Private real estate companies are experiencing a sudden resurgence in financing, with continuous issuance of supportive policies | debt growth | a sudden resurgence in financing

Release time:Apr 14, 2024 11:07 AM

According to market reports, Zhongjun Group, a listed real estate company in East China, plans to advance the issuance of a medium-term note in August, with an issuance scale of no more than 700 million yuan, fully guaranteed by China Bond Investment. On July 27th, Zhongjun informed First Financial that they are currently working hard to secure a specific timeline.

Recently, two private real estate companies have completed bond issuance with the help of China Bond Growth Fund.

On July 24th, New City Holdings successfully issued its first medium-term note since 2023, with an issuance scale of 850 million yuan, a term of 3 years, and a coupon rate of 4%, guaranteed by China Bond Investment. In mid June, New City Holdings also issued the first 1.1 billion yuan corporate bond in Jiangsu Province, which was enhanced by multiple institutions such as China Securities Finance, local guarantee companies, and securities companies through a new model of "central local cooperation" for credit enhancement.

In mid July, private real estate company Xinhu Zhongbao also issued a winning note worth 700 million yuan, marking the company's first successful issuance of domestic bonds in nearly two years and the first private real estate company in Zhejiang Province to receive the "second arrow" support.

Although the support for private real estate enterprises to issue bonds has been launched in 2022, the second arrow was launched in November of that year to support private enterprises, including real estate enterprises, in issuing bonds for financing.

According to Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, under the framework of the "second arrow", since the fourth quarter of 2022, it has provided credit support for approximately 26 billion yuan in bond issuance for private real estate enterprises. Among them, real estate companies that have successfully issued bonds include Country Garden, New City Holdings, Midea Real Estate, Excellence, Yajule, Zhongjun, etc. The support scope of the "second arrow" is expanding.

In mid July, the Dealers Association convened another financing symposium for some private enterprises, including New Hope, New City Holdings, Country Garden, and other private real estate companies. The symposium mentioned that it will solidly promote the implementation of the "second arrow" work and continue to support private real estate and industrial enterprise bond financing.

In addition, the 2023 Mid year Work Symposium of the China Securities Regulatory Commission on July 24-25 also pointed out the need to adhere to the linkage between stocks and bonds, and continue to maintain the stability of financing channels in the capital market of real estate enterprises.

In fact, the regulatory authorities have always maintained a supportive attitude towards real estate financing. However, based on the current situation, the financing channels for private real estate enterprises are still not smooth.

According to data from Kerui, in the first half of 2023, the financing volume of 80 typical real estate companies was 296.5 billion yuan, a year-on-year decrease of 30%. Among them, most of the bond issuing enterprises are "old faces", with more than half of the enterprises being state-owned and central enterprises, including Xiamen Guomao, Shoukai, and OCT, all of which have issued bonds worth billions of yuan; Only a few private enterprises, such as Country Garden, Yaju Le, and New Hope, have issued bonds with a scale exceeding 1.8 billion yuan. An insider from a private real estate company admitted to reporters that there are not many signs of improvement in the company's financing environment.

In addition to direct support for bond financing, in mid July, the regulatory authorities also extended the two policies with applicable terms in the "Financial 16 Articles" until the end of December 2024. The two policies involved in this case are "supporting the reasonable extension of existing financing such as development loans and trust loans" and "encouraging financial institutions to provide supporting financing support".

The industry believes that the release of the "16 Financial Measures" in November 2022 means that the direction of policy relief has shifted to "rescuing projects+rescuing enterprises", providing strong support for real estate enterprises in financing. Among them, guiding financial institutions to continue to reasonably extend the existing financing of real estate enterprises can help alleviate the pressure on their cash flow and provide them with more breathing time.

According to a research report by Tianfeng Securities, from 2023 to July 14, the total amount of extended bonds of real estate enterprises reached 163.9 billion yuan, an increase of 62.3% compared to the first seven months of 2022. After the introduction of the "16 Financial Measures" in November 2022, the scale of real estate enterprise bond extension has significantly increased.

However, several real estate developers have also provided feedback to reporters that the situation varies in different regions and banks, and there is no unified standard. Many projects still face difficulties in achieving development loan extensions.

A person from a real estate company in East China said that there are almost no new development loans coming in for projects now, and it is also difficult to discuss the extension of existing development loans with the support of "Financial 16 Measures". An insider from another real estate company that has not yet been out of danger also revealed that it is very difficult to advance the extension of the development loan on the project, and the bank may still have concerns about future repayment.

This concern may still come from the current sluggish sales. In the case where financing channels are basically closed, the inflow of funds from real estate companies mainly relies on sales receipts. But since July, the performance of the real estate market has remained dismal. Previously, a certain East China real estate company told reporters internally that "so far this month has been extremely poor.". Even in Shanghai, the difficulty of selling projects in some non core areas has increased, and developers have started to launch distribution to promote decentralization.

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