The Real Deal New York

China Evergrande turns to high-interest bonds to refi massive existing debt

The company raised $1.8B this week; its chairman bought $1B of them
November 03, 2018 02:00PM


(Credit: Max Pixel)

Developer China Evergrande Group is turning to high-interest U.S. dollar bonds to refinance some of its existing debt, which totals $96 billion.

Evergrande, China’s third-largest developer by sales, raised $1.8 billion in dollar bonds this week, agreeing to pay between 11 and 13.75 percent in interest, the Wall Street Journal reported. Evergrande’s billionaire chairman and majority shareholder Hui Ka Yan bought $1 billion of the bonds on offer to show his “support and confidence in the company.”

On the whole, developers in the country are facing $34.8 billion in onshore bonds and $17.9 billion in offshore bonds mature or become puttable in the next 12 months, according to Moody’s. Many companies have turned to offshore bonds to refinance this debt. According to Dealogic, Chinese property developers have issued $23 billion in offshore high-yield bonds so far this year.

“The refinancing cost is rising because of the tight liquidity facing the whole real estate sector, driven by high refinancing needs and likelihood of a slowdown in property sales growth,” Franco Leung, associate managing director at Moody’s Investors Service, told the South China Morning Post. “We expect some small and low-rated developers to face high refinancing risks.” [South China Morning Post, WSJ] — Kathryn Brenzel