Chinese lender to issue M&A bonds for cash-strapped property sector

SHANGHAI: Shares of property developers rose on Tuesday after a Chinese lender unveiled a plan to issue debt to fund property acquisitions – the first bank to do so – as Beijing sought to reassure investors of the impact wider range of defaults in bond markets.

Shanghai Pudong Development Bank Co plans to raise 5 billion yuan ($790 million) by selling three-year bonds in China’s interbank market, it said in a filing on Monday. The funds would be used to finance acquisitions of real estate projects in the form of loans, he said.

The Shanghai government-controlled bank’s plan to sell bonds has signaled a widening of funding channels for the real estate sector and more financial institutions are expected to follow suit, analysts said.

Beijing is already encouraging major real estate developers to acquire assets from cash-strapped property companies to ease pressure on liquidity. Developer China Merchants Shekou Industrial Zone Holdings Co said last week it planned to issue bonds for real estate acquisitions.

China will also make it easier for state-backed property developers to buy distressed assets from indebted private companies by not counting such loans as debt under rules that limit borrowing, a source told Reuters this month.

Also on Tuesday, Jin Xiandong, an official with China’s National Development and Reform Commission, told a conference that the market was adjusting to news of defaults by some highly leveraged property developers and that he did not expect they would affect foreign bonds of Chinese companies more generally. .

The CSI300 real estate index jumped almost 5% on Tuesday morning, while the Hang Seng Mainland property index gained more than 3%.

Chinese developer dollar bonds also rebounded after sharp falls in the previous session.

A Country Garden Holdings 2026 bond rose to 70.866 cents on the dollar from 64.865 overnight, according to data from Duration Finance, after the developer clawed back $10 million of its own bonds on Monday. Its shares jumped 5.3%.

Separately, in a rare case where a trust company took over the assets of a struggling developer, state-owned Minmetals International Trust bought all the shares of two projects from China’s troubled Evergrande Group, filings showed. with the National Enterprise Credit Information Publicity System.

Two projects – in the southern cities of Kunming and Foshan – were pledged a Minmetals trust loan to Evergrande, according to filings, and Minmetals spent 50 million yuan ($7.9 million) and 30 million respectively. million yuan to acquire all the shares of the projects. It held 51% of the latter project before the acquisition.

Minmetals said in a statement that it wanted to help resolve Evergrande’s issues to “ensure home delivery, secure people’s livelihoods and provide stability.”

More cash-strapped developers worked to avoid defaults or raise funds. Shimao Group rose 4% after winning creditors’ approval on Monday to extend the payment term for a 450 million yuan asset-backed security (ABS).

(1 USD = 6.3429 Chinese yuan renminbi)

(Reporting by Jason Xue and Samuel Shen in Shanghai, Shuyan Wang in Beijing and Clare Jim in Hong Kong; Editing by Rashmi Aich and Richard Pullin)

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