Only half a month into 2021, more than 30 mainland real estate companies have already disclosed their debt issuance plans, with the total scale of domestic and foreign debt issuance reaching 100 billion (RMB, same below), showing the great pressure of debt. It is reported that the maturing debts of mainland real estate enterprises have reached 1.2 trillion yuan this year.
According to a recent report released by Shell Research Institute, the scale of maturing debts of real estate enterprises in 2021 (excluding ultra-short-term bonds to be issued in 2021) is expected to exceed 1.2 trillion yuan, an increase of 36% year-on-year, and a historic breakthrough of the trillion mark.
Faced with debt pressure, mainland real estate enterprises had to issue bonds significantly at the beginning of the year to cope.
According to the report, high amount, low interest rate, mainly US dollar bonds became the characteristics of this round of real estate financing. In terms of cost, Greentown Group issued 2.5 billion yuan of 5-year corporate bonds with a final coupon rate of 3.92%; Yuexiu Financial Holdings proposed to issue 1 billion 5-year corporate bonds with a coupon rate inquiry range of 3.3% to 4.3%.
Most of the U.S. dollar bonds issued in the same period, the interest rate is also slightly lower than last year. Beyoncé proposed to issue $1.2 billion in notes, the highest interest rate of 3.3%.
From the viewpoint of the use of debt issuance, in addition to supplementary funds, borrowing new to repay old is an important use. Some companies will exchange old debt with higher interest rates for new debt that is relatively cheaper and also has a longer cycle.
Yan Yuejin, director of the think tank center of Shanghai E-House Research Institute, said in this regard, although the beginning of the year is the traditional peak time for real estate enterprises to raise funds, but the intention of enterprises to seize the policy window period is also very obvious. Since last year, the Chinese Communist Party has strengthened the management of real estate finance, making companies realize that the model of raising a lot of debt for development is no longer feasible, especially the “three red lines” policy will directly limit the scale of debt of enterprises.
The “three red lines” refer to a gearing ratio of more than 70% after excluding pre-receipts, a net debt ratio of more than 100%, and a cash-to-short debt ratio of less than 1x. The “three red lines” policy directly limits the scale of debt of enterprises.
According to the “three red lines”, the pilot real estate enterprises are divided into four classes: “red, orange, yellow and green”. With the scale of interest-bearing liabilities as the operational goal of financing management, the grades are set as thresholds for the growth rate of interest-bearing liabilities, with the upper limit increasing by 5% for each lower grade. In other words, if the “three lines” exceed the threshold as “red file”, the scale of interest-bearing liabilities will be capped at the end of June 2019 and cannot be increased; if the “two lines” exceed the threshold as “orange file”, the scale of interest-bearing liabilities will be capped at the end of June 2019 and cannot be increased. The annual growth rate of interest-bearing liabilities shall not exceed 5% if the threshold is exceeded in the “orange file”; the annual growth rate of interest-bearing liabilities shall not exceed 10% if the threshold is exceeded in the “yellow file” in the “first line”; the annual growth rate of interest-bearing liabilities shall not exceed 10% if the threshold is exceeded in the “third line”. The “three lines” have not exceeded the threshold for the “green file”, the annual growth rate of interest-bearing liabilities shall not exceed 15%.
Market analysis, in the face of financing regulation tightening, mainland real estate enterprises to speed up the push, active promotion and payback has become the most important work of real estate enterprises. But even so, due to the plague and the poor economic environment on the mainland, the market is unstable and cannot fully guarantee the safety of the enterprise’s capital, many enterprises will face the risk of declining profits and even collapse when the market turns cold and sales are poor.
Many industry insiders said that although the current housing enterprises borrowing to pay off the old, debt replacement is in full swing, but once the loss of the current “window period”, leaving little room for maneuvering enterprises.
Recent Comments