Heavily indebted developer China Evergrande to sell onshore bonds worth US$1.3 billion
- Proceeds from the sale will be used to meet an early repayment request on bonds maturing in 2023
- Hengda Real Estate, the company’s Shenzhen unit, has proposed the bond sale, according to documents filed with the city’s stock exchange
Hengda Real Estate, the company’s Shenzhen unit, has proposed the bond sale, with an indicative interest rate range of between 5.5 per cent and 7.5 per cent, according to documents filed with the Shenzhen Stock Exchange on Thursday. The bonds are to mature in five years.
The proceeds from the sale will be used to meet an early repayment request due on May 6 made by the investors of bonds worth 15 billion yuan maturing in 2023.
Evergrande, which is chaired by billionaire Hui Ka-yan, owed 670 billion yuan as of the end of last year. It has failed to meet Beijing’s deleveraging targets, which cap debt-to-asset ratios for developers at 70 per cent, net debt-to-equity at 100 per cent and short-term borrowings at no more than cash reserves.
In comparison, Evergrande set its own target of meeting the thresholds next year. This means Evergrande will lag behind its peers.
“Evergrande’s reliance on short-term debt remains material, accounting for about 47 per cent of total debt as of the end of 2020, and its cash to short-term debt weakened,” Cedric Lai, vice-president of corporate finance group at Moody’s, said this month.
Evergrande’s gearing will continue to improve because of expected debt reduction and revenue growth backed by its solid sales performance, however its short-term debt raised concerns, said Moody’s Investors Service.