EARNINGS CALL: Shui On Land Says It Has Refinanced RMB 1.5B of RMB 2.9B Debt Due in H2’22, Negotiates for Financing of RMB 800M to RMB 1B Debt, Will Repay Rest in Cash

Management of Shui On Land Ltd. said during investor calls this week that the company has RMB 2.9 billion ($420.2 million) maturing debt due in the second half of 2022, of which it has refinanced about RMB 1.5 billion, according to two sources familiar with the matter.

For the remaining debt, Shui On Land plans to repay part of it in cash and is negotiating for the financing of about RMB 800 million to RMB 1 billion of the maturing debt. Continue reading for more on Shui On Land refinancing, and request a trial to read more analysis and intelligence from Reorg's Asia Core Credit team. 

Due to the Covid-19 pandemic, the company has provided rent rebates or waivers for its rental tenants, and that the rental income has recovered by 80% and the sales business has recovered by 90%, according to the sources.

The company has about RMB 8.5 billion to RMB 9 billion unrestricted cash, the sources added.

Shui On’s total cash and bank deposits were RMB 12.975 billion as of June 30, of which RMB 2.1 billion were deposits pledged to banks and RMB 2.115 billion were restricted bank deposits, which can only be applied to designated property development projects of the group, according to its 2022 interim results.

For potential M&A, the company said certain distressed developers had yet to sell their core projects, and that Shui On is waiting for the right opportunities when other developers put their core assets up for sale. It is also considering investment opportunities involving the Chinese government’s coordination on distressed project relief, the sources said.

Shui On focuses on major cities such as Shanghai and will balance the need for liquidity and cash flow for potential acquisitions. It does not plan to drastically increase its leverage in the future.

Regarding share buybacks, the company said it has not conducted any major buyback as the liquidity of its stock is relatively low, and that it hopes to buy back more in the future. It does not plan to buy back its offshore notes in the near term due to liquidity concerns.

For cash collection from sales, management noted that the amount remained relatively low due the Covid lockdown in the second quarter of 2022. The cash collection rate was about 70% during the first half of 2022, and it sold some inventory in mid-June, whose cash collection will be booked during the second half of 2022.

Management noted that the company is unable to issue large-scale onshore corporate bonds as it does not have a holding company onshore and its onshore entities are mostly project companies.

Shui On Land’s capital structure is below: