7 billion dollar high interest notes weigh on property developers to gamble on long term

Jia Yubao as of September 7, including 150 million to 200 million US dollar priority bills to be issued by Baolong Real Estate (1238.HK), Chinese property developers listed in Hong Kong have issued about 7 billion US dollar priority bills this year, which is 4 times times more than $1.62 billion trillion in debt issuance abroad in 2007. Even if the foreign Bill financing annual interest rate as high as 10% or more, but the real estate developers to take the "cost of space to hoard the future" strategy.　　The widespread 5-7-year medium and long term paper, which is not bank credit, has greatly extended the debt adjustment space for property developers.　　Of course, in the long term on betting and the appreciation of the renminbi, developers seem to be able to play to the market rules of their own, and they may also need to pay for business greed and business penalties like Wall Street investment banks in general.　　With the current Beijing-Shanghai-Shenzhen market for the first full line of trading warmer, as well as property developers of the contrarian price increases, the second regulation is not necessarily not. High-interest game: the annual interest rate of more than 700 million U.S. dollars two times the background of the tide of debt issuance is facing real estate credit regulation.　　The difference is that this year, the size and frequency of issuance of debt is far more than last time, and constant land production (3333.HK), Bi Garden (2007.HK), people and Business (1387.HK) or two-degree debt issuance. Take the country garden as an example, it first issued 550 million USD 7 annuity interest 11.25% on April 16, and the priority note issued on August 5 of 400 million USD 5 year annuity interest 10.5%, which was issued two USD 375 million year annuity interest 5 in September 2009.　　Priority notes. Bi Garden 2009 debt due to market sales in the first half of the year (contract sales of 8.79 billion yuan), provincial real estate projects slow progress, real net profit decline, and other reasons, although the 35.7% of the net balance of assets is already low debt, but 11.75% of the annual interest rate of the year in the new Asia record.　　After the issuance of debt, S & P will downgrade the long-term credit rating of the country garden from bb+ to BB. And Bea Garden again this April, on the one hand, for the 2008 issue expires in 2011 600 million U.S. dollar convertible debt to do financial preparation (there are early redemption factors), on the other hand, also due to the 2009 gross income and gross margin of the decline. The former in the land value-added tax before the provision of about 7.026 billion yuan from 2008 to about 4.65 billion yuan, the latter from 2008 's 44.7% to 26.4% as for the August two-degree issuance of debt, is the country park, Anhui Chaohu Lake City as a result of illegal occupation of the site was listed under the supervision period, The move was once seen as a cash-flow problem for the industry.　　Bi GUI Yuan announced that the debt was issued in order to buy the outstanding 600 million-dollar convertible bonds and to finance the new real estate projects (including construction and land funds). In terms of 600 million-dollar convertible bonds, the country garden is more than ready to redeem. According to sources, at the beginning of the issue, the country Garden and overseas investment bank Merrill Lynch also signed a cash settlement swap agreement, that is, if the final stock price below the initial prices, Merrill will be to BeaGui Yuan charge the difference, vice versa is the garden to Merrill Lynch difference.　　The IPO, which was priced at HK $5.38 in 2007, continued to fall and closed on September 7 at HK $2.59, meaning Merrill won the garden. This is the same as the Xu Jiayin of Evergrande (3333.HK) at the end of 2006 with Merrill Lynch and Deutsche Bank.　　August 2, Xu Jiayin outside the field of 72,642,921 shares, average price per share of 2.074 yuan, involving about 150 million yuan, is to deal with the results of Deutsche Bank exercise options. In the same year's gambling agreement, most of the Chinese property developers lost.　　And to get this round of 7 billion dollars of high interest overseas bills, the real estate developers do not have the price. The available case is that in 2008, the Sino-Zhang Yi crisis is essentially a disagreement between Chairman Yong and the foreign shareholders in the management, and from the flow of funds, there is also a 2006 issue of the 100 million U.S. $5 annuity Interest 10.5% senior bonds every six months of interest to bring the financial pressure of CIIC. According to the agreement, the Sino-Branch Intelligence in the bond listed on the Singapore Exchange on the relevant issues to disclose truthfully, the crisis of the Chinese science and tech exposure.　　In March 2009, with the help of the local government, the foreign-bond holders realized the debt-to-equity swap, and the Chinese branch wisdom made the necessary sacrifices to survive the crisis. Unlike the 10.5 million-dollar interest paid annually by the Chinese branch, the property developers pay about $700 million a year for the 7 billion-dollar bills that are still climbing.　　Among them, the country garden pays interest about 104 million dollars each year, Evergrande Real estate pays interest about 176 million dollars each year. Long-term regulation of gambling of course, not all Hong Kong-listed Chinese property developers have opted for high interest paper financing.　　For example, Oct group issued a medium-term note of 5 billion $3 annuity interest 3.39% August 3, Poly Hong Kong (0119.HK) August 4, placing 400 million shares per share of HK $8.8, and Chinese construction September 6 issued a medium-term note of 10 billion Yuan 10 year annuity interest about 4%.　　However, not private developers can be like Oct Group, Chinese architecture, such as the acquisition of medium-term note registration, domestic real estate developers in the market is not good in the equity financing to obtain support, in the domestic loans without a door, the choice of foreign debt issuance more realistic. In order to maintain the normal interest payment of the high interest notes in the 5-7-year period, the real estate developers need to obtain the corresponding sales revenue and gross profit margin expansion, and will occupy the cash flow of hoarding land behavior control at a reasonable scale. And from the current situation, the real estate developers face this round of regulation, in the first half of the choice is to expand the land hoarding, and house prices do not cut sales income growth down.　　Some people in the industry have portrayed the property developers as "a death-full of profits and great risks". Therefore, the High interest overseas bill financing is not entirely to the capital liquidity transfusion, in addition to the constant land production and the country garden already have the cash unable to cover its maturing loans and accounts, including the Accor le Overseas Paper Financing property developers, as long as not to continue to maintain a large buying land,Opened the construction area, this year the capital chain pressure can bear completely. Financial analysts said, "The real estate developers at present high interest in debt to gamble, one is to control the continuity of the policy, the second is the appreciation of the renminbi expectations."　　"The primary justification for this round of regulation is to expect prices to fall, and from the previous August, including Wang Shi, some of the real estate big guys put words" the housing market wait-and-see trough has passed ", to the current real estate developers facing the Beijing-Shanghai-Shenzhen market for the first full line of trade rebound in the contrarian price increases, sustained a large six months of real estate control　　The financial analyst said that the so-called "Golden Nine silver Ten" during the increase in turnover may be due to the increase in supply, once the rise is too large, or even a clear contrarian rebound, it is likely to lead to a new more forceful second-round regulation. As for the appreciation of the renminbi, the "summer Report" released September 7 by the Ministry of Industry and Information Technology said that the "expected renminbi revaluation" increased the uncertainty of China's exports in the second half of the year, in fact there is concern about the appreciation of the renminbi.　　However, an appreciation of the renminbi is clearly conducive to the Hong Kong dollar denominated Chinese property h shares and their dollar bills. Greentown Real Estate (3900.HK) issued in November 2006 and redeemed in 2009 of the 400 million U.S. dollar annuity interest rate of 9% priority bills, as the renminbi against the U.S. dollar from 7.8 to 6.8 of the appreciation, so that the Greentown enjoyed a "free lunch." However, because the offshore Bill financing agreement on the proportion of debt requirements, also make Greentown property must be redeemed in advance, and to redeem the capital chain unprecedented tension.　　This is the two sides of the offshore high interest financing.　　Therefore, this round of property developers high interest paper financing tide is not so much to deal with the regulation of the reserve "winter" fund game, rather than to bet on the future appreciation of the renminbi capital game. Obviously, the big difference with other industries is that the property developers have distinct financial characteristics, "financing-enclosure" is the real estate developers two yuan business logic. With a high leverage ratio, even if financing costs increase, it can also create the commercial greed of Chinese property developers like Wall Street investment banks.