Chinese Lender SPDB to Issue Country’s First Bonds to Fund Property M&As(Yicai Global) Jan. 20 -- Shanghai Pudong Development Bank will become the first Chinese lender to release bonds aimed at mergers and acquisitions in the property industry amid real estate developers' liquidity pressures.
The bank will issue CNY5 billion (USD788 million) worth of debt with a three-year maturity tomorrow, the Shanghai-based financial institution said in a statement recently.
The move could reduce property firms' risks and the scale of bonds could be widened if the debt instruments are well received, according to insiders. But on the other hand, mergers may be limited as no developer wants to devalue their assets amid the sector's defaults and reduced sales.
The scale of SPDB's bond plan suggests it's a pilot, said Yan Yuejin, think tank research director at the Shanghai Federation of Social Science Associations. If the market response is positive, the scale may be increased, he added.
A manager at a commercial bank in eastern China said to Yicai Global that the lender has been observing client demand, knowing that regulators encourage lenders to support real estate M&As.
SPDB's issuance could support property firms' financing conditions, Zhou Maohua, analyst at China Everbright Bank, said to Yicai Global. More loans for acquisitions could follow, guided by regulators, with an easing of troubled real estate assets, Zhou added.
Such bonds could serve as a new way for financial institutions to participate in risky asset disposal, said Chen Xing, deputy research director at the corporate department of the China Index Academy. If the notes are separated from property loans and personal housing loans, they could be more widely accepted to mitigate property firms' pressures, Chen added.
However, the demand may be limited. Real estate firms are focused on their existing cash flows amid the sector's down cycle so companies that have the funds remain cautious about new acquisitions, said Chen. Meanwhile, sellers don't want to seem too eager and undervalue their assets, he added.
Editor: Emmi Laine, Xiao Yi
