Advanced Theory & Practice of Bonds

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1-2 December 2021

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Chinese real estate developers Country Garden, R&F Properties and Kaisa Group have reduced debt as per their latest results. Country Garden cut debt by CNY 43.1bn ($6.6bn) to CNY 326.5bn ($49.9bn) last year, according to its annual results. They reported a net profit decrease by 11.4% to CNY 35bn ($5.4bn) and saw revenues fall 4.7% to CNY 46.3bn ($7.1bn) in 2020. The president of the company said “Our financial position is healthy and we hope to lower our debt to below 300 billion yuan ($45.8bn) this year.”

CG,RF,Kaisa
Guangzhou R&F Properties cut debt by CNY 37.4bn ($5.7bn) to CNY 159.7bn ($24.4bn). Net profits fell 9.3% and revenues fell 5.4% to CNY 9.2bn ($1.4bn) and CNY 85.9bn ($13.1bn) respectively in 2020. “We aim to reduce our net gearing ratio to below 100% in 2021, and to clear all three red lines in 2022,” said Chairman Li Sze Lim.

Kaisa Group said its net gearing ratio fell to 97.9% in 2020 from 144% in 2019. Net profits increased 18.6% last year to CNY 5.4bn ($830mn). Franco Leung, MD of Corporate Finance at Moody’s said “We expect Chinese developers will continue to control debt growth in 2021, given the tight regulatory conditions.” He added that while only a handful are being monitored by regulators, even companies that are not have been trying to adhere to the three red-lines and this may decrease margins.

Country Garden’s bonds were flat with its 3.875% 2030s at 100.06, yielding 3.9%. R&F’s bond issued by Easy Tactic was also flat with its 8.625% 2024s at 94.25, yielding 11% while Kaisa’s bonds were stable with its 10.875% Perp at 97.25, yielding 12.2%.

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