(Bloomberg) — China plans to let property companies resume issuance of asset-backed securities, ending a three-month market freeze as authorities move to insulate higher-rated developers from an industrywide funding crunch.
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A gauge of Chinese real-estate developers pared earlier declines on the report. Elsewhere, investor focus turns to Wednesday’s deadline for a Yango Group unit’s dollar debt exchange offer. That’s after the company warned that without more time it “may not be able to repay” existing bonds at maturity.
China Evergrande Group Chairman Hui Ka Yan injected more than 7 billion yuan ($1.1 billion) in cash to boost the firm’s liquidity, China Business News reported, citing unidentified people close to the company. Hui raised funds from the disposal of personal assets and share pledges, the report said.
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Agile Seeks $275 Million in Exchangeable Bonds (7:16 p.m. HK)
Property developer Agile Group Holdings Ltd. is seeking HK$2.145 billion ($275 million) from a sale of 5-year exchangeable bonds, according to terms of the deal obtained by Bloomberg News.
The bonds are exchangeable into ordinary shares of property management unit A-Living Smart City Services, while the proceeds will be used for refinancing existing debt, the terms say.
Evergrande Unit Sued by Shanghai Co. for Payment (5:55 p.m. HK)
Hengda Real Estate, China Evergrande Group’s local unit, is sued by Shanghai Trendzone Construction Decoration Group for a combined 237.9 million yuan, according to a statement to Shanghai’s stock exchange.
China Won’t Bail Out Property Firms, Partial Easing Best: CEBI (3:47 p.m. HK)
The Chinese government won’t provide a bailout to property firms at a time when it’s trying to transit to a “more market-oriented” economy, said Banny Lam, head of research at CEB International Inv Corp.
Potential easing seems to focus “on the buy-side of the property market” which could increase developers’ sales revenues. That would help property firms “raise more liquidity to fulfill their debt obligations.”
Aoyuan’s Dollar Bonds Fall, Local Note Halted as Rating Slashed (2:23 p.m. HK)
Aoyuan’s dollar bonds are falling Wednesday, outpacing broader declines in China’s high-yield offshore credit market. Its long-term rating was downgraded by S&P to CCC from B, citing “high nonpayment risk” if alternative fundraising plans don’t materialize in time. Its leverage may be higher than it appears due to off-balance sheet debt resulting from its joint venture and minority interest, according to Bloomberg Intelligence analyst Dan Wang.
China Defaults to Rise on Tightened Funding in 2022: Moody’s (2:23 p.m. HK)
Investors’ rising aversion to risk and reduced funding access for Chinese companies in sectors such as property will drive more defaults in 2022, according to a Moody’s report.
Increased credit differentiation will lead to more SOE defaults, particularly in the onshore market, while funding access is tightening for financially weak SOEs of low strategic importance, Moody’s said.
China to Ease Developer Funding Curbs in $152 Billion ABS Market (12:56 p.m. HK)
Financial regulators recently told Chinese exchanges that “high quality” developers can apply to issue new ABS to repay outstanding debt as soon as this month, people familiar with the matter said, asking not to be identified discussing private information.
No developers have issued ABS since August after the government began tightening approvals in the second quarter, one of the people said. Developers had about 973 billion yuan of outstanding ABS as of April, according to GF Securities Co.
Agile Remits Funds to Redeem $190m 3.85% Notes (12:23 p.m. HK)
Agile has remitted funds to redeem outstanding 3.85% senior notes in the principal amount of $190 million in full on Nov. 18, according to Hong Kong stock exchange filing.
Evergrande’s Online Sales Platform Closes Some Units: Cailian (11:38 a.m. HK)
Evergrande’s online home and car sales platform closed some local units due to funding issue and business contraction, Cailian reports, citing unidentified people close to Evergrande.
China Junk USD Bonds Fall as Much as 1 Cent, Extend Declines (10:16 a.m. HK)
China’s high-yield junk notes dropped as much as 1 cent on the dollar Wednesday, according to credit traders, set for a second straight day of declines after Tuesday’s drop snapped a recent rally, according to a Bloomberg index.
Rebound in China Credit to Help Stronger Developers: JPMorgan (9:53 am HK)
Further gains in Chinese dollar credit will be driven largely by investment-grade property companies or high-yield issuers with better balance sheets, according to Varun Ahuja, a credit analyst at JPMorgan Chase & Co.
Chinese high-yield debt offers much higher relative value compared to other markets in Asia, but flows into property credit will depend on the timing of any support. B- and BB- rated issuers should perform better once money starts coming in, according to Ahuja.
Evergrande to Streamline Internal Structure by Nov. 30: Cailian (9:10 a.m. HK)
Evergrande aims to merge some departments and make personnel changes by Nov. 30 to meet the need of strategic development, Chinese news outlet Cailian reports, citing internal memo on Tuesday.
One of Asia’s Oldest Hedge Funds Is Buying Distressed China Debt (1:00 a.m HK)
One of Asia’s oldest hedge funds, LIM Advisors, is picking up distressed bonds of Chinese developers as the fallout from China Evergrande Group deepens.
George Long, the firm’s founder and chief investment officer, said LIM has been snapping up a “little bit” of such debt but is staying away from bonds of Evergrande because of its complex structure with both offshore and onshore securities and risks that can’t be gleaned from the balance sheet.
A look at Evergrande’s maturity schedule:
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