Recently, Greentown China announced that it has redeemed $500 million of perpetual bonds.
Greentown China can be called a large perpetual bond holder. According to the data, as of the first half of 2021, the scale of its perpetual bonds was 18.537 billion yuan.
According to the plan, Greentown China will redeem all perpetual bonds by 2023.
To complete this plan, Greentown China's most basic operation is to reduce expenses and leave cash to pay off debts.
However, in January this year, Greentown China ranked first in the list of real estate enterprises with 10.4 billion yuan of equity land acquisition.
While redeeming perpetual bonds and taking land in a big way, Greentown China relies on the financing convenience brought about by its state-owned enterprise background.
Continuous redemption of perpetual bonds, profitability becomes the key
On February 9, Greentown China announced that it would redeem the US$500 million perpetual bonds issued by the company's wholly-owned subsidiary in 2019.
More than two months ago, in December 2021, Greentown China also announced that it would redeem $500 million of unlisted perpetual bonds that could be redeemed in 2021.
Greentown China was previously a major perpetual bond issuer, with a peak of 21.229 billion yuan in perpetual bonds.
As of the first half of 2021, the scale of Greentown China's perpetual bonds was 18.537 billion yuan.
According to Greentown China's plan, it will redeem all perpetual bonds in 2023.
Since the second half of last year, Greentown China has redeemed $1 billion of perpetual bonds in July, followed by $3.1 billion and US$500 million of perpetual bonds.
Recently, Greentown China once again redeemed $500 million in perpetual bonds.
As of now, the scale of Greentown China's perpetual bonds should have dropped to about six or seven billion yuan.
In this way, Greentown China is promoting the completion of the plan with practical actions.
The reason why Greentown China wants to actively buy back perpetual bonds is from its characteristics.
First, from the perspective of accounting treatment, perpetual bonds are included in the owner's equity. In other words, no matter how many perpetual bonds issued by housing enterprises, it will not increase the scale of their liabilities, which is conducive to adjusting their debt indicators.
Greentown China is naturally well aware of this. However, perpetual bonds also have drawbacks, that is, high financing costs and erosion of profit margins.
The data shows that in the first half of 2021, the weighted average interest rate of Greentown China's perpetual bonds was 6.60%, while the weighted average interest cost of its total borrowing was 4.6% in the same period.
In the first half of last year, Greentown China's net profit attributable to the mother was 1.769 billion yuan, compared with the distribution profit of perpetual bonds of 650 million yuan in the same period.
It is not easy to make some money, and you have to pay so much interest for perpetual bonds, Greentown China is definitely going to be "heartbroken".
In addition, the role of perpetual bonds in reducing the debt ratio is also weakening.
Seeing that perpetual bonds have become "chicken ribs", Greentown China resolutely abandoned them.
The ambition of scale is undiminished, and the enthusiasm for taking the land against the trend is high
Whether it is perpetual debt or other debts, the repayment of debts depends on cash.
In order to repay the debt, other housing companies are racking their brains to reduce expenditure. Especially for high-cost land, if you can take it, you will not take it.
However, Greentown China is not taking the usual path, not delaying the redemption of DOLLAR debts, but also taking land in a big way.
In the past January 2022, Greentown China ranked first in the list of real estate enterprises with 10.4 billion yuan of equity land acquisition.
In fact, since last year, greentown China's land acquisition momentum has been extremely fierce.
The data shows that in the whole year of 2021, greentown China's equity land acquisition amounted to 96.9 billion yuan, ranking 6th in the land acquisition list.
It should be known that in 2020, Greentown China only ranked 8th with 88.7 billion yuan in land acquisition.
That is to say, in the cold winter of the industry in 2021, Greentown China took the land against the trend and did not lend itself.
The reason for this is because of Greentown China's desire for scale.
At the performance meeting in early 2020, Zhang Yadong, chairman of the board of directors of Greentown China, said that "by 2025, the sales scale will reach 500 billion yuan, of which the traditional real estate development part will achieve 350 billion yuan and the asset-light part will achieve 150 billion yuan.".
The basic premise for accomplishing this goal is to have sufficient soil reserves.
As Zhang Yadong said before, "The biggest problem of Greentown is that there is no goods to sell." The means to solve this difficult problem, then, are nothing more than to take land on a large scale.
Judging from the recent results, Greentown China has indeed achieved good results in taking land against the trend.
According to the data, in the whole year of 2021, Greentown China achieved a cumulative contract sales amount of about 350.9 billion yuan, an increase of about 21% year-on-year.
This result, among a number of housing enterprises with sluggish sales performance, can be called "standing out from the crowd".
However, according to the "two-point ban" of no more than 40% of the previously announced land sales ratio, Greentown China's 66.88% land sales ratio in 2021 exceeded the standard by 26.88 percentage points.
"Forbidden" to take land, Greentown China is not small.
Frequent bond financing, the background of state-owned enterprises into dependent
Of course, whether it is debt repayment or land acquisition, Greentown China relies on sufficient cash support.
So, where does the cash come from? Or have to issue bonds.
Just on January 3, Greentown China disclosed the issuance documents of the first medium-term note in 2022, with a registered amount of 4 billion yuan and a proposed issuance amount of not more than 2.6 billion yuan.
Of the $2.6 billion bills, $1.5 billion was used to repay debt.
On January 28, Greentown China once again announced the issuance of US$400 million credit enhancement bonds due 2025, with an annual interest rate of only 2.30%.
Throughout January, Greentown China issued 2.6 billion yuan of credit bonds and 2.53 billion yuan of foreign debt, totaling 5.13 billion yuan, the largest financing scale, which was 2 billion yuan more than the second-place Country Garden.
Moreover, the average interest rate of Greentown China's bond issuance in January was only 3%, ranking second among bond-issuing housing enterprises, only 0.1 percentage points higher than Su Gaoxin.
In fact, not only in January, Greentown China's recent financing activities have been unusually frequent.
In late December 2021, Greentown China also issued US$150 million, three-year, 5.95% off-shore senior notes.
Today, that is, February 10, the relevant news shows that Greentown China intends to register and issue two medium-term notes, the amount of the fourth medium-term note in 2022 is 2 billion yuan, and the amount of the fifth medium-term note in 2022 is 1.5 billion yuan, and the project status is "pre-evaluated".
Other housing companies are racking their brains in order to raise funds, but Greentown China's bond issuance looks so "easy".
In this regard, even the always "sharp" S&P has been quite softened, saying that "Greentown China's continued refinancing will support its stable business and provide a buffer for the difficult real estate sales prospects in the coming months.".
The reason is still related to the background of State-owned enterprises in Greentown China.
It should be known that after CCCC became the major shareholder of Greentown China, it jumped to the background of state-owned enterprises, obtained sufficient capital advantages, and the financing cost fell to an ultra-low level of 4.6% of the industry.
With the support of state-owned enterprises, Greentown China naturally wants to replace all perpetual bonds, after all, state-owned enterprises attach importance to profit indicators; moreover, with financial support, Greentown China's ambition for scale also has sufficient confidence.
However, does Greentown China remember the experience of almost falling down due to capital chain problems when it was a private enterprise?
Although it has a state-owned enterprise background, Greentown China still has to develop steadily.