Chinese property firms must act quickly for offshore refis

A handful of Chinese property companies have returned to the offshore loan market for new borrowings in the past few weeks, after having difficulties with fundraising in second half of 2018. With no guarantee that conditions will get any more favourable, the rest of the sector should act quickly to refinance their deals in the market.

  • By Pan Yue
  • 14 May 2019
Email a colleague
Request a PDF

Some Chinese real estate companies have benefitted from the mostly benign conditions in financial markets this year, heading offshore to raise syndicated loans.

Three firms — Country Garden, Shimao Property Holdings and Greenland Holdings — are separately syndicating their borrowings in the market, aiming to raise a total of $2.2bn.

Dongguan Bestway Estates, Vimicro VMF Shanghai Corp and China Aoyuan Group have already sealed deals worth a total of $434m-equivalent, according to Dealogic.

It is a good sign that the market has reopened for these borrowers, given that other Chinese developers also have offshore loans that need to be refinanced. But they will need to act quickly if they want to take the money they need this year.

One reason for this is that the sector limits are always a big concern in the loan market. Some Chinese banks used up their lending capacity in the first half of 2018, when 10 mainland developers launched deals worth about $6.8bn, according to Dealogic data. 

Chinese lenders have therefore pulled back some of their support for property firms, having previously been strong backers of these companies. A number of lenders said they were so close to their limits that they have had to pass on recent deals from their existing clients.

Fortunately there are banks that still have lending capacity, some of which have told GlobalCapital Asia they have managed to free up some further space for the Chinese property sector.

Companies like Longfor Properties, which has three deals worth $1.4bn maturing this year, and China Resources Land, which has a $1bn deal maturing, should take note of these developments. Time is of the essence if they want to come to the offshore loan market before Chinese banks start reaching their sector limits again.

The competition for liquidity also remains fierce. Chinese property companies have $6bn in offshore loans maturing this year that still need to be refinanced, in addition to $17.3bn offshore bonds maturing before April 2020, according to data from Moody’s and Dealogic.

Country Garden and Shimao are aiming to raise up to $1bn each, while some Hong Kong local firms, like Cheung Kong Holdings, Sun Hung Kai and New World Development are regularly in talks with banks for bilateral deals with large sizes — these are also included in some Hong Kong banks’ property sector limits.

This means that banks could run out of lending capacity quite quickly.

In addition, the attitude of lenders towards Chinese real estate companies has become slightly more optimistic compared with last year, partly because of favourable conditions in the bond market. Many firms have managed to issue bonds with tenors of three or five years — longer than the one and two year deals they sold in 2018.

Loans bankers are therefore more comfortable lending to Chinese property companies, because they believe that the developers could turn to the bond market to refinance their borrowings should they need to.

But it is unclear how long this situation can last, given that the bond market can be very volatile.

High yield issuers from China were doing okay in March last year, for example, but they started to pay up a month later in April and, in May, issuance conditions began to worsen and companies started to struggle in the bond market.

Many market participants remain optimistic, arguing that the bond market will remain open this year. But with the US-China trade war still raging, there is reason to think that conditions could quickly turn tough again.

This could therefore be the best time to access the offshore loan market for Chinese property companies, which have been waiting for the best terms and pricing for their refinancings this year.

They should get involved as soon as they can, before liquidity has dried up or market conditions have deteriorated.

  • By Pan Yue
  • 14 May 2019

Panda Bonds Top Arrangers

Rank Arranger Share % by Volume
1 Bank of China (BOC) 22.38
2 China Merchants Securities Co 18.86
3 Industrial and Commercial Bank of China (ICBC) 15.71
4 Agricultural Bank of China (ABC) 11.43
5 China Securities 9.52

Bookrunners of Asia-Pac (ex-Japan) ECM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 CITIC Securities 8,165.85 33 10.03%
2 Goldman Sachs 6,894.63 24 8.47%
3 Morgan Stanley 4,734.46 31 5.82%
4 China International Capital Corp Ltd 4,224.24 22 5.19%
5 UBS 3,970.90 25 4.88%

Bookrunners of Asia Pacific (ex-Japan) G3 DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 14,234.94 125 8.36%
2 Citi 9,980.15 77 5.86%
3 JPMorgan 9,599.33 61 5.64%
4 Credit Suisse 6,362.70 47 3.74%
5 Bank of America Merrill Lynch 6,190.73 49 3.63%

Asian polls & awards

  • GlobalCapital Asia capital markets awards 2018: Investment banks

    In the fourth and final instalment of GlobalCapital Asia’s capital markets awards announcements, find out the Best Asian Investment Bank and the Best Investment Bank in the region for 2018.

  • GlobalCapital Asia capital markets awards 2018: Bonds

    In part three of our results announcements, we reveal the winning bond deals across a variety of categories. In addition, we also name the Best G3 Bond House, Best Local Currency Bond House, Best High Yield Bond House and the debut winner of the Best House for SRI Financing.

  • GlobalCapital Asia capital markets awards 2018: Equities

    In part two of our results announcements, we reveal the winning equity deals and banks, including the Best Follow-on/Accelerated Bookbuild, Best Equity-Linked Deal, Best IPO, Best ECM Deal and Best ECM House.

  • GlobalCapital Asia capital markets awards 2018: Loans

    GlobalCapital Asia has spent the last two months talking to banks and their clients in a bid to determine the most impressive capital markets transactions and advisers across Asia ex-Japan in 2018. We are pleased to begin our awards announcements in the loan market.

  • GlobalRMB awards: Most impressive issuers, best law firm

    In this third part of the GlobalRMB awards, we present our reasons for choosing the best issuers in the FIG, corporate and SSA categories — and praise the strong performance of one well-known foreign law firm.