became the country’s latest property developer to tap international bond markets, offering double-digit yields on up to $2 billion of new dollar debt.
The Hong Kong-listed group sold $1 billion apiece of three- and four-year bonds, priced at par with interest rates of 11.5% and 12% respectively, according to a term sheet on Friday.
Chinese property companies have kicked off the year by selling billions of dollars of longer-dated bonds, capitalizing on a hot market to reduce their heavy reliance on short-term funding.
However, Evergrande stuck to relatively short-dated bonds and offered higher yields than some peers. This week,
sold a $300 million bond with a 5.5-year maturity at 9.95%. Both sets of bonds were rated B2 by Moody’s Investors Service Inc., or five notches below investment-grade.
“The sheer amount of bonds outstanding from Evergrande may lead to market indigestion, which may explain why investors demand a higher yield than other Chinese developers with similar ratings,” said Luther Chai, an analyst and credit strategist at CreditSights in Singapore.
Excluding bonds sold through private placements, Evergrande has 12 dollar bonds with a combined face value of nearly $18 billion outstanding, according to CreditSights. Moody’s estimates the company’s total debt was $132.5 billion as of June 2019.
Mr. Chai said Evergrande hadn’t stuck to commitments to cut debt in the last financial year, possibly because of its capital-intensive electrical-vehicle business. That meant limited visibility on its credit profile more than three years out, he said. “A lot hinges on the March results, where we’ll see if they keep deleveraging promises made last year,” he said.
A Hong Kong-based hedge-fund manager, who placed orders for the bonds, said the yields were attractive and other investors worried too much about its leverage. However, a second hedge-fund investor disagreed, saying it was hard to get comfortable with investing in its debt.
In a filing, the company said Chairman
Hui Ka Yan
and Chief Executive Xia Haijun each bought $50 million of the bonds “to signify their support to and confidence in” Evergrande. Unusually, in 2018 Mr. Hui bought more than half of a previous $1.8 billion bond deal.
Last month Evergrande said it would pay a $2.7 billion dividend. Most of that would go to Mr. Hui as the company’s majority owner.
Write to Frances Yoon at firstname.lastname@example.org
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