Chinese developers’ bonds indirectly backed by Beijing are unlikely to resolve property sector’s liquidity crisis, analysts say

Excellence Group and China SCE are set to issue onshore notes backed by state-owned China Bond Issuance

Such onshore medium-term notes are not big enough to solve all funding problems, CGS-CIMB Securities executive says

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Residential buildings under construction in Shanghai. The onshore medium-term notes are expected to offer only marginal help to some developers. Photo: Reuters

Published: 7:15pm, 21 Sep 2022Updated: 11:09pm, 21 Sep 2022

Chinese property developers Excellence Group and China SCE Group Holdings are set to issue bonds indirectly backed by the government, amid the gloom that continues to shroud the sector.

Excellence Commercial Management, a wholly-owned subsidiary of Shenzhen-based Excellence, will in the coming days issue a three-year medium-term note of 1 billion yuan (US$142 million), a debt facility in the mainland Chinese interbank market, according to a term sheet seen by the Post.

The note, with an interest rate set preliminarily at around 3 to 4.3 per cent, will be guaranteed by state-owned China Bond Issuance, the country’s first professional credit enhancement institution established in 2009. Hong Kong-listed China SCE is also expected to issue a new onshore bond in the coming days according to sources, as are Gemdale Corporation and Sino-Ocean Group.

The bonds, with “unconditional, irrevocable joint-liability guarantees” from China Bond Issuance, however, may not solve home builders’ lack of access to funding, as the overall market is expected to see continued headwinds going forward, analysts said.

“The scale of the onshore medium-term notes is around 1 to 1.5 billion yuan [each], which can only offer marginal help to some developers. They are not big enough to solve all their funding problems,” said Raymond Cheng, managing director of CGS-CIMB Securities.