* Offshore debut to offer bond investors play on new Chinese
By Ina Zhou and Carol Chan
HONG KONG, April 17 (IFR) - Days after plans for a new
economic hub south of Beijing ignited a frenzy among mainland
investors, a Chinese property company with links to the zone has
unveiled plans to sell overseas bonds.
China Fortune Land Development stands to benefit
from the central government's Xiongan New Area project,
announced on April 1. The company said on April 6 it planned to
raise $1 billion through its first offshore bond offering.
The local government has given Fortune Land, which is based
in Hebei province where the special economic zone will be built,
the task of developing some 500 square kilometres of the new
area, or about a quarter of the total planned size.
The bond deal may take some time to get off the ground, like
the planned metropolis itself, but it has already caught the
attention of potential underwriters and investors.
Fortune Land's bond offering "is probably the only chance
available to gain access to Xiongan-related assets", said a Hong
Kong-based credit trader at a major Chinese bank. He noted that
property sales had been frozen in the area and that related
stocks might already have overshot due to the frenzied investor
Some DCM bankers were keen to get in on the action.
"We have already sent people to Hebei to approach the
issuer. We definitely want to get on the deal," said a banker at
a middle-sized Chinese bank.
Expectations that Xiongan will mirror the success of the
Shenzhen Special Economic Zone and Shanghai Pudong New Area have
fired up domestic investors, sending the shares of regional
companies sharply higher. Fortune Land's Shanghai-listed shares
rose more than 62 percent, to 44.39 yuan, from April 1 to April
12. Last Thursday, the company, along with 13 others, requested
a trading halt to evaluate the impact of the project on its
The new economic zone, situated around 100km south-west of
Beijing, will take over some administrative functions of the
capital and is expected to grow into an international hub.
Another DCM banker with a foreign bank said he would be sure to
join in pitching for the mandate, but cautioned that marketing
the credit to foreign investors could be challenging.
"How will you tell the story to investors? It is not a
conventional Chinese property developer and there is no
comparable peer in the US dollar bond market," he said.
Fortune Land develops industrial new towns for local
governments through public-private partnerships, whereas
property companies that have tapped the offshore bond market in
the past are mostly developers of commercial or residential
"You can market the credit skewing towards Chinese local
government vehicles, but then it is a privately owned company,
not an SOE like all LGFVs," said the banker with a foreign bank.
Eye-catching equity gains and reports of property
speculators flocking to the area with suitcases full of cash,
are not expected to skew the pricing of the new bonds.
"The issuer's credit fundamentally won't change immediately.
It (Xiongan New Area) may be a market topic, but it won't affect
the yield it needs to pay investors," said a Hong Kong-based DCM
banker at a Chinese investment bank.
Another banker, who approached Fortune Land years ago to
explore US dollar bond issues, pointed to the uncertainties
surrounding the Xiongan project.
Fortune Land itself warned in a filing that the contracts it
had secured with the local government were subject to policy
"The company has not obtained any residential land in the
area and thus no project development has been started," it said.
The issuer must also secure the approval of the National
Development and Reform Commission, a main regulator of Chinese
offshore debt, bankers said.
"Every issuer desires to print offshore deals as early as
possible in an environment of rising US interest rates, but the
pace of issuance ultimately lies in the hands of NDRC," the
A Fortune Land investor relations officer told IFR that the
offshore bond plan had not been registered with NDRC yet, which
means months might pass before an actual offshore deal could be
Fortune Land, rated AA+ (Dagong Global), last month
privately placed 706 million yuan ($102 million) securities
backed against PPP projects in the domestic exchange market.
This was one of the first batch of PPP securitisations
designed to attract private investment to government-led
projects. A one-year senior tranche was priced at par to yield
(Reporting by Ina Zhou and Carol Chan; Editing by Daniel
Stanton and Steve Garton)