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Thursday, June 20, 2024

Poly, Chinese Developer, Considers $1.7 Billion Convertible Bond Offering

Here are the key points on the potential $1.7 billion convertible bond offering being considered by Poly, a major Chinese developer:

Overview

  • Poly Developments and Holdings Group Co. Ltd., one of China’s largest state-owned developers, is considering raising around $1.7 billion through a convertible bond sale.
  • The proceeds would be used to refinance existing offshore debt and replenish working capital.
  • Convertible bonds allow investors to convert the debt into equity at a set price after a specified period, providing an equity upside.

Background on Poly

  • Poly is a major real estate conglomerate owned by the Guangzhou city government.
  • It has had significant exposure to the property crisis roiling China’s real estate sector over the past couple of years.
  • The company has been seeking to raise funds to ease its liquidity crunch amid sluggish home sales and tight credit conditions.

Convertible Bond Details

  • The proposed convertible bonds would likely have a 5-year maturity.
  • Pricing and other key terms are still being finalized.
  • The deal size of around $1.7 billion would make it one of the largest convertible bond sales by a Chinese developer this year.

Market Context

  • Chinese developers have been actively tapping the convertible bond market this year to raise funds amid limited financing channels.
  • However, investor appetite remains selective given concerns over the property sector’s health.
  • Successful pricing will hinge on Poly’s credit profile and the conversion premium offered to investors.

In summary, the sizeable convertible bond deal underscores Poly’s funding needs but also points to some reopening in credit markets for stronger developers with state backing. The pricing and demand will provide insights into investor sentiment toward China’s property sector.

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