Greentown China Holdings seized on positive sentiment towards the property sector following the news of China Vanke's government support.
The developer printed a US$350m three-year non-call two issue at 8.45%, inside the initial price guidance of 8.85% area, ending the two-year absence of Chinese real estate companies from the bond market.
Property management services company Dalian Wanda Commercial Management Group sold two deals totaling US$700m at the beginning of 2023, while the last deal from a property developer was Seazen Group's US$100m 7.95% 364-day green bond in June 2022, according to IFR Asia data.
Greentown was monitoring the market and hosted multiple rounds of non-deal roadshows and investor communications over the past few months, allowing it to lock up anchor investor support from onshore commercial banks. It made a quick decision to come to market on Thursday following the news that Vanke had obtained a loan with favourable terms from its state-owned shareholder with more financing support planned to stave off a looming default.
Similar to Vanke, Greentown has a state-owned shareholder background via its largest shareholder China Construction Communications Group, which owns a 28.97% stake. Greentown's results are consolidated into CCCG's financial statements and it shares credit lines with CCCG onshore.
A banker on the deal said Vanke's news sent "a strong signal" of state support for the real estate sector.
"People are still digesting the news to see how realistically that will be put into work, but at least from a signalling perspective, we think there could be more local government or even centralised support for the sector," said the banker.
The improved sentiment was reflected in strong secondary performance across the board. Vanke's bond prices have jumped 14–24 points in the past three weeks, which led to gains in bonds from other property names, including Longfor Group Holding and China Jinmao Holding Group.
Aluminium producer China Hongqiao Group and conglomerate Fosun International both issued US dollar bonds earlier this year and have seen them trade above par, which shows investors have a decent appetite for high-yield names, said the banker.
He said news during the Lunar New Year holiday that Chinese technology company DeepSeek had produced a world-class large language model at lower cost than its US competitors boosted sentiment towards both the bond and equity markets, and that investors are viewing China with a different perspective.
Another banker also welcomed the development.
"It's good to see some diversification in terms of the funding channels for the company, and I hope it will pave the way for other names in the future if we see further stability," said the second banker.
The first banker said he has already received positive feedback from investors for both state-owned and private-sector property names.
Ample internal resources
A concurrent tender offer was launched to further support the new deal. Greentown offered to buy back its 4.7% April 2025 and 5.65% July 2025 bonds at par, which will be funded by the proceeds from the new bonds. The outstanding principal amounts are US$446.5m and US$294.5m respectively. The two 2025 notes were trading at cash prices of 99.375 and 99.125 when the tender offer was launched, according to LSEG data. The tender expires on February 20.
The maximum acceptance amount is capped at the new bond's issue size plus US$100m.
Opening the tender for more than the new bond amount signalled that Greentown has ample internal resources for repayments.
The company has been vocal about its goal to reduce its reliance on the US dollar bond market, which is more expensive than onshore funding and offshore loans. That is why it kept the new deal small despite its large final order book of US$1.5bn, including US$75m from the leads, from 105 accounts. The deal was upsized slightly from the initial target of US$300m.
Asia took 97% and EMEA and offshore US 3%. Asset and fund managers accounted for 70%, banks and financial institutions 18%, corporates 11% and private banks 1%.
Bankers said it was difficult to pinpoint fair value but estimated the new issue premium was around zero to 10bp. China Jinmao Holdings Group, a property developer owned by SOE Sinochem Holdings, was used as the main comparable, with its 4.25% 2029 bond trading at 7.9%. Bankers applied a spread in the range of 50bp–75bp given the different shareholder background and Greentown China's lower ratings.
Greentown China is rated B1/BB– (Moody's/S&P), and the new Reg S senior bonds will be rated B1 by Moody's. Jinmao is rated Ba2/BBB–/BBB–.
Nomura's analysts saw fair value at low 8% as "a rare high quality China property issuer with solid funding channels and decent operation", they wrote in a note on Thursday. They said Greentown "has been one of our favourite China property names over the past few years and we continue to overweight the name with solid SOE background and better-than-peer business operations".
The notes were priced at par and were trading at 101 on Friday morning.
Certain subsidiaries incorporated outside of China will provide a guarantee.
Deutsche Bank, HSBC, Guotai Junan International, JP Morgan, Soochow Securities (Hong Kong) and UBS were joint global coordinators, lead managers and bookrunners. Deutsche Bank and HSBC are also dealer managers for the tender offer.