Evergrande Real Estate Group Ltd, China’s third-biggest developer by market value, will begin marketing its first sale of bonds this week to fund projects and repay the remaining balance on a US$433 million loan from 2007.
Guangzhou, southern China-based Evergrande will meet with investors in Hong Kong on Jan 13-14, then in Singapore, London, Boston, New York and Los Angeles for the US dollar-denominated benchmark offering, according to a person familiar with the matter, who asked not to be identified.
Benchmark typically means at least US$500 million. Investors may find bonds offered by Chinese developers attractive as the ‘downside is limited’, Lee Wee Liat, a property analyst at Nomura International Hong Kong Ltd, said by telephone yesterday.
The developers will probably have to offer the bonds at ‘good rates, as sentiment has changed’, due to government policies targeting the real estate industry.
China’s cabinet on Sunday said that agencies will boost monitoring of loan flows to prevent funds illegally entering the property market and tackle ‘overly rapid’ price gains in some cities. Prices across 70 cities in China increased at the fastest pace in 16 months in November after bank lending rose to a record. ‘Although the Chinese government is still relatively supportive of the property sector, it may tighten up some aspects, such as credit availability, in 2010,’ Michael Wu of Fitch Ratings in Hong Kong said yesterday.
The ratings company plans to rank Evergrande’s bonds at BB+, its highest non-investment-grade rating, according to the statement. Standard & Poor’s will grade the proposed debt BB-, its third-highest junk rating, according to a statement yesterday.
Moody’s Investors Service said it plans to grade the debt at B1, its fourth-highest non-investment-grade rating.
The rating reflects the company’s ‘high exposure to development and execution risks as it pursues rapid growth in China’s property sector’, Kaven Tsang, a Hong Kong-based analyst at Moody’s, said.
Evergrande hasn’t issued bonds before, according to data compiled by Bloomberg. S&P analyst Christopher Lee and Fitch analyst Mr Wu confirmed that the bonds would be the company’s first.
The company hired Bank of America Merrill Lynch, Goldman Sachs Group Inc and BOC International to manage the sale of senior guaranteed bonds, it said in a filing to the Hong Kong stock exchange yesterday. Evergrande stock fell 1.2 per cent to HK$4.03 in Hong Kong trading as of the lunchtime close yesterday.
Source: Business Times, 12 Jan 2010
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