China’s Longfor sets 3.3% coupon in 1st sale of state-backed bonds by private builder

By Steven Bian and Clare Jim

SHANGHAI/HONG KONG (Reuters) – Longfor Group stated its 1.5 billion yuan ($219 million) bonds had been priced at a coupon charge of three.3%, marking the primary sale by a non-public Chinese language homebuilder of notes absolutely assured by the state to spice up market sentiment amid a sector-wide money crunch.

Beijing has stepped up help for the property sector on worries {that a} deepening debt disaster and defaults might impression property builders thought to be financially sound.

Longfor’s three-year notes, priced on the decrease finish of an indicative vary of three% to 4.3%, had been oversubscribed by 2.86 occasions, the corporate and market sources stated. The providing was assured by state-owned China Bond Insurance coverage Co Ltd.

“It exhibits debt assure and credit score enhancement is a crucial component for bond issuance now,” stated Yan Yuejin, analysis director of E-Home China R&D Institute. “Different property builders will turn into extra energetic to challenge bond.”

Based on knowledge by China Central Depositary & Clearing Co, the median yield for AAA-rated property bonds that mature in three years is at 2.6416%.

CIFI Holdings, Longfor’s smaller Shanghai-based peer, can be planning to promote 1 billion to 1.5 billion yuan of three-year medium-term notes in September at a coupon charge of three%-4.5%, in response to a time period sheet seen by Reuters.

The bonds can even be assured by China Bond Insurance coverage, and the proceeds will probably be used for mission improvement and debt repayments, the time period sheet exhibits.

CIFI didn’t instantly reply to a request for remark.

Chinese language regulators have instructed China Bond Insurance coverage to offer ensures for onshore bond issuance by a couple of personal property builders, Reuters reported final week.

China Bond Insurance coverage will present “full quantity, unconditional and irrevocable joint legal responsibility assure” to those bonds. The assure supplies extra safety than credit score threat administration instruments, market individuals have stated.

However a few of China’s state-backed monetary establishments are pushing again on Beijing’s calls to help the embattled sector on worries it might damage their steadiness sheets.

Regardless of the state assure, Longfor’s price to borrow was greater than for friends in latest issuances.

State-owned Poly Developments and Holdings’ five-year bonds, callable after three years, had been priced at 2.8% this week, whereas Shenzhen-based China Vanke issued a 2 billion yuan three-year inexperienced bond at 2.9% earlier this month.

($1 = 6.8559 Chinese language yuan)

(Reporting by Steven Bian in Shanghai and Clare Jim in Hong Kong; Extra reporting by Samuel Shen; Modifying by Himani Sarkar)