This article is regarding the primary credit markets in Asia and slowdown witnessed in new issuances from the Chinese developers in the HY space.
The month of February has seen few junk bonds from the China property sector. Glorious Property Holdings Limited, issued USD 250mn senior unsecured notes maturing in five years with a coupon of 13.25% at par (bonds are rated Caa1 by Moody’s and B- by S&P). The company’s stated use of bond proceeds is to refinance existing debt and for general corporate purposes. There was no perpetual issuance by any property name during the month. There was not a single issuance from Indonesia high yield (HY) property space.
CIFI Holdings, a Chinese property developer, had plans to issue USD-denominated senior notes. The company had hired Citigroup, Deutsche Bank, HSBC, RBS and Standard Chartered to arrange fixed income investor meetings. It marketed 5 year maturity USD-denominated senior notes at low to mid 11%. The proceeds were to be used for refinancing debt, acquisition of new projects and development. However, it cancelled its proposed bond sale, citing unfavourable market conditions.
Far East Consortium International Limited tapped the bond markets in February 2013. It is a small-sized Hong Kong based company with a long track record of operations. The company issued dimsums of CNH 1 billion with a maturity of 3 years and coupon of 5.875% at par (equivalent to a yield of 5.875%). This dimsum bond is a small sized issuance and the deal received high subscriptions from the fixed income investors. The company had earlier planned a USD bond issuance in Nov 2012 which got cancelled then.
February 2013 has been a stark contrast to January 2013, which was a month that saw huge supply in the primary markets in the Asia fixed income space. There was a record amount of issuance from the China property high yield sector. The flow of issuances started with Country Garden Holdings Company Limited and Kaisa Group Holdings Ltd, which issued USD 750mn 10 year maturity notes and USD 500mn notes seven year maturity notes. Even issuers rated in the CCC rating bucket such as Hopson Development Holdings Limited, Powerlong Real Estate Holdings Limited and Greentown China Holdings Limited had tapped the bond markets in January.
Yanlord Land Group Limited is one of the few Chinese property credits not to have tapped the USD debt capital markets in 2012 and 2013. The company recently announced its financial results for 2012. The company witnessed a 15% YoY increase in revenues in 2012. The company’s profitability improved while the liquidity position also looks adequate. The company’s total debt outstanding and net debt declined significantly resulting in an improvement in its credit metrics. Moody’s upgraded Yanlord’s rating outlook to stable from negative while affirming its Ba3 corporate family and its B1 senior unsecured debt ratings. The rating action was driven by Yanlord’s strong performance (both operating and financial) during 2012.
Most of the Chinese companies will announce their 2012 annual results in March 2013 and the Asian secondary bond markets are likely to be active, with these data flowing in.
Fixed Income Research 