HomeMarket NewsSmall CapsHysan Development Issues $4 Billion Bonds, Marking a Surge in Borrowing

Hysan Development Issues $4 Billion Bonds, Marking a Surge in Borrowing

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Hong Kong-based property giant, Hysan Development Company Limited (HYSNY), has recently issued a prospectus for up to $4 billion of medium-term bonds. This is a significant increase compared to its average medium-term debt tranche, which was around HK$300 million ($38.5 million). The company’s move to increase borrowing comes at a time when the real estate market in Hong Kong is facing challenges, with increasing numbers of developers and borrowers defaulting on US dollar debt issuances.

Hysan’s New Bond Offering

Hysan Development’s recent bond issuance will be in the form of zero-coupon notes, heavily discounted to institutional purchasers. The bonds are priced at a floating rate of forward interest, a clear indicator of the optimistic sentiment regarding Federal Reserve easing. Purchasers of these bonds are betting on potential interest rate falls and the resulting increase in the bonds’ value, as the discounted price becomes more attractive to lenders.

The company plans to list the bonds on the Hong Kong exchanges within the next 12 months. The issued bonds will be unsecured, relying on Hysan’s guarantee for repayment. Earlier this year, Fitch Ratings rated the company’s notes as A-, and stated that Hysan had sufficient cash and credit lines to meet its short-term debt obligations. It is important to note, however, that Fitch also forecasted an increase in Hysan’s average borrowing cost to 3.3% in 2023 from 2.2% in the previous year, and highlighted the company’s rising leverage.

Bright Spots Amidst Industry Challenges

While the Hong Kong real estate market is facing uncertainty, there have been a few positive developments. Sunac China Holdings Limited (SNCNF) successfully restructured its offshore debt, with a Hong Kong court granting the company permission to reissue $10.2 billion in new debt. This marks a significant achievement and may indicate a potential turnaround for distressed real estate developers in the region.

Key Players Involved

Bank of America Corporation (BAC) and UBS Group AG (UBS) are handling the debt issuance, while Bank of China Limited (BACHF), Credit Agricole SA (CRARF), JP Morgan Chase & Company (JPM), Mitsubishi UFJ Financial Group Inc. (MUFG), BNP Paribas (BNPQF), Citigroup Inc (C), DBS Bank Limited, HSBC plc (HSBC), Mizuho Financial Group Inc (MFG), and Standard Chartered plc (SCBFF) are acting as dealers of the notes alongside the lead issuers.

As of the time of writing, Hysan Development’s shares were down 1.4% in Hong Kong morning trading.

Conclusion

Hysan Development’s decision to issue $4 billion of medium-term bonds reflects a significant increase in the company’s borrowing. While the Hong Kong real estate market is facing challenges, including increasing defaults on US dollar debt issuances, there are some positive developments, such as Sunac China Holdings’ successful debt restructuring. Investors will closely watch Hysan’s bond offering and its impact on the company’s liquidity position and future growth prospects.

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