Hong Kong, November 03, 2015 -- Moody's Investors Service says that the $28.0 billion
issuance of onshore bonds by Moody's-rated Chinese property
developers between 1 January 2015 and 30 October 2015 versus the $1.9
billion for full-year 2014 is credit positive for the developers.
"The issuance of onshore bonds by Moody's-rated developers
is positive for their credit profiles because it lowers their average
funding costs, enhances their liquidity profiles, diversifies
their funding channels and lengthens their debt-maturity profiles,"
says Kaven Tsang, a Moody's Vice President and Senior Credit
Officer.
Tsang also points out that the local currency bonds lower the developers'
foreign-exchange risk.
"As for subordination risk, such risk will not increase materially
during the coming six to 12 months, because rated developers have
used the majority of their onshore-bond proceeds in 2015 to refinance
their onshore debt," adds Tsang.
But the risk would rise if the developers increase substantially their
domestic bond issuance to fund acquisitions and development.
Moody's conclusions are contained in a just-released report
titled "China - Property — FAQ on Onshore Bond Issuance,
Ratings Factors, Medium-Term Risks," and is co-authored
by Tsang and Franco Leung, a Moody's Vice President and Senior
Analyst.
The report was published because of the increased interest by onshore
bond investors in Moody's-rated Chinese property developers,
as indicated by the surge in domestic bond issuance by the developers
in 2015.
Moody's report addresses the investors' frequently asked questions
and highlights a few credits of interest, such as Evergrande Real
Estate Group Limited (B1 negative), Dalian Wanda Commercial Properties
Co., Ltd. (Baa2 stable), Greenland Holding Group
Company Limited (Baa3 negative) and Guangzhou R&F Properties Co.,
Ltd. (Ba3 stable).
As for key risk factors faced by the sector over the next two years,
Moody's report identifies three issues: adverse regulatory
changes, a deterioration in market liquidity, and a weakening
of demand for property.
Nevertheless, Moody's does not expect that these three risk
factors will escalate during the coming 12 months. Moody's
expectation is reflected in its stable outlook for the sector.
Moody's also discusses in the report the significance of operating
scale, and the size and quality of land banks in its rating assessments.
In general, large residential property developers in China tend
to exhibit advantages over smaller companies. These benefits include
better access to funding sources, the financial strength to bid
for land in good locations, greater purchasing and pricing power,
more financial and operational flexibility, and better geographic
diversity.
Subscribers can access the report at http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1009472
The report may also be found through this link to Moody's topic
page titled China — Reform and Rebalancing: http://www.moodys.com/chinarebalancing.
The topic page provides subscribers with a centralized source for Moody's
research related to key credit issues in China, as the country's
rebalancing story unfolds.
Recent Moody's publications relating to China Reform and Rebalancing include:
- 2016 Outlook -- China Property (Presentation)
- ABS — China: Disclosure Guidelines for Revolving
Structures Allow Greater Scrutiny of Asset Quality
- Regional and Local Governments: Falling Land Sales to Weaken
Chinese RLGs' Credit Profile
- China's Rates and Reserve-Requirement Cuts Are Credit
Positive for Banks
- China Property Focus — October 2015
- Inside China — October 2015
- Property — China: Developers' Increasing Use
of JVs Lowers Corporate Transparency
- Chinese Banks: China's Latest Rate and RRR Cuts Are
Positive for Banks' Liquidity
- Chinese Auto ABS: Delinquencies Stable in Q2 2015,
but Likely to Increase Slightly
- Slower Growth and Rising Credit Risk Are Symptoms of Rebalancing
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web site at www.moodys.com.
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Kaven Tsang
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Gary Lau
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
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Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
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Moody's: Rated Chinese property developers' credit profiles boosted by their onshore bond issuance