Future Land slashes interest costs with dollar bond

The Chinese property company will pay half what it does on one outstanding bond after taking advantage of buoyant high-yield demand.

Future Land Devlopment, which has two potential bond redemptions looming this year, turned to bond investors this week in part because it wanted to raise money to pay back debt.

It clearly picked a good time to do so — the company's new $350 million deal will cost it just half as much as one of its other outstanding deals.

Bankers working on the deal approached investors in early morning trading on Thursday, pitching a three-year bond with guidance in the 5.625% area. That was pushed down to between 5.125% and 5.25% after strong demand, and the deal eventually priced at the bottom of that range.

Future Land has tapped the dollar bond market three times before, in 2013, 2014 and 2015. The 2013 bond was called last year, but the company still has a $250m 6.25% November 2017 bond and a $350 million 10.25% July 2019 issue outstanding.

Compared to the size and cost of those deals, the new bond looks like a smart move for the company.

Future Land is paying interest of around $15.625 million a year on its November 2017 bond, but raised $100 million less from that deal at issue. It is paying a whopping $35.875 million each year on its July 2019 issue, which becomes callable this July.

The new deal, in contrast, will cost the company only around $17.94 million a year in interest payments.

That sort of cost-saving would not have seemed possible at the start of 2016. Future Land endured a period of volatility last January, as its chairman Wang Zhenhua was investigated by anti-corruption officials in the Changzhou city government. But the investigation appeared to come to nothing. Wang had resumed his duties by mid-February 2016, according to Moody’s.

Future Land’s outstanding bonds have certainly recovered since that time. The company’s 2019 notes, which yielded as much as 10.722% last January, were offering investors a bid-side yield of just 3.584% on Friday morning.

Part of this shift can be attributed to the looming July call date of the 2019 bond, but it is clear investors are now more bullish on the credit. Future Land’s $250 million November 2017 bond was yielding around 3.868% bid when this story was written on Friday.

Some 260 investors participated in this week's deal, placing orders worth around $4 billion between them. Asian investors got around 75% of the bonds, with the rest going into Europe. Fund managers took 87%, private banks 5%, and banks and other investors the remaining 8%.

Future Land’s new February 2020 bond is rated Ba3/BB-/BB- by Moody’s, S&P Global and Fitch. It was priced at 99.656 with a 5% coupon.

Bank of America Merrill Lynch, Deutsche Bank, Haitong International, HSBC and JP Morgan were the global coordinators and bookrunners of the deal.

Future Land will raise around $344.5 million after paying bankers fees and other costs, it said in a stock exchange announcement.


¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media