China Aoyuan prices its longest bond offering
Deal optimizes company’s maturity profile, reduces borrowing costs
23 Feb 2021 | Chito Santiago

Chinese property developer China Aoyuan Group returned to the US dollar bond market and priced on February 22 a US$350 million offering, representing its longest bond maturity ever.

The Reg S six-year non-call four-year deal was priced at 99.651% with a coupon of 5.88% to offer a yield of 5.95%. This was well inside the initial price guidance in the 6.20% area. The company says the longer tenor optimizes China Aoyuan’s maturity profile and reduces its borrowing costs.

The proceeds from the transaction will be used to refinance the company’s existing debt, and it will, according to the company, continue to exercise financial prudence and maintain diversified onshore and offshore financing channels to ensure fund safety.

The deal attracted a final order book in excess of US$1.1 billion from 63 accounts. In terms of geographic distribution, 87% of the bonds were distributed in Asia and 13% in Europe. By type of investors, asset managers and financial institutions accounted for 85% of the paper, while private banks took the remaining 15%.

BofA Securities, Bank of East Asia, Barclays, CICC, CMBC Capital, CMB International, Credit Suisse, Deutsche Bank, DBS, Guotai Junan International, Haitong International, Industrial Bank (Hong Kong), J.P.Morgan, OCBC Bank and UBS were the joint bookrunners and lead managers for the transaction.

China Aoyuan last tapped the US dollar bond market in November 2020 when it printed a US$230 million 5.98% senior notes, due August 2025. The deal was nine times oversubscribed with the order book peaking at US$2.1 billion.

That transaction came after the company received on October 2020 a rating upgrade from Fitch Ratings from BB- to BB with a stable outlook. The upgrade, the agency says, reflects China Aoyuan’s track record of maintaining a healthy financial profile, as well as its improved geographic diversification and enlarged operating scale, which is comparable with BB-rated peers.

The company, Fitch adds, has been financially disciplined during the expansion, aided by its fast-churn business model. As a result, its proportionate consolidated leverage stayed below 40%.

China Aoyuan focuses on the Guangdong-Hong Kong-Macau Greater Bay Area with a nationwide strategic layout covering four major regions – south China, the core region in central and western China, east China and the Bohai Economic Rim in north China. As of June 30 2020, the total gross floor area of its land bank was about 48.74 million square metres across 90 onshore and offshore cities.