July 26, 2018 / 11:07 AM / 4 months ago

Chinese developers rush for dollar bonds, raising $2.6 billion

HONG KONG, July 26 (Reuters) - Seven Chinese property developers have tapped Asia’s dollar bond markets in the past week, raising a combined $2.6 billion, as they race to take advantage of fresh investor enthusiasm for junk-rated bonds amid signs of economic support from Beijing.

Worries about a falling yuan, slowing property sales and a series of defaults by Chinese borrowers earlier this month had virtually frozen the junk, or high-yield debt, market.

But investors have warmed to such bonds from mainland companies following signs that Beijing is once more focusing on boosting the economy by loosening access to credit amid rising economic headwinds.

On Thursday, Aoyuan Properties was seeking at least $150 million while Greenland Holdings sought $300 million.

Agile Group Holdings was first out of the blocks with a July 20 offering of $400 million, following on an initial offering of $200 million the week earlier which struggled to drum up investor demand.

Yuzhou Properties on Monday raised $425 million, having received orders for $1.5 billion of the bonds.

“The dollar bond market is volatile and dynamic (and) good windows come and go in a flash. We have seen a recovery in the bond market recently and considered that it would be a good window to do a tap,” Yuzhou’s chief financial officer Jacky Wong told Reuters.

The $2.6 billion in deals have made the past week the busiest week since mid-June.

On Wednesday, Sunac China Holdings raised $400 million and Sino-Ocean Group Holding raised $700 million.

The previous day China Fortune Land Development sought $200 million.

Developers are faced with a record refinancing need, with $39.2 billion of bonds, potentially still due this year, according to Moody’s data on the developers it rates.

“The biggest concern they have is offshore maturities,” one banker said, adding that because of that developers would keep needing to tap the markets when the opportunity arises.

Companies in the sector are some of the most active borrowers in Asia’s junk bond markets, and have raised $46.3 billion so far this year, Thomson Reuters data show.

“China has tightened liquidity onshore – the signal it sends to investors is that people can’t raise money onshore so will come offshore,” said a senior banker who has worked on property deals.

Offshore investors have also been comforted by limits on borrowing from China’s National Development and Reform Commission (NDRC), which must approve all bonds maturing after one year or more. The NDRC earlier this month said it was focusing on approving borrowing limits from companies seeking to refinance existing debt rather than those looking to raise fresh cash - easing investor fears they faced a huge wave of supply.

JP Morgan analyst, Ryan Li, said: “Now onshore corporate bond issuance is not only tight but more expensive; the rates are 100-200 basis points higher.”

Editing by Jennifer Hughes and Jacqueline Wong

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