Sino-Ocean Group, a Chinese property company sold a $200m of three-year green bond. This support from banks helps the firm to attract and overcome investors’ concern about developers. China Zheshang Bank, Beijing branch is the source of credit-enhanced structure notes with a standby letter. The price of the notes is to yield 3.8%. The initial guidance is from 3.8% unchanged area.
The credit-enhanced structure could indeed bring back the firm to the market. However, bankers started to be aware that the structure could fit the developers. There have been rumors around that Chinese property companies are eyeing SBLC-backed trades, said IFR Asia. It is one of the ways to raise funds in a market that has been closed off for them.
With that concern, The Sino-Ocean trade was the first offshore bond that got the offering from the Chinese property sector. It was since Greenland China Holdings printed on February 17. Sino-Ocean Land Treasure IV issued Sino-Ocean senior notes. The guarantor is Sino-Ocean Group Holding. The rate is Baa3/BBB- (Moody’s/S&P). The rate of the bonds would be Baa3 from Moody’s. In this case there was no rating advantage for the issuer.
On the other hand, there was an obvious difference in valuation between the issuer’s existing curve and the credit-enhanced issue. Sino-Ocean’s standalone 2025 bond is to yield over 10%. It is 600bp wider than the new issue. Lucror Analytics pointed out that the success of the Sino-Ocean deal brings positive impact for the property sector. Other firms are likely to follow the near term with the same structured deals.
Meanwhile, analysts at Nomura’s sales and trading desk said that in a pre-pricing note Zheshang Bank is smaller. Thus, compared to other banks like ICBS or CCB, it is less solid. The analysts added that there is always a limit to how much support Zheshang Bank would be able to offer.
