China’s CIFI to Sell New Bonds, Other Defaulting Developers to Follow, as Regulatory Support Grows

13/1 2023 00:00

CIFI Holdings Group received the official green light to sell new bonds and other Chinese property developers that have defaulted on debt have also made similar applications, as regulatory support for China’s real estate sector is cranked up.

CIFI will issue up to CNY1.5 billion (USD220 million) of medium-term notes in the inter-bank market, the Shanghai-based firm announced yesterday.

The medium-term bond issuance plans of builders in the ‘registration completed’ or ‘pre-evaluation’ stages on the website of the National Association of Financial Market Institutional Investors included two other defaulters, Powerlong Real Estate Holdings and KWG Group Holdings.

Industry insiders told Yicai Global that the plans submitted by the three firms shows that regulatory support is expanding to include more bond issuers and real estate policy easing continues.

CIFI and Guangzhou-based KWG have begun offshore debt restructuring, while Powerlong, which is headquartered in Shanghai, has started to roll over its domestic and offshore debts.

Regulatory support for developer credit has been evident, said Yu Xiaoyu, research director of the Yihan think tank, adding that more are benefiting from the backing, with future funding expected to be easier and larger.

One-hundred property companies secured financing of CNY101.8 billion (USD15.2 billion) last month, up 85 percent from November and 33 percent from a year ago, according to figures from China Real Estate Information. It was the only month of 2022 in which financing topped CNY100 billion.

A core reason for the easing of leverage constraints is to further guarantee the delivery of new-build residential properties and to stabilize market expectations. When regulators approve bond sales they prioritize those developers that will use the funds to deliver projects under construction, according to sources at real estate companies that are processing such plans.

When sales were good in the past, construction funds usually came from project pre-sales after real estate firms paid for the land and initial construction, said a manager at one developer. But that model is now unsustainable, the person said, adding that firms now need to issue more debt to ensure the completion and delivery of projects.