Shui On rolls over some debt, issues new notes

Shui On Land announced the results of its exchange offer yesterday, a complex transaction that showed the lengths Chinese property developers will go to in order to manage their debt repayments in light of a difficult funding climate for the mainland property sector.

The company said investors exchanged US$793 million of outstanding debt due next year for new bonds with maturities of four and six years, and for cash.

On April 14, the company proposed exchanging the equivalent of up to US$1.44 billion of notes due in 2015 for a new batch of securities due in 2018 and 2020, at enhanced coupons, and a money payout added as an inducement. This was done to extend the firm's debt maturity profile in the face of a heavy refinancing schedule next year.

"The debt profile is not that ideal," said Daiwa Securities analyst Felix Lam. "It needs to spend a lot of money for expansion. To reduce the pressure on repayment, it's better for the firm to spread out its debt [maturities]."

The company, which has 10.7 billion yuan (HK$13.3 billion) of debt maturing next year, according to Lam, has been trying to raise new money to manage its refinancing risks.

"The company would like to handle [its debt maturities] and get better prepared for the repayment [of debt in] 2015 earlier than later," said Michelle Sze, the head of investor relations for Shui On.

Shui On has been aggressively replenishing cash levels and securing fresh funding channels.