Chinese developers face tough year with record $17B of bond maturities in 2017

Government efforts to curb property bubble have chilled new issuances, made it more difficult to move capital overseas

New York /
Dec.December 12, 2016 08:41 AM

The new year could be a tough one for China’s highly leveraged real estate developers, as $17.3 billion worth of bonds come due next year at a time when developers are not selling any new notes.

Developers have turned to the Shanghai Stock Exchange to sell bonds that financed about 40 percent of onshore debentures over the past two years, according to Bloomberg.

But they haven’t sold any new bonds since October when regulators raised the threshold for developers to sell bonds on the exchange in order to deflate its real estate bubble. This comes at a time when a record $17.3 billion of developer bonds are set to come due next year, with another $27.9 billion due in 2018.

Smaller developers will feel the pinch the most, as larger firms are still able to sell exchange-regulated bonds, according to NN Investment Partners.

“Overall, funding conditions will become more challenging in 2017,” said NN Investment senior credit analysis Clement Chong. “Only stronger developers can issue onshore bonds, subject to a number of conditions. But smaller builders will be forced to come to the offshore market to issue bonds, which will be subject to regulatory approval.”

Greenland Group TRData LogoTINY, the majority partner in Brooklyn’s Pacific Park, has the second-highest level of outstanding debt with 282 billion yuan.

The real estate industry accounts for as much as 20 percent of China’s economy, according to Bloomberg. Meanwhile, the yield premium on AAA-rated domestic corporate notes has reached its widest since July 2015.

Lending outside China is also becoming more difficult as banks charge more to lend to builders offshore. Government efforts to curb capital heading offshore have made it more difficult for developers to make overseas bond repayments, according to analyst Sun Binbin of TF Securities in Shanghai, where The Real Deal last month hosted its property showcase.

“The curb in refinancing will certainly increase Chinese developers’ debt burden,” he said. “It’s hard to predict when China’s exchanges will resume property bond sales.” [Bloomberg] – Rich Bockmann


Related Articles

arrow_forward_ios
(iStock)

China limits property loans to curb housing bubble

China limits property loans to curb housing bubble
Beike Zhaofang founder Zuo Hui (Getty; iStock)

Inside the world’s most valuable proptech company

Inside the world’s most valuable proptech company
WeWork CEO Sandeep Mathrani (Getty)

WeWork sells majority stake in China division

WeWork sells majority stake in China division
Newly uncovered trademarks show Trump’s Cuba real estate aspirations

Newly uncovered trademarks show Trump’s Cuba real estate aspirations

Newly uncovered trademarks show Trump’s Cuba real estate aspirations
Jackie Chan and the building (Credit: Andrew Chin/Getty Images, and NICOLAS ASFOURI/AFP via Getty Images)

Jackie Chan’s Beijing condos head to auction amid dispute between developers

Jackie Chan’s Beijing condos head to auction amid dispute between developers
In China, residential developers have used presales to power their construction, but that may not be enough in a Covid world. (Getty)

Presales powered resi development in China. Covid may change that

Presales powered resi development in China. Covid may change that
Hamid Moghadam (iStock)

Prologis CEO: Capital is not an issue, it’s finding properties

Prologis CEO: Capital is not an issue, it’s finding properties
Beijing

Falling rents in China a sign of economic uncertainty

Falling rents in China a sign of economic uncertainty
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...