Issuance of US$100m 9.25% Senior Notes 04/2018 向農銀國際配售 1 億美元票據

Published on April 1 2015

* The Notes were issued in the amount of US$100,000,000 and will mature on 1 April 2018.

* The Notes will bear interest from and including 1 April 2015 at the rate of 9.25% per annum, payable quarterly in arrears.

* The Notes sole buyer Harbor Sure is a wholly owned subsidiary of ABC International Holdings Ltd ( Agricultural Bank of China )

* Certain of the Company’s future joint venture subsidiaries (if any) guaranteeing the Notes
* Aoyuan intends to use the net proceeds to refinance existing indebtedness and for general corporate purposes.

* The Notes will not be listed.

* Aoyuan may At any time at its option redeem the Notes, in whole or in part, at a redemption price as defined in the Indenture.

Continuous drop in Cost of Fund

Average cost of fund for the year 2013 & 2014 has been 11.4% and 10.2% respectively. Aoyuan may now get development loan from banks in China at an annual interest rate 7% to 8%. Issuance of 5 years duration bond has always been expensive for this single B rating company. Currently there are two Aoyuan USD bonds. They are Bond 2017 of 13.875% and Bond 2019 of 11.25% in interest rate. The next redemption date for Bond 2017 is 11/2015 at 106.9375%. There is chance that Aoyuan may redeem Bond 2017 to lower the average cost of fund for the financial year 2015 to a level under 9%.

ABCI knows Aoyuan well

Agricultural Bank of China was one of the leading firms for the issuance of Aoyuan Bond 2019 and ABCI maintains regular analysis on the listed company. In the latest analysis report released in the last week of 03/2015, analyst Mr Kenneth Tung wrote "Despite the slower growth expected, Aoyuan will likely outperform its peers with sound balance sheet and generous dividend payout. The counter’s current valuation is attractive with an 8.4% yield and 3.13 times 2015 P/E. Maintain BUY."

Only 10% deposit is paid for the Australian site

The 10% deposit was paid in 02/2015, while the rest 90% would has to be settled in 21/04/2015. Aoyuan's timing on the exchange rate is really good, as the market in general is looking forward for Australian Dollar to be bottoming out against USD in the second quarter. The newly raised money may work as a bridge loan while development loan of very low interest rate from Australian banks would likely be landed in 3Q of the year. VP Jacky Chan said that development loan for the Australian project is going to be secured of an interest rate even lower than those in Hong Kong.

Comments from Aoyuan management

"In 2014, Aoyuan successfully lower the net gearing to 61.8%, which was at a low to moderate level in the industry. Apart from the introduction of Huaxia Insurance as a strategic investor of the Company"s project company by means of capital injection in 12/2014, Aoyuan will further optimize capital structure through diversified financing channels, while strengthening cash flows and maintaining steady financial positiont."

三菱日联证券信贷分析师 Rui Guo : 财报中一些异常的项目可能是企业无力偿债的信号。财务指标恶化的表现包括现金偿债能力过低、EBITDA (税息折旧及摊销前利润) 利息覆盖率过低、净资产负债率过高、负债和 EBTIDA 比例过高。如果以上这些指标在短期内恶化，也说明有风险，其他的“雷”还有很多，比如在岸永久债务可能会被伪装成资产负债表中的股权等。开发商可能利用合资企业结构来给项目提供资金，这从资产负债表上看不出来，也会带来财务不透明的问题。

BABSON 资产管理的新兴市场公司债券负责人 Brigitte Posch : 短期债务相比可用流动资金过高，以及土地溢价相比可用流动资金过高有风险。建议投资者在考虑平均回款率和应付土地款的情况下，利用每月合约销售来对一个公司潜在的现金流入情况做实时评估。目前开发商开工放慢，去库存依然是主要任务。

开元资产管理的首席运营官 Domingo Chen : 大部分投资者的焦点已经从年销售完成率、月销售情况转移到财务状况上面。地产商财报中隐藏的“雷”可能表现为高资产负债率、库存增加、高应收账款，也可能出现在合同销售额和毛利率上。中国近期下调存款准备金率，对房地产行业是积极的。具有竞争优势的大开发商以及多元化的经营模式仍然可以给投资者带来丰厚的回报，不过，月销售额的同比下滑、年度销售指标未完成，这些情况表明某些开发商正在经历困难时期。

霸陵投资基金经理 William Fong : 开发商的现金管理，例如买地节奏，需要视公司的规模和风格而定，不能用相同的指标一概而论。