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Chinese Property Bond Markets Update

The Asian bond markets saw lesser activity during the week from 13 May 2013 to 17 May 2013, compared to the previous week. The Chinese property bond market saw one new bond issuance from the sector. There was a dimsum bond issuance by Yanlord Land Group Ltd in the high yield space. Two companies availed offshore loan facilities. There were no rating actions in the China property sector. The monthly operating statistics were released by Agile Property, SPG Land and Central China Real Estate.

Yanlord issued CNY 2.0 billion 5.375% coupon bearing dimsums maturing in 3 years at par. The final pricing of these junk bonds was tighter than the initial guidance of 5.5%. Citi, DBS Bank, HSBC and Standard Chartered were the sales managers. The bonds were issued by Yanlord Land (HK) Company and were unconditionally guaranteed by Yanlord Land Group Ltd. The proceeds from the bond issuance will be used to finance existing and new projects. S&P has assigned BB- long-term issue rating to the issuance. Moody's has affirmed Yanlord's Ba3 corporate family rating and has upgraded Yanlord's senior unsecured debt rating to Ba3 from B1. The rating outlook on the company remains stable. Moody's has removed the notching related to subordination risk, to reflect Yanlord management's commitment to maintain the onshore secured borrowings/total assets ratio below 15%.

Agile Property announced that it has signed a HKD 3,978mn three year term loan facility with a group of banks. China Resources Land, an investment grade credit and sovereign owned entity signed a HKD 800mn three year term loan facility with a bank.

Agile acquired 10 adjacent commercial and residential sites with total area of 606,000 sqm in Tengchong County of Yunnan Province for CNY 160 million. Agile also acquired a site in Sanshui District, Foshan City for CNY 200 million.

Agile achieved contract sales of about CNY 2.35 billion during Apr 2013, down 27% MoM. The contract sales during Jan-Apr 2013 stood at CNY 9.8 billion, which is about 23% of the company's annual sales target. SPG Land reported contract sales of CNY 377 million for Apr 2013, 109% higher compared to Mar 2013. The contract sales during the first four months of 2013 were CNY 1.2 billion, equivalent to approximately 29% of the company's 2013 sales target. Central China met 30% of its 2013 annual sales target, by generating CNY 3.8 billion of sales during Jan-Apr 2013. The contract sales during the month of April were CNY 649 million, down 36% sequentially.

Given that the recent few weeks have seen supply in the high yield dimsum bond space, the high yield Asian credit markets may see some supply from the sector in the dimsum space in the forthcoming weeks. Fixed income investors should track the market for new investment opportunities that may come up.