DJ Chinese Developers Flock to Issue Dollar Debt
By Frances Yoon
Chinese property companies have kicked off 2020 by selling billions of dollars of longer-dated bonds, capitalizing on a hot market to reduce their heavy reliance on short-term funding.
The country's real-estate groups sold about $8 billion of dollar bonds in the first two weeks of January, according to credit strategists at ANZ.
Corporate borrowers in China have typically relied on shorter-term funds, meaning they have to more frequently refinance their debts. In 2018, some developers sold bonds due in as little as a year, as investors worried about their ability to repay sums borrowed for longer periods.
The average bond in an ICE BofA index of Chinese high-yield securities in dollars has 2.7 years to maturity, compared with 5.9 years for a similar U.S. index.
Among the longest-dated new deals, investment-grade rated Longfor Group Holdings sold its first 12-year bond, with a coupon of 3.85%, while Country Garden borrowed for 10 years.
Ernst Grabowski, head of Asia-Pacific debt syndication at Morgan Stanley, said issuers had benefited from a strong market backdrop, funds flowing into the region, low interest rates and more visibility on future Federal Reserve policy. Recent minutes showed Fed officials appear comfortable holding rates steady in the months ahead.
Mr. Grabowski said the Fed's three interest rate cuts last year had helped pave the way for longer-dated bond sales, and he expected property bond issuance to be robust this year.
Deals from Kaisa Group and Sino-Ocean Group Holding each attracted nearly $3 billion in orders from investors, or multiples of the $500 million and $400 million they raised respectively, according to bankers, in a sign of strong demand.
Mark Kiesel, chief investment officer for global credit at Pacific Investment Management Co., said constantly refinancing short-term debt wasn't sustainable, and so it was healthy for the real-estate firms to extend their debt maturities.
Write to Frances Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
January 10, 2020 05:50 ET (10:50 GMT)
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