The Most Difficult Time For Housing Companies To Raise Interest Rates Is As Low As 3.375%.

Troubled housing enterprises in the first half of the year of financing difficulties, in late 2019, early 2020 seems to usher in a glimmer of dawn.

In January, Longhu, dragon and other housing enterprises issued overseas bonds, financing interest rates also hit a new low, coupled with a comprehensive reduction, for large housing enterprises and high quality housing enterprises, a new financing window is coming, and the industry has also spent a time of tight funds.

However, industry financing has long been unable to "rain and dew" but serious differentiation, some housing enterprises can get very low interest rates, long term financing, some have to raise money with high interest rates, or even few financial institutions and investors.

China Index Research Institute data show that in 2020, the debt repayment scale of Housing enterprises rose to 651 billion 340 million yuan. Looking forward to 2020, housing financing is still a big problem and has become one of the core competitiveness of Housing enterprises. The scramble for high-quality financing channels and funds has started.

In terms of endogeneity, housing companies should do more. It can survive for a long time without extreme reliance on external financing.

Troubled housing enterprises in the first half of the year of financing difficulties, in late 2019, early 2020 seems to usher in a glimmer of dawn. - Song Wenhui photo

Longhu ultra-low interest rate financing

In 2019, Zhonghai, Vanke, Huarun and other central enterprises or state-owned capital background developers, with low interest rate financing to look up to the industry, this advantage in early 2020, there are also private housing enterprises to achieve.

In January 7th, the announcement of the Longhu group showed that the company had issued $650 million bills, of which 250 million dollars in seven years, 3.375% in votes and 3.85% in the 12 year period, setting a double record of the "longest term" and "minimum interest rate" of China's private housing enterprises.

Longhu is the only private housing company in the country that has obtained all three international credit rating agencies (S & P / Moodie / Fitch) investment grade rating. This financing attracted 4 billion 800 million US dollars over 7 times of subscription orders, pushing the final pricing narrowing to the most recent issue.

As the first issue window in 2020, the nearby bond market in the year end was extremely busy. Besides Longhu, there were a number of housing companies issuing overseas financing.

In January 6th, dragon light real estate issued the first issue of corporate bonds in 2020, issuing a scale of 1 billion yuan, bonds for a period of 5 years, an annual interest rate of 4.8%, also set the company's lowest debt interest rate in the past three years.

In fact, since last November, housing enterprises financing has been somewhat warmer.

According to data from the Institute of strategic planning, in November 2019, the total financing of 40 typical listed housing enterprises amounted to 90 billion 436 million yuan, a sharp rise of 283.49% in the ring ratio, and the total amount of financing was second only to the highest point in March this year.

Overseas financing is also heating up. In November 2019, the total foreign currency financing of Housing enterprises was 39 billion 144 million yuan, an increase of 172.55%, accounting for 43.28% of total financing. Among them, the total amount of US dollar financing is 23 billion 149 million yuan (US $3 billion 293 million), accounting for 25.60% of the total financing. The total amount of Hong Kong dollar financing is 15 billion 995 million yuan (17 billion 811 million Hong Kong dollars), accounting for 17.69%, and the growth rate is nearly 21 times, mainly from overseas syndicated loans and foreign equity allotment.

Central Plains real estate data also show that in November 2019, the housing enterprises dollar financing blowout, more than 20 Housing enterprises released the US dollar financing plan total amount of more than 5 billion U.S. dollars.

Near the Spring Festival, many housing enterprises launched more frequent financing. A financing window has emerged.

However, the trend of Housing enterprises financing differentiation is deepening. Leading housing companies can get financing at lower cost, while small and medium-sized housing companies need to raise money at high interest rates, or even to get financing.

In November 13, 2019, Vanke issued a 5.5 year fixed rate note of $423 million, with an interest rate of 3.15%, and a 10 year fixed rate note of $300 million, with an interest rate of 3.5%.

In contrast, in December 27, 2019, Yide international issued $50 million in 2021, with a high interest rate of 14%. In the same month, Canon international issued a $67 million 500 thousand preferred note with an interest rate of 13.75%; Southern China city issued $150 million notes with an interest rate of 11.5%.

From the monthly point of view, affected by low interest rate financing, such as country garden, Vanke and greenbelt, the cost of offshore bond financing in November was 7.28%, down 1.92 percentage points.

In December, the monthly financing cost of offshore bonds was 10.66%, rising by 3.48 percentage points, mainly due to the fact that some small and medium-sized Housing enterprises, such as Jiayuan international, Silver City International, and Shang Shang industries, issued relatively high cost external debt.

In 2019, Hengda financing amounted to 64 billion 426 million yuan, far ahead; the financing of Biguiyuan, Fuli and Rongxin exceeded 25 billion yuan; the sum of financing of rongchuang, Yu Zhou and Shimao exceeded 20 billion yuan. A total of 24 Housing enterprises financing amount exceeded 10 billion yuan, 27 Housing enterprises financing amount between 50-100 billion yuan.

In terms of financing costs, 121 Housing enterprises, Jiayuan international, Xinyuan Real Estate and other 21 Housing enterprises average financing interest rate of more than 10%, 1/6 Housing enterprises financing costs more than 7%.

In addition, the average financing interest rate of 100 billion housing enterprises is 6.52%, and the weighted average interest rate of China shipping, Vanke, Huarun, poly, investment and Jinmao is below 4%.

Financial commentator Yan Yuejin said that the financing environment of Housing enterprises in recent years eased compared with that in 2019, and the central bank's overall reduction will help ease the tension of capital chain in housing enterprises.

"Financing in 2020 has been relaxed." Yan Yuejin said that the whole financing situation will change, which is a major trend, especially for large enterprises to enjoy the benefits brought by the decline in interest rates.

How can housing companies change their money in 2020?

"Real estate is highly dependent on the industry, and the core competitiveness of the next ten years is to see the financing capability of Housing enterprises." On December 31, 2019, Ding Zuyu, CEO of Yi Ju enterprise group, said in his speech across the year.

Since May 2019, with the continued tightening of domestic and foreign financing, the traditional financing channels such as trust loans, bank loans and corporate bonds are limited, and this situation will continue in 2020.

Then how will housing companies find the money? For large housing enterprises, it may be relatively easy. The traditional low cost financing of bank development loans and corporate bonds are inclined to them. The most difficult time has passed. For small and medium-sized Housing enterprises, finding money in 2020 is still the most urgent thing.

Listing and splitting are worth considering. Since 2019, 6 small housing companies have been listed in Hong Kong, such as Dexin China, Silver City International Holdings, Zhongliang holdings, Xinli holdings, etc. in 2020, there are also housing companies waiting for IPO, including Helen Fort real estate, Austrian holdings, Datang real estate and so on.

It is also a common practice to separate property listings and build diversified financing platforms. Last year, the property of Jia Zhao, Pauli, times and other properties were split up. It is expected that more housing prices will be split this year, such as Huarun land, and China's property.

The separation of commercial real estate is also on the agenda. In December 30, 2019, Baolong business succeeded in landing Hong Kong stocks at the end of the year. Besides, the business of Huarun, Longhu and other companies also has the possibility of splitting.

In the past few years, it has been revisited by some companies, such as Evergrande and Biguiyuan. Since 2018, housing companies such as Pauli development, China Construction International and Yuexiu group have issued perpetual debts. In 2019, China's happiness was issued at least 8 billion 500 million yuan in perpetual debt, with an interest rate of 9.5%-12%.

The industry expects that this way of perpetual debt will also be applied this year.

Compared with traditional financing methods, the current regulatory attitude towards asset securitization is relatively loose. ABS and supply chain finance are being sought after.

In December 24, 2019, Vanke Guoxin Securities purchased the tail asset support special plan twelfth phase of the priority asset backed securities issued successfully, the actual circulation amounted to 1 billion 90 million yuan, the coupon rate was only 3.69%.

In addition, the size of China Railway ABS is 461 million, and the scale of ABS is 677 million.

Many housing prices long awaited REITs also have news. Recently, the Shenzhen Stock Exchange said that it will actively promote the REITs process and form a distinctive REITs plate.

Kim Ke Ling, chairman of the company believes that in the near future, China's first real REITs products will appear.

Ke Rui pointed out that the future securitization of assets may become a breakthrough for housing companies financing, but the best way to maintain cash flow is to strengthen their own hematopoietic capacity, with sales return as the main force to ensure financial stability. "Housing Companies in 2020 should improve their ability to withdraw money and abandon the habit of thinking with scale first."

Li Qilin, chief economist of Lian Xin securities, believes that housing companies should avoid two kinds of risks. First, there is a relatively low risk of monetary capital and debt (especially short-term debt). If the scale of its own funds is small and its reliance on external financing is too dependent, credit risk will be relatively large. Two, the shortage of land stock reserves and the risk of actively taking the place may lead to more difficult operation.

In 2019, China's housing enterprises generally entered the peak of debt repayment, and a large number of small and medium-sized Housing enterprises went bankrupt due to tight capital chains. China Index Research Institute data show that in 2020, the debt repayment scale of Housing enterprises rose to 651 billion 340 million yuan, and nearly trillion yuan in 2021.

In order to avoid the risk of capital chain, Li Qilin believes that under the circumstances of full supervision and control of real estate debt financing channels, the differentiation of industries is inevitable. Housing companies should first control the pace of expansion, reserve cash in advance for the winter, and seek cooperation or development with peers or financial institutions to reduce and diversify risks.