China's Sunac raises $1 bln in bonds to refinance debt after deal spree (updated)

LVGEM (China) Real Estate Investment

03/08/2017 06:03

* New bonds trade slightly lower in Thursday debut 
    * Investors concerned about large issue size - trader 
    * $1 bln bond sale comes after $516 mln share placement last 
week 
 
 (Recasts, adds details of bond sale, bond performance and 
comments) 
    HONG KONG/SHANGHAI, Aug 3 (Reuters) - Sunac China Holdings 
Ltd  1918.HK  has issued $1 billion worth of bonds offshore to 
refinance some of its existing debt, in the acquisitive Chinese 
property developer's latest fundraising after a recent spate of 
deals. 
    The highly-leveraged company is tapping multiple financing 
channels offshore after its credit risks came under scrutiny in 
China on a string of high-profile purchases, including the $6.52 
billion tourism projects deal with Dalian Wanda Group and a $2.2 
billion stake in Leshi Internet  300104.SZ .  urn:newsml:reuters.com:*:nL3N1KA3OL 
    Last week, Sunac agreed a private share sale worth $516.4 
million.  urn:newsml:reuters.com:*:nL3N1KG05L 
    Sunac said in a filing on Thursday it issued $400 million 
senior notes due in 2020 and $600 million due in 2022 at coupon 
rates of 6.875 percent and 7.95 percent, respectively. 
    The new bonds started trading on Thursday slightly weaker 
than their issue price.  
    "Clearly a billion dollars across two tranches is a big size 
- normally high yield names come in smaller tranches. And this 
is an acquisitive company," said a bond trader who asked not to 
be named, referring to the weak debut of Sunac's new bonds. 
    The bond sale included nine bookrunners, a lineup larger 
than usual, underscoring the challenges to issuers amid ample 
supply in the China high yield property sector.  urn:newsml:reuters.com:*:nL3N1KG1GQ  
    LVGEM (China) Real Estate  0095.HK  is the latest joining 
the long queue of issuers on Thursday, hiring eight bookrunners. 
    Analysts have said Sunac's gearing ratio will surge to 
become among the most indebted developers in the country after 
the Wanda deal, and S&P has put Sunac's rating on CreditWatch 
Negative, which means there is 50 percent of chance of negative 
rating action.  
    "The proceeds from the notes issue are intended to be used 
for re-financing the group's existing indebtedness," Sunac said. 
    Sunac's next bond maturity date will not be until 2019, but 
32.64 billion yuan from other borrowings will be due by the end 
of this year. Bond analysts expect the company to call the 2019 
bonds on which it is paying a coupon of 8.75 percent. The bonds 
are callable in December. 
    Sunac said its total borrowings, which include notes, 
asset-backed securities, bank loans, corporate bonds and private 
domestic corporate bonds, amounted to 112.8 billion yuan  
($16.77 billion) as of the end of 2016.    
    Sunac chairman Sun Hongbin said last month the deal with 
Wanda, which was adjusted to exclude the purchase of 76 hotels, 
would help the company's liquidity and lower its debt level. He 
added the firm had "ample" cashflow, with 90 billion yuan of 
cash on hand.     
    HSBC, Morgan Stanley, China CITIC Bank International, 
Citigroup, CMB International, Haitong International, Industrial 
Bank Co, ICBC International and SPDB International are the 
bookrunners of Sunac's bond sale. 
($1 = 6.7270 Chinese yuan renminbi) 
 
 (Reporting by Clare Jim, Umesh Desai, Donny Kwok in HONG KONG 
and Adam Jourdan in SHANGHAI; Editing by Stephen Coates and 
Muralikumar Anantharaman) 
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters 
Messaging: donny.kwok.reuters.com@reuters.net)) 
 
Keywords: SUNAC CHINA NOTES/