Chinese property developer Dalian Wanda’s second dollar bond sale in less than a month was quickly oversubscribed on Monday, drawing fresh attention from global finance after years of concern about the financial health of China’s highly indebted real estate groups. indicates hunger.
Orders for the three-year US dollar bond sale by Wanda received about $500 million, according to two people familiar with the deal, who said the developer had planned to raise up to $300 million from the offering.
The latest debt sale by Wanda, which already brought in $400 million from bonds issued in January, underscored a nascent recovery for high-yield dollar lending in Asia. Sales had completely evaporated in the past two years as Chinese authorities clamped down on excessive leverage in the sector. Issuer Wanda Properties Global guided for a bond yield of about 12.5 percent.
Investment bankers in the region say appetite for foreign investors is back as Beijing looks to shore up the hard-hit region. The government has removed equity and asset targets to limit the leverage of asset groups. The targets had earlier served as a warning to banks to avoid lending too quickly to developers.
A person familiar with the deal said investors who placed orders for the January offering “came back to ask Wanda to raise more” because they didn’t get enough allocation from the previous deal, which raised about $1.4 billion. bn.
The person said Wanda was unlikely to use up all of its dollar debt-issuance quota from China’s central government, which would allow it to raise $400 million before it expires in March. “We are going to be looking at a size of $200mn to $300mn,” the person said.
A fund manager in Hong Kong described the bond sale as a “barometer for investor confidence” in China’s property sector.
The government’s renewed support to the industry has boosted bonds of developers with strong balance sheets. Dollar bonds from real estate groups such as Country Garden and Wanda have clawed their way back to face value after trading in distressed territory.
Not all developer bonds have come back, including those from defaulting developers such as China Evergrande – which has repeatedly missed restructuring deadlines – are still at distressed levels. Bankers in the sector say many bond investors are still wary of the property sector.
However, a broader improvement in sentiment was reflected by gains for Bloomberg’s China high-yield dollar bond index, which is dominated by developers and recently hit its highest level in nearly a year after touching a record low in November. has reached
“financial [at Chinese developers] are getting better,” said Bruce Pang, chief economist for Greater China at JLL.
Pang said Beijing’s increased policy support has begun to boost cash flow into the country’s real estate groups, helping ease the risk of a cash crunch that has plagued the industry in recent years. He said that there is a possibility of issuing more dollar bonds in the coming year.
“The supply will be better this year, but the question is demand,” Pang said. “Issuers have to set attractive terms to ease investors’ concerns about their credit risk.”
Credit Suisse is the global coordinator and bookrunner for the transaction.
Additional reporting by Sun Yu in Beijing