Future Land expects cost of offshore borrowing to rise
Future Land Development Holdings expects the cost of borrowing offshore will rise for privately owned enterprises after the difficulties surrounding Kaisa Group Holdings.
"Funding cost will be relatively higher than last year under the current environment. It could be one or two percentage points more," said vice-president and chief financial officer Lu Zhongming. "The interest rate is too high."
In July last year, Future Land issued US$350 million in five-year senior notes at an interest rate of 10.25 per cent per year while subsidiary Jiangsu Future Land raised two billion yuan (HK$2.48 billion) from five-year bonds at 8.9 per cent.
Lu, speaking after the company's annual results conference yesterday, said the firm had not decided if it would issue any bonds overseas this year. It hoped to strike a balance in raising funds between domestic and overseas markets.
Kaisa narrowly escaped becoming the mainland's first developer to default on offshore debts by settling a US$23 million interest payment that it had missed on January 8.
Edison Bian, the head of China property research at UOB Kay Hian, said in a report last week market sentiment towards privately owned enterprises worsened significantly in the new year mainly because of Kaisa's crisis.
"With a net debt-equity ratio of 52.6 per cent, our financial strength is healthy," Future Land chairman and chief executive Wang Zhenhua said.
Wang said the company's senior bond was given a B1 rating by Moody's Investors Service last year, reflecting the stability of its funding base.
"I do not think the Kaisa issue will cause any significant impact on the company," he said.
Wang said the company had set a contracted sales target of 28 billion yuan this year, up from 24.51 billion yuan achieved last year, reflecting the market's stable outlook.
Future Land on Monday announced a 4.5 per cent rise in net profit to 1.03 billion yuan but gross profit fell 17.3 per cent to 3.87 billion yuan. A final dividend of five fen a share was declared.
It had a land bank of 15.56 million sq metres at the end of last year, which cost an average 1,834 yuan per square metre.
Shares of Future Land yesterday rose 1.27 per cent to 80 HK cents in a market that closed 0.24 per cent firmer.
