Yanlord Land Group has become the sixth Chinese property developer to price in the international bond markets this year. Yesterday morning, the company sold $300 million of debt with a 9.5% fixed-rate coupon. The bonds were issued at par for a yield of 9.5% as well. The Reg-S/144A high-yield securities have been set to mature on May 4, 2017 and will be callable after four years.
Moody's has issued a Ba2 rating on the securities, while Standard and Poor's rates them BB. At just below investment grade, Singapore-listed Yanlord is considered to be a relatively strong name within the China property sector.
Early buying saw the bonds trade up to 100.40 shortly after pricing but they were then offered back down to 99.50 during the course of the Asian morning session. By the close of Asian trading yesterday, the bonds had settled around the issue price at 99.90 to 100.10.
The key benchmark for the pricing was the newly issued Agile 2017 bonds that are also rated BB.
The joint bookrunners on the deal were HSBC and Royal Bank of Scotland, which were able to attain an order book of more than $800 million from over 80 accounts. Asian investors bought 61% of the bonds, Europe-based investors took 15% and offshore US investors purchased 24%. Fund managers and hedge funds were allocated 70%, private banks 15%, banks 11% and insurance and pension funds the remaining 4%.
Yanlord hired HSBC and RBS in mid-April and investor talks kicked off on April 20. "Investors wanted to understand the credit away from the noise of the market," said one source close to the deal. As tightening regulatory reforms in the domestic market caused short-term volatility it was important to market the credit on the basis of the company's strong credit fundamentals.
Meanwhile, fellow Chinese developer Glorious Property conducted a roadshow last week but has not launched an international bond or announced a specific time when it may do so. Market talk suggests it will hold off until the market backdrop is more stable. Deutsche Bank, J.P. Morgan and Standard Chartered are mandated to arrange a bond for Glorious.
With no further indication of when Aoyuan Property may come to market (it is expected this quarter), the next property company to issue a high-yield bond may be Indonesia's Lippo Karawaci. Its proposed senior unsecured notes have been rated B1 by Moody's, B by Standard and Poor's and B+ by Fitch.