Several Real Estate Firms Announce Debt Restructuring Progress Amid Improved Financing Environment
Since September, several listed real estate companies have successively announced progress in debt restructuring or financing activities. According to statistical data from institutions, the financing scale of typical real estate companies increased both year-on-year and month-on-month in August. Institutional analysis suggests that the current real estate financing coordination mechanism is accelerating its implementation and effectiveness, and with recent changes in the external environment, the liquidity pressure on real estate companies is expected to be relieved to some extent.
Some real estate companies have made progress in debt restructuring. On September 20, Guancheng Datong disclosed a prompt announcement regarding the full repayment of debts to Oriental Assets, stating that Guancheng Datong issued corporate bonds "20 Guancheng 01" in July 2020. In September 2022, the company cooperated with Oriental Assets on the "20 Guancheng 01" bond, with the latter paying off the principal of 1.73 billion yuan on behalf of the bond. Since then, Guancheng Datong and Oriental Assets have formed a new creditor-debtor relationship, and with the consent of Oriental Assets, the company has provided pledge guarantees for this debt with assets such as 95% of the equity in the Sun Palace Company and 79.08% of the equity in Datong New Materials.
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Guancheng Datong's announcement this time stated that as of June 30, 2024, the balance of the aforementioned debt was 858 million yuan. As of September 20, 2024, the company has fully repaid the aforementioned debts to Oriental Assets and the corresponding fund occupation fees, and the company's corresponding guarantee responsibilities have been lifted, with subsequent procedures for lifting the pledge to be handled. Guancheng Datong also stated that the repayment of this debt will effectively reduce the company's asset-liability ratio and interest-bearing debt ratio, is expected to reduce the company's financial expense expenditure, and enhance the company's risk resistance capability.
On September 14, Huaxia Happiness disclosed the latest announcement on the progress of debt restructuring and other matters, stating that as of August 31, 2024, the amount of financial debt in Huaxia Happiness's "Debt Restructuring Plan" that has achieved debt restructuring through signing and other methods has accumulated to approximately 190.029 billion yuan (including the restructuring of domestic corporate bonds issued by the company and its subsidiaries, as well as the restructuring of foreign dollar bonds issued by overseas indirect wholly-owned subsidiaries); as of August 31, 2024, the company's "Xingfu Selection Platform" and "Xingfu Choice Platform" equity, built with the equity of subsidiary companies, have offset a total amount of financial and operating debts of approximately 16.935 billion yuan.
In the announcement, Huaxia Happiness stated that from August 1, 2024, to August 31, 2024, the company and its subsidiaries did not have any new default debts. As of August 31, 2024, the total amount of debt that the company has failed to repay on time has accumulated to 24.555 billion yuan.
In addition, Hong Kong-listed companies such as Yuzhou Group, China Aoyuan, Sino-Ocean Group, and Zhengrong Real Estate have also recently announced progress in debt restructuring. Among them, Yuzhou Group's overseas debt restructuring plan has been approved by the majority of creditors.
Monthly financing scale increased year-on-year and month-on-month. In recent years, affected by factors such as high carry-over costs, rising expense ratios, stock reduction, and asset impairment, the net profit of listed real estate companies has continued to decline. In the first half of 2024, the pressure from the sales and financing ends was transmitted to the balance sheets of listed real estate companies, with some companies' cash and cash equivalents declining, leading to an increase in debt ratios.
However, since the second half of this year, the financing of real estate companies has shown a phased improvement. The real estate financing data recently announced by the Yi Ju Research Institute shows that the financing scale of the 30 typical companies monitored increased both year-on-year and month-on-month in August. In August, the 30 real estate companies issued 22.01 billion yuan in domestic bonds, a month-on-month increase of 68.8%, and a year-on-year increase of 26%.From the perspective of financing channels, similar to the previous month, medium-term notes, general corporate bonds, and super short-term financing bills accounted for 58%, 28%, and 14% respectively. Due to the increase in bond issuance by private enterprises and mixed-ownership enterprises such as Midea Real Estate and Greentown China during the month, the financing cost has risen somewhat, but the overall financing cost remains at a historically low level.
Yi Ju Research Institute analysis pointed out that in August, the total repayment amount of 30 real estate companies was 13.67 billion yuan, and the net financing amount was 8.34 billion yuan, making it one of the months with a higher net financing amount this year, second only to January and March, significantly easing the debt repayment pressure. During the month, 11 out of 30 real estate companies issued new bonds, an increase in the number of bond-issuing companies compared to the previous month. It is worth mentioning that companies such as Binjiang Group and Midea Real Estate have issued new bonds with interest rates lower than the maturity interest rates of their debts, showing an optimization trend in debt structure.
On August 21, at the "Promoting High-Quality Development" series of thematic press conferences held by the State Council Information Office, the person in charge of the Financial Regulatory General Bureau introduced that the urban real estate financing coordination mechanism has achieved phased results. The coordination mechanism, with cities as the main body and projects as the center, has supported the financing of real estate projects with precision through the efforts of all parties. Among them, commercial banks have approved more than 5,000 "white list" projects, with approved financing amounts close to 1.4 trillion yuan.
The reporter noticed that since September, the financing actions of A-share listed real estate companies have been continuous. On September 11, China Merchants Shekou announced that the company's 2024 public issuance of corporate bonds (second phase) for professional investors meets the bond listing conditions of the Shenzhen Stock Exchange and will be listed starting from September 12. On September 6, Tibet Urban Investment announced that the company's registration application for the public issuance of corporate bonds with a total par value not exceeding 800 million yuan to professional investors has been approved by the China Securities Regulatory Commission.
In addition, the 2023 annual private placement of A-shares to specific objects and the prospectus (revised draft) disclosed by Pearl River Shares on September 6 shows that the company's private placement of shares to specific objects this time does not exceed 256 million shares (inclusive of this number), and the total amount of funds raised does not exceed 748 million yuan (inclusive of this number). After deducting the relevant issuance expenses, all will be used to supplement working capital and repay debts.
The effectiveness of the real estate financing coordination mechanism is becoming apparent.
"The urban real estate financing coordination mechanism is accelerating the establishment and taking effect." Liu Shui, Director of Enterprise Research at the China Index Research Institute, analyzed that in January of this year, the Ministry of Housing and Urban-Rural Development and the Financial Regulatory General Bureau jointly issued a document guiding the establishment of urban real estate financing coordination mechanisms across the country. In June, the two ministries and commissions once again jointly issued a notice, proposing a number of optimization measures to improve the efficiency and quality of "white list" project delivery, in order to further play the role of the urban financing coordination mechanism.
Liu Shui further stated that promoting the inclusion of projects that need financing support is conducive to more projects in related fields obtaining financing support. For projects that need to obtain financing support through the "white list" but have not yet met the "white list" conditions and standards, specific requirements have been made for the responsibility implementation of each link, such as the urban coordination mechanism urging banks to propose targeted opinions and suggestions, real estate companies to take measures to repair problem projects as soon as possible, and urban governments to strengthen coordination to promote projects that meet the "white list" conditions and standards to be included as much as possible.
Analysts from the CRIC Research Center also believe that with the advancement of the urban real estate financing coordination mechanism, and the subsequent launch of project white lists across various regions, the main body of financing support is sinking from enterprises to specific projects, which to some extent alleviates the liquidity pressure of real estate companies.
The analyst pointed out that for real estate companies that can still operate normally, the top priority is still to grasp the existing policies to do a good job in debt continuation, such as through credit support policies, using credit protection tools, joint liability guarantees, and other credit enhancement methods to issue new bonds to achieve "borrowing new to repay old", and also through the issuance of ABS, REITs, and other methods to revitalize operational properties, actively try to use operational property loans to repay existing loans and public market bonds. In addition, real estate companies also need to actively negotiate with financial institutions and creditors to appropriately extend the debt term to alleviate the current debt pressure.The institution believes that the recent announcement of interest rate cuts by the Federal Reserve will have a positive impact on existing US dollar-denominated debt and newly issued US dollar-denominated debt. The analysis by the Yiju Research Institute suggests that for existing US dollar-denominated debt, the risk held by investors is reduced, which in turn will also reduce the pressure to repay. At the same time, for new US dollar-denominated debt issued by real estate companies, the cost of financing is lowered, which also helps high-quality real estate companies to further expand their financing channels.