HONG KONG: China’s Country Garden Holdings Co Ltd will sell up to 500 million yuan ($74 million) of onshore bonds with credit risk protection, responding to a regulatory call to boost issuance and help improve market sentiment for property developers.
There has been little corporate bond activity from Chinese property developers after much of the sector was gripped by a liquidity crunch last year.
The credit crunch, triggered by tighter debt cap rules, has pushed some big developers such as China Evergrande Group into crisis, shaking investor confidence in the sector and the health of the Chinese economy.
Authorities have asked Country Garden, Longfor Group and Midea Real Estate – three large private developers in good financial health – to issue bonds this week to boost confidence, sources said.
The sources added that securities firms would issue credit default swaps or credit risk mitigation mandates for the bonds to make them more attractive.
Country Garden said in a filing on Tuesday that it would issue a three-year callable bond, which gives creditors the option to resell after the first and second year, adding that the bond had an indicative yield range of 4, 5% and 5%.
China Securities Finance Corp and CSC Financial Co will issue less than one-year credit protection contracts for the bond, he said.
Separately, Longfor issued 402 million yuan of supply chain asset-backed securities this week that were tied to credit protection mandates.
Referring to this issue, the Shenzhen Stock Exchange said in a statement on Tuesday that credit protection mandates are an innovative tool to help private sector developers obtain debt financing.
(1 USD = 6.7523 Chinese Yuan)
(Reporting by Clare Jim; Editing by Edwina Gibbs)