China eases offshore and onshore bond issuance curbs for property firms

HONG KONG/SHANGHAI (REUTERS) - China has relaxed curbs on property firms seeking funds in offshore and onshore bond markets, people familiar with the matter say, a move that could allow fresh capital into a sector that has struggled to refinance after a slew of tightening measures.

Since late last year, regulators have made it harder for developers to sell onshore corporate bonds in a bid to help cool an overheating property market. Separately, the National Development and Reform Commission (NDRC) stopped granting new quotas for offshore dollar bond issuance in the second quarter of this year.

However, a bond underwriter told Reuters that the NDRC, the regulatory body that approves offshore corporate debt sales, in June lifted the curbs on offshore bond issuance by developers. A number of developers have already issued into the offshore market in recent weeks. "There are no written words, but the message was communicated in meetings with officials. This way, policies can be flexible," the underwriter said, declining to be named as he was not authorised to talk to the media.

Meanwhile, three developers told Reuters they can once again apply for onshore issuance with the China Securities Regulatory Commission, the agency responsible for onshore bond oversight. New regulations governing many land auctions and setting limits on home prices in some mainland cities are threatening many developers' business models, which in turn is hurting their cashflow.

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If liquidity continues to be tight, companies and analysts said the market might start to see bond defaults next year when many bonds reach maturity, especially in the onshore market.

According to the NDRC's website, 10 property companies, including Longfor, Country Garden, CIFI and Greentown China have been given the green light since June 23. Five have already completed their bond issuance. Neither the NDRC nor the CSRC replied to a request for comment.

However, one of the developers that applied to issue offshore said that the amount approved was less than what the company had sought, a sign regulators are still keeping a tight rein on financing in the property sector.

"There seems to be some progress for approvals after the hiatus although further approvals still seem uncertain at this point. We think that for refinancing and more solid developers, approvals will still be forthcoming but it won't be a floodgate situation," S&P analyst Christopher Yip.

For onshore bonds, developers such as China Vanke and Shanghai Shimao announced the sale of corporate bonds earlier this month, although both were using a 2015 quota so required fresh approval from the CSRC for the issuance. Agile also sold 3 billion yuan bonds last Wed. "The tightening seems to have relaxed a bit in May, they now resume the review process and our application is waiting to do that now," said a state-owned developer.

Developers are looking for alternative refinancing channels after the bond window at the main exchange was shut for months.

Beijing Capital Land Ltd said on Friday it plans to sell a bond worth up to 2 billion yuan on the Beijing Financial Assets Exchange (CFAE), a listing where CSRC approval is not required.