Offshore bond sales from Chinese developers fell more than 90% in the first half


(Yicai Global) July 13 — The amount of foreign bonds issued by Chinese property companies in the first half of the year fell 91.1% from the same period last year, after a series of very media coverage has eroded foreign investor confidence, Securities Daily reported today, citing data from the China Index Academy.

Chinese developers raised 16.9 billion yuan through the sale of offshore bonds in the six months to June 30, according to the report. No new foreign bonds were issued in February and May. And the total raised from non-bank financial institutions fell 56.5 percent in the first half year-on-year to 482.5 billion yuan ($71.8 billion), it added.

The housing sector’s overall financing environment hasn’t improved much in the first six months, said Chen Xiao, a senior analyst at Zhuge Housing Data Research Center. Investors remain cautious and developers are under liquidity pressure. It remains difficult for most private promoters to raise funds.

Asset-backed securities financing and supply chain-based credit bonds were popular, however, accounting for 29.9% of the total financing scale in the first half to 144.4 billion yuan (21.4 billion), a gain of 7.8 percentage points over the same period last year, according to the China Index Academy.

Market confidence will gradually recover as sales improve, said Chen Xing, deputy director of research at the enterprise division of China Index Academy. Supportive policies will help foster a better funding environment in the second half, but it will take time. Real estate companies under high debt pressure and with tight cash flows are always exposed to the risk of default.

Property companies mainly seek on-site financing, said Yan Yuejin, research director at think tank E-House China Research and Development Institute. Those who can should adjust their fundraising teams as soon as possible to make efforts in funding sectors with supportive policies, he added.

The second debt repayment peak of the year in July and August has arrived, Chen Xing said. Real estate companies with good quality assets and facing short-term liquidity pressures should communicate in advance with creditors if they need to defer repayment, in order to avoid cross-defaults.

Developers usually offer to pay extra fees and increase coupon rates to persuade creditors, Chen Xing added. While this relieves short-term pressure, it leads to a heavier interest burden and does not alleviate long-term debt pressure.

Editor: Kim Taylor


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