Country Garden to sell dollar bonds

By Jun Ebias (China Daily)
Updated: 2010-08-05 14:53
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HONG KONG - Chinese developers Country Garden Holdings Co and KWG Property Holdings said they are planning to issue dollar bonds, as tighter lending rules in Beijing encourage them to seek funds overseas.

This will be the second time this year for Country Garden to sell debt overseas and the first time for KWG, which plans to meet investors ahead of the issue.

"They probably want to buy land or refinance their maturing debt by raising money offshore because the use of proceeds is more relaxed than getting money from onshore banks," said Annisa Lee, credit analyst at Nomura in Hong Kong. "The use of proceeds from onshore bank loans is generally restricted to funding construction costs."

The positive reception Shimao Property Holdings received to its bond offering last week also encouraged other developers. The issuer attracted $3.75 billion in orders for its $500 million, seven-year bond priced at the lower end of its guidance.

Shimao was the first Chinese developer to tap the global bond market since Renhe Commercial Holdings Co sold a $300 million, five-year bond in May.

Aside from the higher yields that Shimao paid to investors, expectations that China may not impose more curbs on its property market also boosted demand.

"The market is opening up again, so we are seeing those who were not able to issue bonds doing so again. Chinese developers were active issuers earlier this year but the market closed after that," a Hong Kong-based banker said.

Country Garden said it had hired Goldman Sachs group Inc and JPMorgan Chase & Co to manage the deal and planned to use the proceeds to fund the purchase of its existing bonds and finance existing and new projects.

KWG Property said it had picked Morgan Stanley and Standard Chartered Bank Plc to manage the deal, adding that it would use the proceeds to fund property projects for general purposes.

A source close to the KWG Property issue said the company would hold a series of meetings with investors starting on Wednesday in Hong Kong that would end in Boston on Aug 10. The road shows will visit Singapore and London.

Renhe Commercial will hold conference calls with investors in Asia and Europe this week, a source close to the deal said. It hired Bank of America Merrill Lynch, UBS AG and BOC International to arrange the meetings.

The source did not say if Renhe would issue dollar bonds after the conference calls.

Tightening measures adopted by China to cool its property market pushed spreads on Chinese property bonds wider, prompting potential issuers to cancel debt sale plans. Among those that put on hold planned issues was Glorious Property Holdings.

These developers tapped the global bond market to raise funds earlier this year after China tightened lending rules.