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2021 is the year with the most debt maturity for housing enterprises, and it is also the year when housing enterprises are under the greatest pressure.
Following the Evergrande thunderstorm, Xinli, Fantasia, Modern Real Estate and other Chinese-funded real estate companies have defaulted on their US dollar bonds, the credit crisis has been pushed to a climax, resulting in the collapse of confidence in the capital market.
Recently, the three major international rating agencies have taken turns to downgrade the rating of housing enterprises on a large scale.
Credit rating is a comprehensive consideration of asset liquidity, financing ability, solvency, performance ability, etc. by the institution, and the enterprise is rated as different grades.
Credit rating is divided into entity rating and product rating, the former is the assessment of the overall credit risk of the enterprise, the latter is the assessment of the maturity of a bond publicly issued.
The downgrade is mainly due to concerns about the credit risk of housing enterprises.
In just two days from October 18 to 19, the credit rating of domestic housing enterprises or related bonds was "sniped" by the international rating agency Moody's, involving at least 19 housing enterprises.
Including Yuzhou, Shimao, Jinke, Zhongjun, Hongyang, Baolong, Rongxin, Greenland, Sunshine City, Kaisa, Zhongliang, R&F, Xiangsheng, etc.
For example, Moody's downgraded greenfield holdings' corporate family rating from "Ba1" to "Ba2" and Kaisa's corporate family rating from "B1" to "B2", placing the rating under negative observation.
S&P has also successively downgraded the rating ratings and rating outlooks of many real estate companies, including Evergrande Real Estate, Xinli Holdings, Fantasia, Xinyuan Real Estate, Jianye Real Estate, and Rongsheng Development.
On October 21, Fitch included 29 developers of in-houses, including Jinmao, Xuhui, Kaisa, Longhu, Rongxin, Sunac and R&F, on the rating watch list.
According to a research report released by Guojin Securities on October 14, in less than a month and a half since September, Moody's, Standard & Poor's and Fitch have downgraded the main body rating of housing enterprises at least 25 times, and some of them have been downgraded many times;
If you count Moody's rating actions against 19 real estate companies from October 18-19, the number of rating downgrades so far in September has reached at least 44.
Image source: Phoenix Wind Finance Society
Statistics show that as of the end of September, the three major international rating agencies such as Moody's, Standard & Poor's and Fitch have downgraded the rating of real estate enterprises more than 90 times, more than double the total number of last year.
Judging from the Moody's report, such an intensive downgrade of the rating of housing enterprises is due to the lack of optimism about the future sales and financing prospects of housing enterprises, and is worried about the risk of their liquidity.
The policy is tightening, the financing channels are narrowing, and the maturity scale of bonds has increased... Multiple negative factors superimposed and fermented, becoming the "fuse" of rating changes.
Yu Xiaoyu, research director of Yihan Think Tank, said that the scale of thunderstorms is a bit much, and rating agencies have begun to adjust the model.
The key point is that with the strengthening of pre-sale fund supervision, in terms of institutional rules, pre-sale regulatory funds have been kicked out of the "available cash" column.
Since these monies can be used for real estate construction, which in turn is converted into inventory, the agency includes it in the net property asset when calculating the leverage ratio.
That is, pre-sale regulatory funds are excluded from available cash when net debt and liquidity are calculated, and the project is added to net property assets when calculating leverage.
One reduction and one increase will increase the leverage ratio of most housing enterprises and reduce their solvency, resulting in a downgrade of their ratings.
In addition to this, RMBS, or pre-sale real estate loans, is a common underlying asset in China's personal residential mortgage asset securitization transactions.
The problem of RMBS has attracted the attention of international rating agencies.
After the developer obtains the land, he uses the project's house and other assets as collateral to obtain funds from banks and other institutions;
After the development reaches a saleable level, the buyer gives the developer a part of the cash, borrows money from the bank with the house as collateral, and the developer repays the bank after getting the money and carries out other activities...
Many of these links, because they are mortgages, there is a risk of "mortgage default".
Real estate projects used as collateral for RMBS transactions, if not completed or delayed, will push up the "mortgage default rate", so that RMBS investors and more investors and financial institutions are at risk.
However, THE RMBS transaction documents usually do not disclose the names of the housing enterprises involved, so it is impossible to judge which RMBS transactions have a greater exposure to the real estate projects of the troubled housing enterprises based on public information.
Rating agencies may follow the cautious principle of "preferring to kill by mistake, not letting go" and downgrade the rating of housing enterprises on a large scale.
By the end of 2021, there are still many housing enterprises using dollar bonds due.
Image source: Guo Chao said
Faced with such a situation, housing companies have resorted to tricks to cope.
Some housing companies seek to extend their recently due debts, and some sell their property assets. But the actual effect is a drop in the bucket under the downward pressure of the market.
A number of real estate companies have also enhanced market confidence through shareholder loans and redemption of US dollar bonds, including Aoyuan, Zhongliang Holdings, Yuzhou Group, DXN Real Estate, Jinhui Holdings, Hongyang Real Estate and Rongxin China;
Among them, Aoyuan, which has recently suffered a rating downgrade, responded to Times Finance, "I understand that the market is concerned about the short-term liquidity and repayment ability of housing enterprises, but the rating action of Standard & Poor's and Moody's does not agree with its basis and arguments, Aoyuan has been advancing its business as planned, laying out funds in advance, actively managing debt, and continuously improving credit indicators."
At the same time, the central level has issued intensive voices, transmitted positive signals, and maintained a clear attitude towards stabilizing the property market.
On September 29, the central bank and the Banking and Insurance Regulatory Commission held a symposium on real estate finance work, proposing to "accurately grasp and implement the prudent management system of real estate finance" and "safeguard the healthy development of the real estate market and safeguard the legitimate rights and interests of housing consumers".
On October 15, at the central bank's third quarter financial statistics press conference, Director Zou Lan believed that some financial institutions had some misunderstandings about the "three lines and four gears" financing management rules, requiring that the balance of interest-bearing liabilities of "red file" enterprises should not be added, and misinterpreting that banks should not issue new development loans;
Next, we will guide major banks to accurately grasp and implement the prudent management policies of real estate finance and maintain the smooth and orderly delivery of real estate credit.
On October 20, the 2021 Financial Street Forum Annual Conference was held in Beijing. Liu He, member of the Political Bureau of the CPC Central Committee and vice premier of the State Council, said that the reasonable capital needs of the real estate market are being met, and the overall situation of the healthy development of the real estate market will not change.
Pan Gongsheng, vice president of Chinese Min min bank, pointed out that for the real estate market, "the excessive contraction of risk appetite of financial institutions and financial markets has gradually been corrected."
Image source: Middle Finger Research Institute
On October 21, the State Council New Office held a press conference on the data information and key work of the banking and insurance industry in the third quarter; Liu Zhongrui of the Banking and Insurance Regulatory Commission analyzed at the meeting that Evergrande is an individual problem and will not have a big impact on the reputation of Chinese-funded enterprises.
According to the high-level statement, many industry insiders also said that the real estate has reached the bottom of the policy, the credit policy is expected to be marginally relaxed, the real estate credit will accelerate, and the real estate market will obviously stabilize and warm up in the next few months.
According to the monitoring of the Middle Finger Research Institute, the total financing of real estate enterprises in September was 91.16 billion yuan, down 43.8% year-on-year and 22.3% month-on-month, and the scale of single-month financing fell for 7 consecutive months year-on-year.
From the perspective of cumulative value, the average interest rate of total cumulative financing from January to September 2021 was 5.58%, down 0.76 percentage points year-on-year.
From the data observation, the total financing of housing enterprises has shrunk, but the cost pressure is gradually alleviating.
With the bottoming out of the real estate loan policy, the real estate credit delivery is also expected to increase, which will help accelerate the development and sales collection in the fourth quarter and alleviate the pressure on the repayment of the foreign debt of the housing enterprises.
Therefore, the author still believes that the overall trend of the healthy development of the real estate industry will not change. At present, housing enterprises need to do to sort out debt risks, face problems and solve problems.
On the one hand, when there is a risk of debt default, housing enterprises should communicate frankly with financial institutions and investors, and disclose key financial information in a timely manner to respond to external concerns.
In particular, the company's current sales, payment collections, short-term debt, cash on hand and financing arrangements, risk response plans, etc.
Only when the information is open and transparent, and the measures are accurate and appropriate, can we eliminate the doubts of the market to the greatest extent and win the understanding and support of investors.
On the other hand, taking advantage of the recovery signal released by the central level, credit delivery is accelerating, and housing enterprises should also increase sales efforts to promote the return of sales funds; or heroes break their wrists to sell assets and sell equity, and quickly return blood to make up for the funding gap.
It is believed that with the relaxation of policies, the easing of financing difficulties for housing enterprises, and the improvement of market sales, the liquidity problem of real estate enterprises will also be solved, and the cold winter of intensive bond defaults will eventually pass.
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