Wanda Group and Macquarie Bank Launch First-of-Its-Kind Bond Offering from China

Strategic Insights -

A US$145 million bond issuance, backed by shopping malls in eastern China, is set to enter the market with attractive pricing and a strong credit profile. The 2.75-year securities, rated "A-minus" by Standard and Poor's and "A2" by Moody's, will be priced at 65 basis points over the London interbank offered rate (Libor), providing a competitive yield for investors. The deal, called Dynasty Assets (Holdings), is a commercial mortgage-backed securitisation (CMBS) that allows developers to free up capital and investors to earn rental income.

Key Takeaways:

  • The bond issuance, backed by nine malls in eastern China valued at approximately US$475 million, will be priced at 65 basis points over Libor, attracting interest from Asia and offshore Chinese money.
  • The CMBS deal, with a preliminary rating of "A-minus" from S&P and "A2" from Moody's, is a welcome entrant to Asia's limited US-dollar-denominated commercial mortgage-backed securities market outside Japan.
  • Wanda Group and Macquarie Bank have partnered to arrange the deal, with Citigroup also involved. Macquarie and Wanda had initially planned to raise funds through a real estate investment trust in Hong Kong but were rejected by the Securities and Futures Commission.
  • The oldest mall in the deal was opened three years ago, with tenants including Wal-Mart, Parkson, Gome, KFC, and Pizza Hut.
  • The deal allows developers to free up capital for reinvestment and investors to earn rental income, providing a new financing option for the Chinese real estate market.
  • Macquarie Bank and Wanda Group are marketing the bonds to investors in Asia and offshore.

Statistics:

  • US$145 million: the size of the bond issuance
  • 65 basis points: the pricing spread over the London interbank offered rate (Libor)
  • 2.75 years: the tenor of the bonds
  • US$475 million: the value of the nine malls backing the bond issuance
  • "A-minus" and "A2": the preliminary ratings for the bonds from Standard and Poor's and Moody's, respectively
  • 9: the number of malls backing the bond issuance
  • 3: the number of years since the oldest mall opened