.
Last week, United Ratings downgraded
the company’s long-term credit ratings to BB
from BBB with a negative outlook, citing the
liquidity problem.SYNDICATED LOANS
› GRAND AUTOMOTIVE SEEKS RMB1BN REFICar distributor CHINA GRAND AUTOMOTIVE SERVICES
is in the onshore market for a Rmb1bn
(US$146m) two-year term loan, while its
subsidiaries seek US$200m offshore.
BNP Paribas, DBS Bank, Hang Seng Bank and
HSBC are the mandated lead arrangers and
bookrunners of the amortising renminbi
facility, which pays an interest margin of
125% of the PBoC rate and has an average life
of 1.895 years. Hang Seng is the facility agent.Country Garden swoops in for size
Bonds Calmer market opens window for one of the year’s largest Chinese property dealsCOUNTRY GARDEN HOLDINGS, rated Ba1/BB+/
BBB–, has raised US$975m from dual-
tranche US dollar bonds, overcoming difficult
public market conditions to complete one of
the year’s largest offshore financings from
the Chinese property sector.
A US$425m long three-year non-call two
tranche due January 2022 and a US$550m
long five-year non-call three due January 2024
priced to yield 7.125% and 8%, respectively.
After a turbulent summer, marked by an
emerging markets sell-off and escalating
trade tensions between the US and China,
Country Garden took advantage of a calmer
backdrop, with bankers pointing to an
improvement in secondary levels and a slim
window before holidays in Hong Kong next
week and China the week after.
“As a seasoned issuer, they knew it was
decent timing, even if it meant that the level
they were paying for was higher than what
they are used to,” said a banker on the deal.
“But they respected and fully understood
that this is where the market is.”
Orders exceeded US$1.4bn across the two
tranches, benefiting from improved investor
sentiment after the Hong Kong-listed
company saw its first-half net profit soar
72.5% to Rmb12.9bn (US$1.9bn).
The deal was the largest offshore issue
from the Chinese property sector since ChinaOverseas Land & Investment raised US$1.5bn
in April, according to Thomson Reuters data.
Country Garden managed to tighten
pricing well inside initial guidance of 7.5%
area and 8.375% area. At final pricing, the
new issue premium on the three-year non-
call two was around 10bp–15bp, based on
Country Garden’s existing 2021s and 2022s
at around 6.86% and 7%, respectively.
The five-year non-call three offered a
wider premium of around 30bp, based on
an extension from outstanding January and
September 2023s at around 7.46% and
7.45%, respectively. That was seen to be
smaller than the 50bp or more on recent
issues from lower-rated peers.HIGH COUPONS
The coupons on the latest bonds are the
highest since February 2015, reflecting the
elevated secondary yields and higher premiums
required even for the most established issuers.
Country Garden’s more recent issues priced in a
range of 4.75%–5.625%.
The banker on the deal said investors
fought it out during allocations to lock in the
high coupons.
“When was the last time an investor
could get 7% from CoGard? It is a good
opportunity. For investors, getting 7% from a
high-quality name is attractive.”CreditSights placed fair value around
7.05% and 7.75%, respectively, but cited
ongoing trade disputes, supply risk in China’s
property sector and weak sentiment as
deterrents to all new issues, forecasting that
final pricing could come wide of those fair
value calculations at about 7.25% and 8%,
respectively.
Country Garden has fully utilised its US$1bn
regulatory quota, and will use part of the
proceeds to refinance offshore debt. It has a
US$500m maturity due on November 20.
The shorter tranche attracted US$680m of
orders from 70 investors. Asian buyers took 83%
of the Reg S notes, while EMEA and offshore US
accounts bought 9% and 8%, respectively.
Banks and asset managers received 48%,
and the rest went to private banks.
The 2024s drew US$740m from 58
accounts. This tranche attracted a larger
EMEA following at 25%, while Asia bought
75% of the notes.
The investor types were similar, with asset
managers and private banks buying 51%
and 49%, respectively. The notes have an
expected BBB– rating from Fitch.
Goldman Sachs and JP Morgan were joint
global coordinators as well as joint lead
managers and joint bookrunners with BNP
Paribas and HSBC.
FRANCES YOON