Spark Global Limited
At the beginning of the year 2021, real estate companies are intensively financing in the bond market. Since January, more than 30 companies have disclosed bond issuance plans, and the total scale of domestic and foreign bond issuance has reached the order of 100 billion yuan.
Although this round of bond issuance has the inertia of “snatching away” at the beginning of the year, two important backgrounds cannot be ignored.
In 2020, the “three red lines” policy for real estate financing management and the centralized management system for real estate loans in the banking industry have been introduced successively, which will limit the debt scale of real estate enterprises to a certain extent. At the same time, 2021 will be the largest year for real estate companies to mature debt.
The Shell Research Institute recently released a report that the scale of debt due in 2021 (excluding the ultra-short-term bonds to be issued in 2021) is expected to exceed 1.2 trillion yuan, an increase of 36% year-on-year, and historically break through the trillion mark.
The “three red lines” superimposed on debt repayment pressure will enable real estate companies to usher in the most tight period of cash flow. Affected by this, real estate companies’ land acquisition, investment and other operational strategies will all be adjusted, and scale growth will inevitably slow down. From a longer-term perspective, the development thinking of the industry is gradually changing.
Tight cash flow will become the norm
High quotas, low interest rates, and mainly US dollar debt have become the characteristics of this round of real estate financing. In terms of cost, the final coupon rate of the 2.5 billion 5-year corporate bonds issued by Greentown Group is only 3.92%; the 1.0 billion 5-year corporate bonds proposed by Yuexiu Financial Holdings have a coupon rate as low as 3.3%-4.3%. .
The interest rates of US dollar bonds issued during the same period were mostly slightly lower than last year. For example, Country Garden plans to issue US$1.2 billion in bills with a maximum interest rate of only 3.3%.
From the perspective of bond issuance purposes, in addition to replenishing funds, borrowing new and repaying the old is also an important consideration. Some companies exchange old debts with higher interest rates for relatively cheap and longer-period new debt.
Yan Yuejin, director of the Think Tank Center of Shanghai E-House Research Institute, told the 21st Century Business Herald that although the beginning of the year was the traditional peak time for real estate financing, the intention of companies to seize the policy window period was also very obvious. Since last year, the real estate financial prudential management system has tried its best, which has made companies realize that the model of large-scale debt development has been difficult to work. In particular, the “three red lines” policy will directly limit the scale of corporate debt.
But before the “three red lines” policy is fully implemented, companies can still manage debt relatively flexibly. The emergence of this round of bond issuance has a factor of “break through” during the window period.
In fact, delaying the debt repayment cycle through debt swaps can also help ease the short-term debt repayment pressure. The report released by the Shell Research Institute shows that since 2018, the debt repayment scale of real estate companies has grown rapidly year by year. In 2021, the scale of due debt of real estate companies is expected to reach 1,244.8 billion yuan, a year-on-year increase of 36%, and a historic breakthrough in the trillion mark.
Reprint indicated source：Spark Global Limited information