On May 17, a reporter from Securities Times Securities China learned from the Shenzhen Stock Exchange that the market's first private housing enterprise credit protection certificate business was officially launched, increasing the financing credit level of ABS in the Longfor supply chain, marking an innovative tool to support private housing enterprise debt financing Achieve new milestones.

  On May 16, market sources said that three private housing companies, Country Garden, Longfor and Midea, were selected by regulators as model private housing companies and will issue RMB bonds one after another this week.

In order to attract investors, the establishment agency will issue credit protection tools at the same time to help private real estate developers gradually restore the financing function of the open market.

  That night, Longfor, Midea Real Estate, and Country Garden successively issued announcements. According to the announcement, these three private housing companies are about to issue the first phase of corporate bonds on the Shanghai Stock Exchange, with a total bond issuance scale of 2 billion yuan.

  Industry insiders believe that the government supports the accelerated implementation of financing measures for private real estate enterprises, and credit enhancement through market-oriented credit protection tools will help private real estate enterprises break through the financing difficulties.

The demonstration effect of leading private housing companies will help private housing companies gradually restore the financing function of the open market.

  The first private housing enterprise credit protection tool is launched

  On May 17, Securities Times Securities China reporter learned from the Shenzhen Stock Exchange that the Shenzhen Stock Exchange launched a credit protection certificate jointly created by China Securities Finance Co., Ltd. (hereinafter referred to as China Securities Finance) and the special plan manager CITIC Securities. -Lianyirong-Xinlian No. 1 Phase 2 Supply Chain Financial Assets Support Special Plan" (hereinafter referred to as Longfor Supply Chain ABS) has successfully completed bookkeeping.

  It is understood that the total issuance size of ABS in Longfor supply chain is 402 million yuan, the interest rate of senior asset-backed securities is 3.50%, the subscription ratio of investors is 2.36 times, and the underlying assets are the accounts receivable of 306 small and medium-sized suppliers upstream of the supply chain to Longfor.

The nominal principal of the corresponding credit protection certificate is 40 million yuan, and the issuance scale of the protected subject is 400 million yuan.

  The Shenzhen Stock Exchange stated that the successful establishment of the credit protection certificate is the first private housing enterprise credit protection tool in the market. phased results.

  The Shenzhen Stock Exchange also stated that the financing solution of "ABS + credit protection certificate" is the first ABS credit protection certificate jointly created by China Securities Finance, and it has also achieved innovation in the business of credit protection tools.

First, compared with the one-to-one credit protection contract, the credit protection certificate has stronger circulation ability and more market-oriented pricing, which improves the willingness of all parties to invest in Longfor ABS, which is beneficial to the upstream small and medium-sized enterprises in the supply chain to speed up the recovery of funds and reduce the capital cost and broaden financing channels.

The second is to adopt the joint issuance method to give full play to the role of the core institution of the CSI financial market, which will help gather the forces of all parties in the market and further enhance the financing support of the capital market for private enterprises.

  The Shenzhen Stock Exchange said that in the next step, it will resolutely implement the decision-making and deployment of the Party Central Committee and the State Council on supporting the development of private enterprises. Product innovation, support more market institutions to participate in the private enterprise bond financing credit protection tool business, and work together to empower the healthy development of the private economy.

  3 private housing companies plan to issue a total of 2 billion corporate bonds

  At noon on May 16, there was market news that three private housing companies, Country Garden, Longfor and Midea, were selected by regulators as model private housing companies and will issue RMB bonds one after another this week.

In order to attract investors, the founders will issue credit protection tools including credit default swaps (private CDS) or credit risk mitigation warrants (CRMW) at the same time, to help private real estate developers gradually restore the financing function of the open market.

  Affected by the above news, as of the close on May 16, the stock prices of the three real estate companies mentioned above have all risen, among which Country Garden has risen by 10.41%.

  However, Country Garden issued an announcement on unusual stock price fluctuations on the Hong Kong Stock Exchange that night, stating that it was not aware of any reasons for the stock price fluctuations, or any information that must be released to avoid a false market in the company's securities, or any inside information that must be disclosed.

  According to the announcement, Longfor, Midea Real Estate, and Country Garden, three private housing companies, are about to issue the first phase of corporate bonds on the Shanghai Stock Exchange, with a total bond issuance scale of 2 billion yuan.

  Country Garden stated that the company plans to publicly issue a domestic corporate bond with a face value of not more than 500 million yuan to professional investors in the short term.

The issuance of corporate bonds is still only in the planning stage.

  According to Longfor’s announcement, the company’s public issuance of corporate bonds of no more than 18 billion yuan (including 18 billion yuan) has been approved by the China Securities Regulatory Commission.

The issuance scale of this issue of bonds does not exceed 500 million yuan (including 500 million yuan), with a term of 6 years, with the option to sell back the investor at the end of the third year and the option to adjust the issuer's coupon rate. The coupon rate inquiry range is 3.00% -4.00%, the issue date is May 18, 2022 to May 19, 2022, and the value date is May 19, 2022.

  For the purpose of raising funds for this issue of bonds, Longfor announced that the raised funds are intended to be used to supplement the company's daily production and operation liquidity, and will not be used for new share placement, subscription, or stocks and their derivatives, convertible corporate bonds, etc. transactions and other unproductive expenditures.

According to the company's financial status and capital use needs, the company may adjust part of its working capital to repay interest-bearing debts in the future.

  According to the announcement of Midea Real Estate, the company has obtained approval from the China Securities Regulatory Commission to issue corporate bonds with a face value of no more than 6.721 billion yuan (including 6.721 billion yuan) on December 30, 2020.

The bonds are issued in installments. The current plan is to issue bonds with a scale of not more than 1 billion yuan (including 1 billion yuan), with a term of 4 years, with the option of the issuer to adjust the coupon rate at the end of the second year and the investor's return. The selling option, the inquiry range of the coupon rate of this bond is 4.10%-4.90%, and the value date of this bond is May 24, 2022.

  As for the purpose of raising funds for this issue of bonds, Midea Real Estate announced that the funds raised in this issue of corporate bonds will be used to repay corporate bonds after deducting issuance expenses.

  Private housing enterprises' financing dilemma is broken

  For the top private housing companies to issue bonds with the blessing of credit protection tools, Liu Shui, head of research at the Enterprise Division of the China Index Research Institute, believes that this means that the financing difficulties of private housing companies have been broken.

  According to Liu Shui, in April 2022, under the guidance of the China Securities Regulatory Commission, the Shanghai and Shenzhen Stock Exchanges held the "Symposium on Credit Protection Tools Supporting Private Enterprise Bond Financing". The role of corporate financing in the process of encouraging market institutions and policy institutions to provide credit enhancement support for private corporate bond financing through the creation of credit protection tools.

In May, the Shenzhen Stock Exchange held a seminar on "Improving Credit Support for Private Enterprises", focusing on improving credit support and researching and discussing measures to alleviate the "financing difficulties" of private enterprises.

  Liu Shui believes that the three private housing companies were selected as model private housing companies by regulators this time, and they issued debt financing through credit protection tools, which means that the government's support for private housing companies' financing measures is accelerating.

  "In the current market environment, credit enhancement through market-based credit protection tools will help private housing companies break through financing difficulties and increase investor confidence." Liu Shui pointed out that credit protection tools can effectively control credit risks and mitigate credit risks for investors. Capital occupation and optimized credit management.

In terms of overseas bonds, in fact, since the beginning of this year, private real estate companies such as Zhuoyue have used standby letters of credit as credit enhancement measures when issuing overseas bonds, and have achieved success.

In terms of domestic credit bonds, credit protection tools are an effective way to increase credit. The issued credit protection certificates play a strong role in credit enhancement for issuing companies, which can quickly break the financing dilemma of private real estate enterprises and help guide the market to repair the real estate industry. The investment confidence of the industry will improve the financing environment of private real estate enterprises.

  According to the statistics of the China Index Research Institute, since the second half of 2021, many private housing companies have defaulted, and the difficulty of financing private housing companies has increased significantly.

From January to April 2022, the issuance scale of real estate enterprise credit bonds was 153.2 billion yuan, a year-on-year decrease of 37.7%. Among them, the issuers were mainly central enterprises and local state-owned enterprises, accounting for 84.9% of the issuance amount. Private enterprises only issued 8 bonds, raising 9.41 billion yuan. Yuan, accounting for 6.1%, and the financing strength is very weak.

In the same period, the scale of overseas bond issuance was only 10.5% of the same period last year, with an amount of 14.3 billion yuan, of which private housing companies raised 7 billion yuan, less than 50%.

  Liu Shui believes that the current financing of private housing enterprises is difficult and urgently needs to be repaired.

"Country Garden, Longfor and Midea are all leading private enterprises in the real estate industry, with strong development and management capabilities and relatively stable finances. After these three companies successfully issue bonds for financing through credit protection tools, they will play a good role in the follow-up market. Demonstrating the driving effect, more real estate companies will follow similar credit enhancement measures to issue debt financing." He said.

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