How does one compete with a liquidity-swamped state-owned Chinese land developer?
Like so:
HONG KONG (Dow Jones)–Chinese developer Agile Property Holdings Ltd. (3383.HK) plans to sell US$400 million worth of seven-year U.S. dollar-denominated bonds, a person familiar with the deal said Wednesday.
Agile Property said in a statement Tuesday it planned to sell bonds to raise funds for existing and new projects, but didn’t say how much it expected to raise.
A roadshow for the offering began in Asia on Wednesday and will then go to Europe and the U.S., according to a term sheet seen by Dow Jones Newswires.
Bank of America Merrill Lynch and HSBC Holdings PLC (HBC) are the joint lead managers and bookrunners of the deal, Agile Property said Tuesday.
Agile Property is a private land developer listed on the Hong Kong stock exchange. It is also the second Chinese high-yield property developer to issue (or plan to issue) a bond in the past two months. The last was Country Garden with the sale of $375m of bonds in early September — which was in itself the first issuance from a Chinese high-yield developer since the Hong Long Holdings deal in 2007.
Why the sudden mini-boom in issuance?
Here’s an (Oct. 8th) idea from Standard Chartered analyst Feng Zhi Wei:
Government-linked companies have been the most aggressive buyers at land auctions, underpinned by strong liquidity from contracted sales in the first eight months of the year . . . and possible indirect support from their parent entities, given the more relaxed lending environment since end-2008. We also note that most of the transactions, especially those with aggressive bids and benchmark prices, have been concluded in recent months (July-September).
So state-owned property developers have been able to use government support and loose lending policies to gobble up properties in China’s land auctions in recent months. In fact a number of the so-called “landmark deals” recent government land auctions — where plots can go for as much as RMB4.06bn ($595m) — have been completed by state-supported land developers. By contrast, private property developers have so far lagged behind their government sponsored-counterparts. Hence the bond issues, which will presumably enable a company like Agile to speed up construction and buy more land.
In short — China’s private property developers are getting in on what has so far been a largely-state induced land boom.
Related links:
Country Garden reopens HY bond as buyers beg for more - EuroWeek
Inflation in China at 15%? - Naked Capitalism
China’s land boom, a datapoint - FT Alphaville
China’s liquid real estate bubble - FT Alphaville
