Since May this year, the regulators have strictly managed the financing channels of real estate enterprises. After a series of policies were issued, private placement, trust and other channels have been greatly contracted, and bank loans have also been significantly limited. Affected by this, the scale of overseas financing of real estate enterprises has increased significantly in the near future.
Overseas financing has never been the main source of funds for real estate enterprises, and at present, the cost of overseas financing is on the high side. Analysts believe that housing companies seeking overseas financing is a helpless move with limited domestic channels. However, due to the peak of debt repayment, the financial pressure of real estate enterprises continues to increase. In the future, it will still be the main strategy of the real estate enterprises to make efforts in the sales side and ensure sales and payment collection.
Nearly half of the financing costs are in double digits
Overseas financing has always been a source of funds for real estate enterprises, mainly used to supplement domestic financing and hedge exchange rate risk. In the first half of this year, the scale of overseas financing of real estate enterprises rose for a time, and then tended to be stable. By September and October, there was a substantial increase.
On October 30 alone, real estate companies had five overseas financing actions. Among them, rongchuang issued $650 million of five-year senior notes with an interest rate of 7.5%; Xuhui issued $400 million of five-year senior notes with a coupon rate of 6.45%. Both companies issue bonds for the purpose of refinancing existing debt.
Hongyang real estate issued US $100 million senior notes due in 2021 on the same day, with an interest rate of 13%. Jiazhaoye also said it would issue US $200 million of senior notes due in 2022 at an interest rate of 11.95%. Yuzhou plans to issue five-year US $500 million senior notes with an interest rate of 8.375%.
In contrast, the scale of domestic financing has declined significantly. According to the data of Chuancai securities, in the first three quarters of 2019, the accumulated domestic debt financing amount of real estate enterprises was 514.4 billion yuan, 37.93% less than 828.7 billion yuan in the same period last year.
Due to the tightening of domestic real estate control policies, the pressure on some enterprises capital is too high. Since this year, the cost of overseas financing of real estate enterprises is relatively high, with nearly half of the cost of overseas financing in double digits.
Among them, contemporary real estate issued a $350 million green bond in January and February, with an interest rate of 15.5%. Even Evergrande, which is in the First Corps, issued several US dollar bills in April with interest rates of 10% and 10.5%, respectively. In September and October, the peak period of US dollar debt, there is also a large amount of financing with double-digit cost.
Overseas financing has not been the main source of funds for real estate enterprises. According to the data of the National Bureau of statistics, from January to September this year, the real estate development enterprises paid in capital of 13057.1 billion yuan, up 7.1% year on year. Among them, although the scale of foreign capital utilization increased by 1.4 times, it was only 10.4 billion yuan.
However, at this stage, overseas financing can still be used as an important supplement to the capital chain of real estate enterprises. According to a person in charge of a small listed real estate enterprise in East China, due to its small scale (failing to enter the top 50), it has been difficult for the company to obtain loans from banks in the past two years. At its most difficult time, the company relied on internal financing and private lending. The company has issued two US dollar debts in the first half of the year, with high cost and small amount, but it can solve the urgent problem.
To some extent, the aforementioned people said, it was a must to issue bonds overseas. Because under the same cost, the company prefers the trust financing with convenient operation and direct landing of the project, but because the latter has been under strict control, it is required to go abroad.
This also reflects the current situation of financing difficulties of real estate enterprises. The past three years (2016-2018) have been the longest rising cycle of the real estate market. Many enterprises have achieved a substantial increase in scale. After this round of growth, medium-sized real estate enterprises have seen opportunities to continue to catch up. However, in 2019, the pressure of domestic regulation and control has increased sharply, and the financing channels have been greatly tightened, which has caught many enterprises unprepared.
In the morning of October 31, Zhengrong real estate announced the issuance of priority notes with a total principal amount of US $300 million and an annual interest rate of 9.15%. The net proceeds will be used to repay existing debts. After hitting 100 billion for the first time last year, Zhengrong set a sales target of 130 billion this year, with a gap of 40 billion as of the third quarter. The companys capital demand is relatively large, and the proportion of debt repayment in one year is 47.4%.
In late October, Zhejiang real estate enterprise Sansheng Hongye issued financial products with a term of 12 months and a yield of 12.5% to its internal employees in 2017, but it has not been cashed up so far, and the company still has wage arrears.
In order to catch the capitals last bus, there has even been a wave of listing of a number of real estate enterprises in the near future. In late October, Tianbao Group and Xinli holding passed the hearing of the Hong Kong Stock Exchange and are expected to land in the capital market in the near future. Sanxun group, which originated in Anhui Province, and GANGLONG real estate, which originated in Changzhou, were not among the top 100 companies. In October, they also submitted listing applications to the Hong Kong stock exchange.
According to the report of Evergrande Research Institute, from the second half of 2018, real estate enterprises gradually ushered in the peak of debt repayment. By the end of June 2018, in addition to private financing and loans from financial institutions, the balance of interest bearing liabilities of real estate enterprises was about 19.2 trillion yuan. From the perspective of cashing scale, the maturity scale from the second half of 2018 to 2021 is RMB 2.9 trillion, RMB 6.1 trillion, RMB 5.9 trillion and RMB 3.4 trillion respectively.
According to more than 50 key cities monitored by 58 anjuke Real Estate Research Institute, as of the end of October, more than 10 brand real estate enterprises have been on sale and promotion. It is expected that the general trend of real estate enterprise price reduction in the fourth quarter will be reflected in more cities and projects.
In the middle of October, Hunan Business Department of Greenland Group was exposed to the news that internal employees were forced to buy houses, and it was finally confirmed that Evergrande launched price preferential measures at the end of August.
Zhang Dawei, chief analyst of Zhongyuan Real estate, also believes that if the situation worsens, the possibility of selling the project will not be ruled out. As a result, the M & a market is likely to see a rise in transactions. For example, Joy City recently transferred half of the equity of Beijing Changyang Peninsula project company to Vanke; SOHO China recently reported that it wanted to sell its three office buildings after selling a batch of parking spaces.
Source: responsible editor of 21st century economic report: Chen Hequn, nb12679