HONG KONG/BEIJING, May 16 (Reuters) - Three major private
Chinese property developers who are financially healthy were
asked by the authorities to issue bonds this week to help boost
market sentiment, two sources with direct knowledge of the
matter said on Monday.
The authorities informed Country Garden, Longfor
Group and Midea Real Estate about the plan
late last week, the sources said. They declined to be named
because they were not authorized to speak to media.
They added securities firms will issue credit default swaps
(CDS) or credit risk mitigation warrants (CRMW) at the same time
to attract investors to buy the bonds, helping private
developers to raise funds from the public markets.
The three developers declined to comment when contacted by
Financial intelligence provider REDD first reported on the
plan on Monday. The report also said Chinese banks have been
asked by regulators to buy those bonds.
China's property sector has been hit by a series of debt
defaults and requests for payment extensions. Many developers
said they have not been getting new credits from banks despite
repeated assurances by policymakers and regulators that they
would help the sector avoid defaults and would ask banks to
Financial regulators including the China Securities
Regulatory Commission (CSRC) and the Shenzhen Stock exchange
issued separate statements early this month highlighting the
importance of supporting normal refinancing needs in the sector,
including via corporate bond issuance.
President Xi Jinping also called for a stable and healthy
real estate market at a late April Politburo meeting.
Chinese authorities stepped up efforts to revive sluggish
property demand by further cutting mortgage loan interest rates
for first-time home buyers on Sunday.
Analysts said corporate bonds protected by credit risk
management tools would encourage market participation in the
"If this can be executed properly, we think that it could
extend to some other developers with weaker balance sheets to
issue similar debts as well," Raymond Cheng, CGS-CIMB Securities
head of China research, said in a note.
Sources told Reuters last month that regulators have asked
developers to apply for quotas to issue bonds, although some
developers were skeptical that there would be demand for the
bonds in the market.
"We still have some quota left, but no banks would buy
property bonds right now unless they were ordered to," one Hong
Kong-listed developer who had problems meeting debt obligations
said. The developer declined to be identified due to the
sensitivity of the issue.
(Reporting by Clare Jim in Hong Kong and Shuyan Wang in
Beijing; Editing by Edmund Klamann and Jacqueline Wong)