CBI Extends Bond Guarantee Program for Property Developers to USD2.7 Billion

(Yicai Global) Nov. 3 — China Bond Insurance said in a meeting with 21 real estate companies that the credit enhancement body is expanding the bond guarantee program for private property developers to about CNY20 billion (USD2.7 billion), according to the participants.

At least 10 real estate developers will see their credit enhanced by the CBI to secure funds at a reasonable cost to improve investors’ confidence and replenish their liquidity.

Since August, state-owned CBI granted 10 developers, including Seazen Holdings and Midea Real Estate Group, full, unconditional, and irrevocable guarantees to help them issue CNY8 billion (USD1.1 billion) worth of bonds, data from the National Association of Financial Market Institutional Investors showed.

“Liquidity is the biggest issue of the real estate industry, not insolvency,” a senior real estate researcher said. Private developers need timely and decisive measures to receive liquidity support and market confidence to be gradually restored, they added.

“By providing a full guarantee to support the issuance of property bonds, the CBI not only solved private developers’ difficulties of selling bonds but also eased underwriters’ concerns over post-default risk disposal,” a bond underwriter from a bank told Yicai Global.

Longfor Group Holdings, Country Garden Holdings, CIFI Holdings Group, and Excellence Group are among the developers that are already issuing guaranteed bonds, sources from the meeting said, adding that other real estate firms, such as Radiance Holdings, Newhope Real Estate, and Agile Group Holdings, are also preparing to issue such bonds.

Underwriters are concerned about investors’ willingness to subscribe when assessing private developers’ bonds. As the first round of the credit enhancement program showed that state-guaranteed private developers’ bonds were well accepted, many attendees at the latest CBI meeting expressed their hopes to join the expansion.

The People’s Bank of China fully supports the healthy development of the real estate industry, Governor Yi Gang said at a summit held by the Hong Kong Monetary Authority yesterday. The market will be able to keep stable development with the continued advancement of the domestic urbanization process.

Editor: Martin Kadiev

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