China Evergrande Group (03333.HK), the country’s top home builder, plans to issue up to US$1 billion in US dollar notes to refinance debt, a move which comes on top of a US$1.5 billion dual tranche issue this week, Reuters reports.
Acquisition-hungry Evergrande is China’s second most indebted company with some US$57 billion in debt, almost six times its market value.
But it does have US$30.8 billion in cash, providing some comfort to shareholders, while plans for a mainland listing for most of its property assets have also raised hopes that it will reduce its huge leverage.
The senior notes due 2024 will carry an interest rate of 9.5 percent per annum and terms of the notes will be determined through a book-building exercise, the developer said in a filing to the Hong Kong bourse.
This latest plan as well as its sale of three-year and five-year bonds this week come after creditors recently approved amendments to its Evergrande’s bond covenants to allow it to take on billions of dollars of additional debt.
Evergrande’s net debt to EBITDA of 17.3 times dwarfs the industry median of 8.2, according to Thomson Reuters data.
The figure implies that it would take Evergrande 17.3 years or more than twice as long as the industry average to repay its debt at its current pace of cash generation.
Despite a stretched balance sheet, investors are keen on Evergrande’s bonds ahead of its planned Shenzhen listing.
“Evergrande’s high leverage should be partially eased after it receives the full proceeds from its 30 billion yuan equity-raising for its onshore subsidiary from new investors in 2017, as well as its ongoing restructuring in the capital market,” Fitch said in a statement on Thursday.
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