Guandian Real Estate Network In the past month, the central bank, China Banking and Insurance Regulatory Commission, etc. have successively released voices to maintain the healthy development of the real estate market, triggering market expectations for the relaxation of real estate credit management.
On October 20, Liu He, member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, said that there are currently individual problems in the real estate market, but risks are generally controllable and reasonable funding needs are being met. The overall trend of healthy development of the real estate market will not change.
Yi Huiman, chairman of the China Securities Regulatory Commission, said that excessive bond financing must be resolutely curbed from the source, and at the same time, unified law enforcement in the bond market must be strengthened and the risk of default in the bond market must be properly handled.
This may mean that on the premise of maintaining the healthy development of real estate, it is unrealistic for the industry to expect too much "big releases". Even so, if marginal relaxation can be achieved, it can still ease the tension in the capital chain to a certain extent for real estate.
The current real estate regulatory system has gradually linked the financing capabilities of enterprises to their leverage ratios, which has caused many enterprises to fall into financing difficulties. More than one senior executive of a real estate company told Guan Guan Real Estate New Media that real estate is now basically borrowing new to repay old ones, and has not received an increase in quotas from exchanges or banks. What's more, the declared issuance quota cannot exceed 85% of the bonds to be repaid.
Judging from the financing situation, real estate companies including Sino-Ocean, Financial Street, Country Garden, CIFI and other recent companies are still issuing credit bonds, but this cannot conceal the overall downward trend in industry financing. According to statistics from market research institutions, domestic and overseas bond financing of real estate companies in the first three quarters of this year was approximately 768.9 billion yuan, a year-on-year decrease of 21%, and the decline was 5 points larger than that in the first half of the year.
Before the industry turning signal appears, real estate companies are still waiting patiently.
Audit and Supervision
Corporate bonds account for a considerable proportion of direct financing channels for real estate. Wind statistics show that as of October 18, the domestic credit bonds issued by real estate companies totaled approximately 530.239 billion yuan, compared with 681.137 billion yuan for the whole of last year; of which general corporate bonds accounted for 209.172 billion yuan, compared with 681.137 billion yuan for the whole of last year. Around 210.11 billion yuan.
The overall level of corporate bonds mentioned above has increased significantly compared with a few years ago, mainly due to the change of corporate bonds from the previous approval system to the registration system.
For example, in May 2017, the Shanghai Stock Exchange issued the "Classified Supervision Plan for Corporate Bonds in the Real Estate Industry (Trial)", which raised the access threshold and carried out classified management for the review of corporate bonds of real estate companies, including limiting it to domestic and foreign companies. Listed real estate companies, central enterprises focusing on real estate, other private non-listed real estate companies ranked in the top 100 of the China Real Estate Association, etc.; set requirements for total assets, revenue, non-net profits, and asset-liability ratio after deducting advances from accounts received.
As of March 2020, a registration system will be implemented for corporate bonds. For public issuance of corporate bonds, the exchange will be responsible for issuance and listing review, and the China Securities Regulatory Commission will conduct issuance registration. At the same time, conditions such as "minimum company net assets" and "accumulated bond balance shall not exceed 40% of the company's net assets" are deleted from the conditions for issuance of corporate bonds. In February this year, the China Securities Regulatory Commission further canceled the mandatory rating regulations for publicly issued corporate bonds.
The registration system shortens the bond issuance cycle and simplifies the approval standards, which increases the feasibility of financing for real estate companies. Wind statistics show that in 2019, general corporate bonds issued domestically by real estate companies were approximately 161.187 billion yuan, equivalent to only 77% of 2020.
However, judging from the feelings of individual companies, the situation may be quite serious. According to incomplete statistics from Guan Guan Real Estate New Media, as of October 20, the total scale of corporate bonds applied for and approved by mainstream real estate companies registered with the China Securities Regulatory Commission during the year was approximately 178.031 billion yuan, of which more than 158 billion yuan was exceeded in the first half of the year, including 13.9 billion yuan from Country Garden. Dalian Wanda Commercial Management's 12.8 billion yuan; in the second half of the year, it was less than 20 billion yuan. The largest one was Shimao Co., Ltd.'s 6.638 billion yuan, and there was a big difference in the amount of approval.
According to general regulations, real estate companies that apply for registration of corporate bonds can use installment issuance. The first issuance is completed within 12 months from the date of consent to registration, and the remaining issuance is completed within 24 months.
Through this regulation, many real estate companies issued corporate bonds this year, but actually used the quota approved in 2020. For example, Sunshine City registered 8 billion yuan in bonds in 2020. As of July this year, it has issued the fourth issue, and the remaining part has not yet been issued.
As for bond issuance and bill financing, the interviewed senior executives of real estate companies all told Guanduan Real Estate New Media that the overall difficulty of bond issuance is not small. An unnamed senior executive of a real estate company in South China acquiesced to the tightening of financing channels; a state-owned real estate company successfully issued corporate bonds in the first half of the year. The company's senior executive said that although the current regulatory authorities still approved the issuance of bonds by real estate companies, the review was "strict" level.
Beijing real estate company Sino-Ocean Group has previously mentioned relevant restrictive policies for real estate company financing. The company pointed out that in terms of credit financing, commercial banks must provide loans to real estate companies only if they meet certain prerequisites, and the form and purpose of the loans must also meet relevant requirements.
It continued that at the current stage, real estate companies that raise funds through other channels such as issuing stocks and bonds also need to meet additional approval requirements from relevant regulatory authorities.
Take the Shanghai Stock Exchange as an example. On April 22 this year, the exchange issued the "Guidelines No. 3 on the Application of the Review Rules for Corporate Bond Issuance and Listing of the Shanghai Stock Exchange - Key Matters of Concern in the Review."
According to the "Guidelines", the Shanghai Stock Exchange will focus on whether the issuer is an investment holding issuer with a "weak mother and strong son" and whether there are circumstances that require attention such as credit rating downgrades and debt default records, and will Information disclosure requirements for specific types of issuers such as urban construction companies and real estate companies have been specifically clarified.
On October 20, Yi Huiman, Chairman of the China Securities Regulatory Commission, also expressed his views on the reform of the registration system. Yi Huiman said that regulatory authorities have always emphasized that the registration system does not mean relaxing audit requirements, and must strictly control the authenticity, accuracy and completeness of information disclosure to improve the quality of listed companies from the source. He also emphasized that we must deeply understand the "dual nature" of capital and strictly control the "entry gate" of the capital market.
Approval requirements
Real estate is one of the main destinations for capital flows, and the industry has continued to be under regulation in the past few years. Looking only at the bond issuance side, in 2015, the China Securities Regulatory Commission relaxed the domestic financing conditions for real estate companies and agreed in principle to red chip companies issuing medium-term notes, short-term financing bonds and corporate bonds domestically; the following year, the exchange required real estate companies to be divided into three This type of supervision requires that funds raised from corporate bonds shall not be used to purchase land.
The above two policies, coupled with the regulatory policy on the classification of real estate corporate bonds in May 2017, have caused the direct financing of real estate companies to experience a roller coaster ride that first increased and then declined. Guan Guan Real Estate New Media once reported that from 2016 to 2018, a 20 billion yuan corporate bond project applied for public issuance by Country Garden was suspended twice.
Compared with past regulations, in August 2020, the Ministry of Housing and Urban-Rural Development and the Central Bank clarified the rules for fund monitoring and financing management of key real estate companies, and the impact is more far-reaching. With the introduction of the "three red lines" policy, financing restrictions for real estate companies continue to tighten, which Yu Liang called a sign of "the end of the era of financial dividends."
A senior executive of a state-owned real estate company told Guan Guan Real Estate New Media that the issuance of bonds by real estate companies has basically been borrowing new money to repay old ones, and one of the additional approval requirements of the regulatory authorities since the "Three Red Lines" is mainly based on window guidance. "15% off" related.
"85% off" is an abbreviation for the debt repayment ratio when due. In fact, on November 27 last year, the Shanghai Stock Exchange issued the "Shanghai Stock Exchange Corporate Bond Issuance and Listing Review Rules Application Guidelines No. 1 - Application Documents and Preparation", which clearly set August 10 as the node and will accept applications after this node. For real estate company corporate bonds, the declared amount shall not exceed 85% of the planned principal and interest repayment of the bonds.
By the end of April this year, the Shanghai Stock Exchange revised the "Guidelines", deleted the relevant statements that took August 10 last year as the node, and expanded the scope of the "15% discount" to all corporate bonds declared by real estate companies. .
In practice, the upper limit of "15% off" will not necessarily be reached. For example, Sunshine City issued 1 billion yuan of new bonds in late August last year, which was intended to be used to repay the remaining principal of "16 Yangcheng 02" of 1.289 billion yuan, a proportion of about 77.58%; the 1.5 billion yuan of new bonds issued in July this year were mainly used In repaying and selling back "16 Yangcheng 01" and "19 Yangcheng 02" ***2.06 billion yuan in principal, accounting for approximately 72.82%.
While the "15% discount" rule has led to a steady decline in the existing debt of real estate companies, the senior executives of real estate companies interviewed also emphasized that at this stage, real estate companies, including corporate bonds, medium-term notes and other channels, do not have new quotas. .
"Currently, exchanges and inter-bank financing do not treat (real estate companies) differently according to the 'three red lines', and even the 'green tranche' has not increased the quota." Working in the "green tranche" state-owned real estate Business people said that now even they are feeling the pressure of tightening financing.
According to outside reports, the "three red lines" are classified into four grades: red, orange, yellow and green from low to high according to the number of three indicators that meet the standards, corresponding to the annual scale of interest-bearing liabilities. The growth rate shall not exceed 0, 5%, 10%, or 15%.
The above-mentioned senior executives of the real estate companies confirmed to Guan Guan Real Estate New Media that the real estate financing environment has indeed not been relaxed yet. When the regulatory authorities review and approve bond issuances, an important part of the strict review is the "fundraising purpose." The person explained that this is mainly because regulators are worried about the solvency of real estate companies.
Data disclosed by the Shanghai Stock Exchange in June showed that in 2020, corporate bond issuers achieved an average revenue increase of 2.5%, and real estate issuers’ average income increased by 11.95%; issuers’ net cash outflows from financing activities increased by 13.35% year-on-year. , and real estate companies were affected by industry policies such as the "Three Red Lines", and their cash flow from financing activities fell sharply by 94.43% compared with the previous year.
At that time, when the Shanghai Stock Exchange responded to the supervision of corporate bond annual reports, it emphasized the need to focus on risk orientation and pay attention to the disclosure of major bond repayment matters. Among them, the exchange conducted detailed analysis on companies with higher risk exposure in the early stage and more severely affected by the epidemic, as well as issuers with greater debt repayment pressure this year and major negative changes in financial indicators such as operating conditions or debt solvency.
S&P Ratings also pointed out in a recent report that as supervision gradually increases supply-side regulation, highly leveraged real estate companies that have aggressively acquired land for scale expansion in the past may face greater risks. Big challenge. This is mainly because in the current tight financing environment, it is difficult for highly leveraged real estate companies to continue to rely on refinancing to maintain capital rolling, which may catalyze the fermentation of credit risk events.
Guandian Real Estate New Media has learned that a considerable number of real estate companies will set special terms when financing, including but not limited to cross-protection, financial indicator commitments, changes in control, rating commitments, etc. A single debt can easily trigger Butterfly effect. Fantasia founder Zeng Baobao previously mentioned that Standard & Poor's suddenly downgraded the company's rating at the end of September, which severely restricted the company's domestic and overseas financing and caused periodic liquidity tensions.
Blue Light Development, another real estate company that has already defaulted on its debt, issued a total of 1.55 billion yuan in corporate bonds in March and July last year, which only accounted for the 2.9 billion yuan issuance quota approved in November 2019. 53%, and there have been few new corporate bond issuances since then. According to regulations, the bond issuance is valid until November this year.
Between the cracks
In addition to the exchange market, tools such as medium-term notes, short-term financing bonds, and ultra-short-term financing bonds commonly used in the inter-bank market have not continued to become the "promised land" for real estate companies. ". Although the China Securities Regulatory Commission canceled the mandatory rating of corporate bonds in February this year, and the National Association of Financial Market Institutional Investors also canceled the mandatory rating of short-term financing bonds in March, medium-term notes of real estate companies are basically subject to additional approval requirements such as "15% off".
According to incomplete statistics from Guanguan Real Estate New Media, as of October 20, the National Dealers Association disclosed that the total amount of medium-term note registration applications accepted by mainstream real estate companies during the year was approximately 93.513 billion yuan.
Among them, similar to the distribution of the number of corporate bond application approvals, the majority of medium-term note registrations were concentrated in the first half of the year, accounting for approximately 76.2 billion yuan, involving Vanke, Sunshine City, Dalian Wanda Commercial Management, China Resources Land, Poly, Jinmao, Joy City, etc.; in the third quarter, the registration approvals were mainly concentrated in September, and only involved Tianheng Real Estate and Capital Investment.
Interviewed real estate company executives said that the industry basically borrows new money to repay old ones, and the registration of bills only means that the corresponding company has existing debt maturing during this period. “It doesn’t have much special meaning.”
According to Wind statistics, the “three red lines” are the number of financings through corporate bonds, medium-term notes, ultra-short-term financing bonds, ABS and other instruments since August 2020 China Merchants Shekou has the largest number of real estate companies, including 10 ultra-short-term financing bonds, 5 corporate bonds and 3 medium-term notes, with a total fund-raising amount of 24.5 billion yuan; followed by Huafa Group with 16 transactions, First Capital Group with 14 transactions, and Poly Development with 13 transactions. Pen.
If we only look at corporate bonds (excluding private placement bonds), the real estate companies that issued the most corporate bonds during this period were Poly Development with 10, Vanke, China Overseas, and Longfor 8 each, and Finance Street 7 strokes. The debt issuance process for real estate companies is relatively difficult, but successfully raising funds from the public market will still bring them considerable benefits.
From a direct impact point of view, after companies such as Vanke, Poly, and Sunshine City that issued corporate bonds this year implemented their plans for using raised funds in accordance with the established plans, their asset-liability ratios shown in their consolidated financial statements basically increased by less than 1%. However, the ability of current assets to cover current liabilities has been improved, and the ability to pay short-term debt has been enhanced.
Under normal circumstances, the debt repayment funds required by real estate companies to issue bonds mainly come from their daily operating income, which requires the company to maintain good operating conditions, financial status and asset quality. Affected by the increase in the proportion of land prices to housing prices in the past few years, the overall profitability of real estate companies has declined compared with past levels.
The second is to provide liquidity support through existing bank credit lines and sales returns. For example, as of the first half of this year, Sino-Ocean claimed that it has an unused credit line of 59.6 billion yuan and enjoys the credit line of its parent company, which has an unused credit line of 242.4 billion yuan. Most real estate companies strived to increase the speed of sales repayment during the year and launched marketing measures including price reductions and promotions.
Under the "two concentration" restrictions on bank loans, commercial banks' credit financing conditions for real estate companies have increased, and mortgage quotas for commercial housing loans are almost exhausted.
Haitong Securities once calculated that among 39 listed banks, 11 banks still have a proportion of personal housing loans exceeding the warning line, but the extent of crossing the line has generally declined. Banks with a proportion of real estate loans exceeding the warning line have never exceeded the warning line. 10 companies dropped to 9 companies.
It is worth mentioning that for housing companies, they can still obtain part of the funds publicly through "housing rental special corporate bonds". According to the rules of the exchange, no less than 70% of the funds raised by this financing type must be used for rental housing projects. The projects cover residential land, collective land construction, commercial office buildings, industrial plants and other renovation leasing projects, and are not subject to " 15% off” limit.
Including Vanke, Poly, Gemdale, Binjiang, China Resources Land, Dahua Group, Huafa Holdings, Sunshine City and other real estate companies, they have been approved or are applying for special corporate bonds for housing rentals in the past year. Judging from the actual situation, Vanke, Poly and other companies that have completed the issuance of this product will use no less than 70% of the funds for the construction of leasing projects, and the remaining part will mostly be used to "supplement working capital."
However, the liquidity obtained through the above channels is still difficult to quench the thirst. Most practitioners had never expected that real estate regulation since the “Three Red Lines” would have such a far-reaching impact. If the restrictive financing policies for real estate companies continue or are further strengthened, this group will face an extremely difficult time in terms of financing plans and financing costs.
Faced with this situation, real estate companies have high expectations for loose financing margins, and regulators' statements always affect their nerves.
At the end of September, the central bank and the China Banking and Insurance Regulatory Commission stated to the public that they would guide major banks to accurately grasp and implement the real estate financial prudent management system, maintain the stable and orderly release of real estate credit, and maintain the stable and healthy development of the real estate market.
In mid-October, Zou Lan, director of the Financial Market Department of the Central Bank, explained that some financial institutions also have some misunderstandings about the "third-tier and fourth-tier" financing management rules for the 30 pilot real estate companies, and will require "red-tier" companies to The balance of interest-bearing liabilities is not allowed to increase. The misunderstanding is that banks are not allowed to issue new development loans. After companies repay the loans with sales proceeds, newly started projects that should have been reasonably supported cannot get loans, which has also caused the capital chain of some companies to be tight to a certain extent. .
On October 20, Liu He, member of the Political Bureau of the CPC Central Committee and Vice Premier of the State Council, also stated that the reasonable capital needs of real estate are being met. On the same day, Pan Gongsheng, deputy governor of the central bank and director of the State Administration of Foreign Exchange, pointed out that under the expected guidance of the financial management department, the excessive contraction of risk appetite of financial institutions and financial markets has gradually been corrected, and financing behavior and financial market prices are gradually returning to normal.