First non-enhanced dollar bond from a China property developer in 2022 is just US$100m

SEAZEN Group said on Tuesday (May 31) it had sold green notes worth US$100 million, the first offshore bond to be issued by a Chinese property developer this year without some form of credit enhancement.

But the relatively small size of the issue, the short duration of the note and its high coupon make it hard to gauge whether the sale represents a true test of investor appetite for China’s highly indebted property development sector which has been badly battered by a liquidity squeeze.

Shanghai-based Seazen said in a filing that a subsidiary had issued senior notes due Jun 1, 2023 at coupon rate of 7.95 per cent.

“We have yet to see any longer-tenor issuances of say 2-3 years; if it happens, it will be a signal that the market is starting to recover,” said Fitch Ratings senior director Adrian Cheng.

Seazen said the proceeds will be used to refinance mid-to-long-term offshore debt due within 1 year and for green projects. It has US$400 million worth of notes maturing in June and another US$400 million combined due in August and September, according to Refinitiv data.

Cheng said the sale will help Seazen’s liquidity but Fitch is still monitoring whether the developer can find other ways to refinance upcoming maturities.

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Fitch in April downgraded Seazen’s credit ratings to “BB” from “BB+” with negative outlooks, citing a deterioration in financial flexibility amid concentrated debt maturities.

But it added that Seazen’s liquidity was adequate, supported by strong access to bank loans and an investment property portfolio that can generate 10 billion yuan (S$2.1 billion) in recurring income and provide the firm with alternative funding options.

Seazen’s dollar bond due in August was trading at 95.270 US cents on the dollar on Tuesday compared to 95.264 on Monday, data from Duration Finance showed.

Its Hong Kong-listed shares gained over 2 per cent, outperforming a 0.7 per cent rise in the Hang Seng Mainland Properties Index.

There has been little corporate bond activity from Chinese real estate firms after some developers including China Evergrande Group defaulted on some offshore payments last year, rattling investor confidence in the industry which accounts for about a quarter of the country’s economy.

A few high-quality private developers including top player Country Garden issued corporate yuan bonds onshore this month, responding to a regulatory call to boost issuance and help improve market sentiment for the sector. REUTERS