Evergrande Emerges As ‘Top Dog’ In Asian Borrowers’ Bond Market

Chinese developer China Evergrande has another notch on their belts after it became the 'largest' among the borrowers in the Asian bond market. According to the Asia Times, the Chinese firm had a retap of around US$1 billion in bonds, making it the best borrower outside of Japan, which remained the best in Asia.

The developer accounted for US$6.6 billion in bonds this year and counting. This included those which have been issued by Hengda Real Estate Group, the company's subsidiary. On Monday, the mother company Evergrande announced the sale of US$200 million worth of three-year notes, US$400 million worth of four-year bonds, and US$40 million five-year bonds.

The worth of these bonds lay in the interest, with each note carrying about 9.5% to 10.5% of interest per annum. The proceeds from these bonds will go into refinancing indebtedness as well as fuel for 'capital expenditures.' In the previous year, it was Chinese internet mogul Tencent who held the position, with US$5 billion from the bond market.

Japan had been Asia's top borrower this year, with the banking firm Mitsubishi UFJ Financial Group taking the lead. The Japanese bank had raised about $7.3 billion in dollar bonds so far, with reports from Dealogic data. Reuters reported that this year, a sale separated China Evergrande and gaming giant Tencent, which had sold US$6 billion in bonds.

Asian junk bonds have been a hot commodity so far this year, with expectations for lower interest rates attracting corporations to them. An early market rally resulted as an after-effect, where bonds have been sold at a rate of US$27.5 billion in the first quarter alone.

As for Evergrande's use for the bonds to combat 'indebtedness' as well as 'capital expenditure,' it was discovered that the developer planned on using around 20 billion yuan on other non-property ventures. These included property businesses as well as the ongoing research and development into the company's electric vehicles venture.

S&P analyst Matthew Chow, who had been monitoring the situation, said that the company's key concern is on issuing more bonds than it can afford to. Liquidity had been slowly but surely easing up onshore and offshore, and the proceeds from this cannot be used to refinance company expenditures.

It has been revealed that Evergrande also possessed one of the industry's highest debt ratio. So far, it has been doing well in cutting down on its net gearing ratio. From 240 percent in June 2017, it aims to lower that measurement to 70 percent by June 2020.

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