NewChinese developers tap local market for 70b yuan in funds as offshore fundraising slows

Country Garden and China Aoyuan Property Group are the latest mainland developers to issue domestic bonds to pay off existing debt and fund future expansion at a time when offshore fundraising is slowing down.

Since a regulatory relaxation in December, mainland property firms such as China Vanke, Evergrande Real Estate, Shanghai Shimao and Longfor Properties have issued about 70 billion yuan (HK$88.6 billion) in corporate bonds and medium-term notes onshore, at much lower cost than what they would have to incur offshore.

"The amount will probably increase month by month as policies stay supportive," said Wang Ying, Shanghai-based senior director at global Fitch Ratings agency.

Aoyuan completed book-building on Wednesday for domestic bonds of 2.4 billion yuan with a term of three years and a coupon rate of 5.8 per cent. The issue kicked off yesterday and ends today. In May, Aoyuan issued US$250 million three-year senior notes offshore, paying 10.875 per cent.

"The issue of domestic bonds will further broaden the financing channels of the company, optimise the debt structure and at the same time demonstrate recognition obtained by the company from the Chinese capital market," Aoyuan said in a statement.

Separately, Country Garden announced in a Hong Kong Stock Exchange filing yesterday that it has received approval from the China Securities Regulatory Commission to issue domestic corporate bonds of up to 6 billion yuan. The company plans to issue the first tranche of up to 3 billion yuan before the end of September.