China’s largest developer by contracted sales took advantage of a pickup in investor sentiment toward the property sector to sell convertible bonds, after deciding against pursuing a similar deal last week.
Country Garden Holdings Co. said Friday that it had raised 3.9 billion Hong Kong dollars, the equivalent of $501 million, by issuing the securities a day earlier.
However, the bonds pay a comparatively high interest rate and can be converted at a modest premium to the company’s recent share price—showing that stronger players in the sector still need to pay up to secure backing from investors.
Country Garden’s shares have swung sharply in the past two weeks, and last week the company decided not to proceed with a potential $300 million convertible issuance. The property giant said it wouldn’t consider issuing convertible debt in unsuitable market conditions.
That hiccup unnerved the market, as investors worried that even comparatively strong developers might struggle to tap new funds, and Country Garden shares hit a near-five-year low on Monday.
Since then, however, Country Garden shares have clawed back some losses, as part of an industrywide rebound. The recovery was fueled by central-bank easing and hopes regulators could give Chinese developers more access to cash payments made by customers for unfinished apartments.
The new convertible bonds are due 2026. They pay a 4.95% coupon and carry a conversion price of HK$8.10. That is the equivalent of $1.04 a share and represents a 16% premium to the developer’s Thursday closing price.
In 2018, Country Garden issued convertible bonds denominated in Hong Kong dollars that paid a 4.5% coupon, and with a conversion premium of 30%.
There aren’t many Chinese developers that can currently issue offshore dollar bonds and some investors, especially international ones, have pushed Country Garden to reopen the market, said a person familiar with the matter. The rebound in Chinese developers’ stocks and bonds, and the gradual warming of investor sentiment, created a suitable window for issuing the convertible bonds, this person added.
Proceeds will be used to refinance debts due within one year, Country Garden said. It has previously said it has prepared internal funds to repay a $411 million bond due this month, and will arrange payments for another $700 million bond due in July based on market conditions at that time.
The company’s bonds have also recouped some losses recently. Three dollar bonds due in 2026 were quoted at more than 80 cents on the dollar on Friday morning in Hong Kong, according to Tradeweb. On Monday they had fallen below 70 cents on the dollar.
Country Garden’s shares fell 5.9% Friday morning.
Write to Rebecca Feng at rebecca.feng@wsj.com
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