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Friday, 14 October 2016, 12:50 HKT/SGT

Source: Modern Land (China) Co Ltd
Modern Land (China) Issues First Offshore Green Bond among Chinese Property Developers
Capturing Green Finance Opportunity with 3-year USD350M Green Bond

HONG KONG, Oct 14, 2016 - (ACN Newswire) - Modern Land (China) Co Ltd ("Modern Land", the "Company" or "Group"), a leading green-technology real-estate developer, is pleased to announce that it issued a 3-year USD350M Green Bond yesterday in New York (Oct 13), making it the first Chinese property developer listed in Hong Kong (HK:1107) to issue such bonds, capturing opportunities arising from green finance.

The Board announced that the Company and its Subsidiary Guarantors - Guotai Junan, Morgan Stanley, HSBC, UBS, VTB Capital and Zhongtai International - entered into a Purchase Agreement in connection with the issue of USD350,000,000 senior notes due in 2019, bearing interest at a rate of 6.875% per annum. The Company has received approval in-principle for the listing and quotation of the Notes on the Official List of the Singapore Exchange Securities Trading Limited.

The gross proceeds of the Notes Issue will amount to approximately USD349 million and the Company intends to use the proceeds from the Notes Issue to refinance certain existing indebtedness. The Notes are issued as Green Bonds to fund existing projects of the Group and businesses with environmental benefits in alignment with the Green Bond Principles, by way of refinancing existing debt in relation to these projects.

Relying on its fast and stable development, Modern Land has obtained distinguished appraisals from renowned international institutions. In August this year, Fitch Ratings, an international credit ratings institution, has upgraded Modern Land's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to "B+" from "B". The Outlook is "Stable." Fitch has also upgraded Modern Land's senior unsecured rating and the ratings on all outstanding bonds to "B+" from "B", with the Recovery Rating at "RR4".

Favourable National Strategies pave ways for Green Bonds

Being the world's second largest economy, China shares substantial involvement in the increasing effort on environmental awareness. In recent years, China rolled out Public-Private-Partnership ("PPP") model, promoting green finances at a national level, as part of the attempts to invite private investments in green industry. By the end of the previous year, China promulgated the "Green Bond Guidelines" and "Eligible Green Bond Project Directory", setting out the legitimate rules for Green Bonds.

In January 2016, Shanghai Pudong Development Bank issued China's first Green Bond with a scale reaching RMB 20 billion. Mr. Li Yuanchao, China's Vice-president, emphasised the development of Green Finance markets in World Economic Forum earlier this year. Green finance markets also became one of the heated topic in Hangzhou G20 Submit in September for the first time. Such incentives and practices provide frameworks for China's green finance and lay down a foundation for the development thereof.

Distinguished Second Opinion from CICERO

Green Bond Issuers always invite independent, not-for-profit, research institute to provide Second Opinions on assessing eligible projects for green bond investments. Modern Land also asked CICERO (Center for International Climate and Environmental Research - Oslo) to provide objective assessment of its Green Bond Framework. According to CICERO's Second Opinion report, Modern Land's energy saving and Greenhouse Gas (GHG) mitigation policies are characterised by a life-cycle approach, with attention given to not only the design phase but also the operational phase of the buildings supported by a technical team. Emissions of the buildings are calculated in accordance with Measurement Standards for Carbon Emissions from Buildings of China. Under the framework, energy performance improvement targets will be applied to each eligible building project. Additionally, all residential buildings developed by Modern Land are operated by property management companies closely connected to the Company which will follow strictly the energy solution and operation strategies as determined in the design phase.

CICERO's Second Opinion report also shows that, the effectiveness of Modern Land's approach is demonstrated by the achievement of its energy efficiency/green buildings up until now. Two buildings developed by Modern Land (Nanchang Mantingcun MOMA Building number 9 and Dangdai MOMA) have been awarded 3-star Chinese Green Building Label. Two buildings developed by Modern Land (Jiujiang Mantingcun Building number 5 and First Phase of Nanchang Mantingchun MOMA) have been awarded 3-star Chinese Green Building Design Label. Other six buildings developed by Modern Land have been awarded 2-star Chinese Green Building Design Label. This is a clear demonstration of the leading position of Modern Land in China's green and energy efficiency building sector.

Deeply-Cultivated in Green Property, with Outstanding Financial Performance

Unlike ordinary corporate bond, green bond requires much stricter standards on capital utilisation, including environment protection. According to Modern Land's Green Bond Framework, for a project (either new or renovation) to be financed through the Green Bond, it will need to meet one of the following specific minimum standards, including 2 Star for Chinese Green Building Label (Chinese Green Building Design Label or Chinese Green Building Operation Label), Gold for LEED, or any other equivalent green building label. Additional energy performance improvement targets of 15% for new construction and 30% for renovations are included. It could be applied in research and development supporting energy efficient building design and technologies with maximum of 10% of issuance.

As a leading company in green property sector, Modern Land has been consistently bringing satisfactory investment returns to its shareholders. For the six months ended 30 June 2016, the Group recorded a revenue of approximately RMB4,271 million, representing a significant year-on-year growth of 118.6%. Compared to the first half year of 2015, profit for the period attributable to the owners of the Company recorded an increase of 75.8% to approximately RMB500 million.

For the six months ended 30 June 2016, the Group achieved contracted sales of approximately RMB7,450.6 million, representing an increase of 70.6% as compared to the corresponding period in 2015. The Group, its joint ventures and associates pre-sold 658,689 sq.m. in total GFA and 1,352 units of car parks, representing an increase of 37.5% and 107.0%, respectively, over the corresponding period in 2015. The results showed a high growth rate in a sustainable development status with satisfactory turnover.

Setting a Precedent for Its Peers in Chinese Real Estate Sector

Despite being a "blue ocean" market in Hong Kong as well as in Mainland China, Green Bond displays notable momentum. According to the statistics of China Securities Regulatory Commission, the green credit balances represent 9% of the total borrowings of 21 China's major banks and financial institutions, totaling RMB 7.26 trillion as at the first half of this year.

Following Shanghai Pudong Development Bank's first Green Bond issuance in China, Link Reit issued the first corporate Green Bond in Hong Kong in July with a scale of USD 500 million. According to media reports, Link Reit's Green Bond was oversubscribed by 4 times, reflecting the overwhelming attention captured in the capital markets.

Being a Chinese property developer, Modern Land's Green Bond sets a precedent to issue the first offshore Green Bond among its peers listed in Hong Kong. This bond issue is believed to establish the Group's strategic position in the relevant market, and reflects the Group's endeavor to support China's initiative to Green Finance. There is an increasing number of enterprises tapping into the prominent trend of Green Finance in China. The Group's Green Bond issuance may serve as an example and substantiate the confidence of its peers, encouraging more capitals to be committed into the Green industry.

Mr. Zhang Peng, Executive Director and President of Modern Land, said, "The Group has been committed into establishing 'green + comfort + energy saving + mobile interconnecting full-life-cycle communities'. Several projects under its flagship have been endorsed with authoritative green construction labels in China. We firmly believe that innovation is vital to green initiatives and we shall not cease to pursue growths and breakthroughs no matter in the aspects of product development or financing channels.

"The Group's venture in Green Finance including issuance of Green Bond does not only enrich its financing channels, but also opens more opportunities for wider investment community. The Company will spare no effort to create green homes resorting to advanced technologies and maximize its shareholders' return with quality products and excellent sales performance."

Oct 14, 2016 12:50 HKT/SGT
Topic: Press release summary
Sectors: Daily Finance, Real Estate, Alternatives, FinTech/Chains, Banking, Const/Eng
From the Asia Corporate News Network

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