Chinese Developer Seazen Wins Cheap Money in Junk Bond Deal

2022-05-31 04:27:41.515 GMT

By Dorothy Ma

(Bloomberg) -- A Chinese property developer was able to raise money issuing a dollar bond at yields far lower than those on its existing securities in an unusual development, after it did the deal using a unit of a Chinese securities firm as the sole coordinator.

Seazen Group Ltd., the nation’s 16th-largest builder by sales, priced $100 million of a 364-day green note to yield 7.95%. That contrasts with yields of about 30% or more on the company’s existing notes maturing in about one to two years, prices compiled by Bloomberg show.

Such a large gap is “somewhat unusual,” according to Charles Macgregor, head of Asia at Lucror Analytics. “It appears this is not an offering to global investors,” he wrote. 

The green issue is the first offshore bond sold by a Chinese developer without credit enhancements this year, at a time when the industry is reeling from a debt crisis sparked by a clampdown on excessive leverage and worsened by slumping home sales. Most junk-rated builders have been effectively shut out from the international debt market after record defaults caused borrowing costs to spike to prohibitive levels of more than 20%.

Haitong International Securities was the sole global coordinator for the Seazen offering. Seazen Resources Securities, a brokerage in which Seazen Group is the majority shareholder, was one of the joint bookrunners and joint lead managers. 

As one of China’s top developers of commercial projects, Seazen operated 125 shopping malls under its Wuyue Plaza brand as of the end of 2021, according to its annual report. Founded in the eastern province Jiangsu, the builder made most of its contracted sales in the Yangtze River Delta Area last year. 

The shopping mall operator was cut deeper into junk by Fitch Ratings and Moody’s in recent weeks, with the latter citing “lower liquidity buffer and constrained funding access” as one of the reasons. 
--With assistance from Finbarr Flynn.