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Treasury & Capital Markets
How a Chinese property developer enhanced green financing initiatives
In one of the last-minute fund raisings from Asia in the offshore bond market in 2016, Chinese real estate developer Modern Land (China) Company on December 29 re-opened its outstanding three-year green bond when it priced an additional US$150 million offering.
Chito Santiago 3 Jan 2017
In one of the last-minute fund raisings from Asia in the offshore bond market in 2016, Chinese real estate developer Modern Land (China) Company on December 29 re-opened its outstanding three-year green bond when it priced an additional US$150 million offering.
The B2/B+ rated company initially printed a US$350 million issue in October with an interest rate of 6.875%, making it the first Hong Kong-listed Chinese property developer to issue a green bond. The proceeds are used to fund existing projects and businesses with environmental benefits in alignment with the company’s green bond principles, by way of refinancing existing debt in relation to these projects.
The additional green bond issuance, which was priced at 98.193%, illustrates Modern Land’s determination to explore innovative financing channels and to consolidate its position in green finance industry.
The tap issuance will lengthen Modern Land’s debt maturity profile and improve its liquidity position, according to Anthony Lee, the international lead analyst for Modern Land at Moody’s Investors Service. Following the offering, the company’s revenue/debt will stay at between 75% and 80%, and its Ebit/interest coverage at around 2.3x to 2.8x over the next one to two years.
Modern Land’s liquidity profile remains adequate. Its cash balance of 5.7 billion renminbi at the end of June 2016 and strong contracted sales are sufficient to meet its short-term debt of 3.5 billion renminbi and committed land payments in the next 12 months. 
A Fitch Rating report says the company managed to significantly reduce its funding cost to 8.4% in the first half of 2016 from 10.5% in the 2015, after the completion of a one billion renminbi five-year onshore bond issuance with a coupon rate of 6.4%. It has also refinanced part of two redeemed offshore bonds – issued with coupon rates of 11% and 13.875% – with the US dollar bond issued in October that carried a much lower coupon rate of 6.875%. 
Fitch expects the reduced borrowing cost to partially offset a lower gross profit margin and strengthen Modern Land’s credit profile. 
Guotai Junan International acted as the sole global coordinator for the latest transaction, as well as a joint lead bookrunner and lead manager along with Zhongtai International. 
Founded in 2000, Modern Land specializes in developing green housing units and is one of the few early leaders in China’s green and eco-friendly lifestyle market.

  

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