Overseas Fund-Raising Winds "Epidemic" Turn: Housing Enterprises Debt Issuance Blowout To IPO

"Although the Federal Reserve's interest rate cut this week has created the largest single day increase in US stocks over the past few years, the IPO financing of Chinese technology companies in the US has not been optimistic." A Hongkong investment bank IPO underwriting department responsible person told reporters regrets. As the voice dropped, the Fed announced a 50 basis point cut in interest rates.

At present, the 3 Chinese technology enterprises that he has worked for has gone to a standstill in the US IPO. One of the enterprise management teams has been unable to go to the United States because of the epidemic situation, and has launched a face-to-face fundraising roadshow with potential cornerstone investors, resulting in the IPO process being repeatedly postponed.

Reporters learned that, compared to the IPO of the United States struggling, Chinese real estate enterprises overseas issuance of bonds raised short-term blowout.

The latest statistics released by Zhongyuan Real Estate Research Center show that in the first 2 months of this year, the amount of overseas financing of Chinese real estate enterprises exceeded US $22 billion, setting a new high in the past few years.

Correspondingly, the number of short-term overseas bonds issued by China's real estate industry suddenly increased. In late January, only one real estate enterprise issued short debt or signed a short-term loan agreement overseas, but by the end of February, the figure reached 8, and the corresponding fund-raising amount of enterprises reached 47% in 2019, which highlighted the surge in short-term capital operation pressure of Housing enterprises.

"Nowadays, many real estate companies are willing to raise interest rates in order to get short-term bond financing. Overseas institutional investors are also optimistic about the rebound in China's real estate market after the end of the epidemic, and are willing to win higher bond investment returns. A brokerage real estate industry analyst told reporters. According to his estimate, the average financing cost of Chinese real estate enterprises overseas issuance in January was about 9.3%, an increase of 1.3 percentage points compared to the same period last year. By February, the average annual interest rate of overseas bond issuance of real estate enterprises rose further to about 12%, and even individual housing enterprises had issued 15% interest rates.

The chief financial officer of a real estate enterprise, which intends to issue overseas bonds, has told reporters that because of the sudden drop in sales and the loosening of domestic credit policies, it is most important for enterprises to survive. Even if the interest pressure on overseas bonds is higher than that of the enterprise, it will not hesitate to do so.

Housing companies are rushing to raise interest rates overseas.

To the surprise of overseas capital markets, the epidemic is causing the real estate enterprises to make overseas bonds hot.

"At present, we are operating three overseas real estate companies to raise overseas bonds, and we had only one project in early March." A Hongkong investment bank real estate business department director told reporters.

According to Moodie statistics, the 27 listed housing enterprises issued overseas bonds in January as high as $16 billion 500 million, refreshing the highest monthly record of $11 billion 100 million in debt raising in January last year.

"In February, the amount of overseas bonds raised by housing enterprises is likely to hit a new high, because the housing market has almost no sales revenue in February, and the short-term financial pressure is even greater." The director told reporters. In the 2 month, the number of short-term bonds issued by real estate enterprises increased significantly compared with January. More than 8 real estate enterprises sought to raise funds by issuing short-term overseas bonds or signing short-term credit agreements. For example, in February, Xu Hui holding and Standard Chartered Bank signed a 200 million dollar loan agreement, the repayment period is only 6 months.

Reporters learned that the annualized interest rate of overseas short-term bonds issued by real estate enterprises is not low. Most of the large real estate companies are raising 11%-12% between them. Some regional housing enterprises will not be able to complete enough subscription unless they bear more than 13% of the annualized interest rate. Some overseas institutional investors fear that after the end of the epidemic, it will take some time for the real estate business to recover, and the acceptable bond interest rate will be raised by more than 100 basis points as a risk compensation.

The above director of real estate business department of Hongkong investment bank pointed out to reporters that in addition to raising the interest rate of issuing bonds, most overseas investment institutions also made corresponding adjustments to the investment threshold of Chinese real estate enterprises issuing overseas bonds. In addition to continuing to focus on basic data such as credit rating, asset size and industry status of debt issuing enterprises, they also significantly weakened the weight of sales return factor and raised the refinancing. Capital capability factor is used to assess the solvency and default risk of real estate enterprises in the future.

"In the meantime, some real estate companies have proposed extending the duration of bonds to alleviate financial pressure on enterprises, which are all rejected by us. This will not only lead to a substantial increase in the interest rate of overseas issuance of bonds, but also significantly exceed the financial capacity that enterprises can afford, and it does not meet the allocation strategy of many overseas institutional investors, which may not attract enough subscription funds. He told reporters. In the meantime, they proposed to issue some convertible bonds to individual listed real estate enterprises in Hong Kong to alleviate the financial pressure of debt repayment, and were also rejected by the other party. The first reason is that some shareholders are afraid that the equity rights may be diluted and not necessarily agree. The two is that the company will produce more profits every year to distribute dividends from shareholders so that the long-term financial pressure will increase sharply.

Technology companies to IPO almost stagnation

Compared with the short term "blowout" of overseas issuance of real estate enterprises, the recent global spread of the epidemic and the sharp fluctuations of US stocks have led to the almost stagnation of Chinese technology enterprises to the US IPO.

The head of the IPO underwriting department of the Hongkong investment bank admitted to reporters that although the US stock exchange did not slow down the progress of IPO examination of China's technology enterprises, however, in view of the conservative and prudent investment strategies of the two tier market investment institutions and the difficulty in implementing the roadshow of the business management team, they had recommended that a number of Chinese technology enterprises suspend the IPO process in the US.

"One of the technology companies is a pity that they have entered the fundraising roadshow, but the development of the epidemic has prevented them from going to the United States, and fundraising roadshows face to face with potential cornerstone investors, which has delayed the IPO process by more than 1 months," he said. He disclosed that due to the recent violent turmoil in the US stock market, the management team of the technology enterprise worried that the institutional investors in the two tier market of the United States were too low in price, and simply decided to shelve the IPO process in the US.

A large US hedge fund manager told reporters that the majority of investment institutions in the United States have switched to the "IPO" strategy for new shares, and that they are willing to take part in fund-raising roadside activities unless IPO enterprises have a unique business model and a relatively high income growth prospect.

"As a matter of fact, we are also unable to protect ourselves. The recent surge in US stocks and the global spread of the epidemic make more and more LP investors choose the risk avoidance strategy. We also face higher capital redemption pressure, so every investment must be carefully calculated." He pointed out.

Many overseas investment bankers say they are more inclined to operate overseas listed companies such as Chinese pharmaceutical research and development, online education, online diagnosis and treatment. After all, during the recent turmoil in the US stock market, online education and medical and pharmaceutical sectors showed a unique trend of rising, indicating that the capital market favored them, which created an excellent window period for these companies to list overseas.

Reporters also noted that at present, a number of domestic medical R & D enterprises are waiting for the IPO hearing of the Hongkong stock exchange, including biotechnology enterprises, private hospitals and medical device manufacturers specializing in the research and development of tumor diseases.

"We are running two new drug research and development companies to list in the United States. We have contacted a number of local two tier market investment institutions to conduct remote video fund-raising roadshows to speed up the IPO process." The Hongkong investment bank IPO underwriting department official pointed out. But how high is the performance of the remote video fund-raising roadshow, but he still has no idea. After all, most US investment institutions are accustomed to face-to-face communication to obtain a lot of valuable information as a key basis for participation in new subscriptions.

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