Its years-long love affair with stocks on the rocks, corporate China is turning to debt.
Many of mainland China's major companies are issuing billions of dollars of new corporate bonds, bucking the global aversion to debt. The trend is helped by expectations of a rising yuan, which would goose returns for foreign bondholders and has helped Chinese companies issue bonds under less-costly terms.
At the other end of the spectrum, hedge funds have become the lender of last resort to a group of less-established, cash-strapped Chinese companies -- loans that sometimes come at a heavy price to the borrower.
Other routes to capital have suffered at the hands of China's ailing stock market, skittish bank lenders and Beijing policy makers hoping to tame growth and slow inflation. The benchmark Shanghai Composite Index has declined about 55% this year.
'The equity market is pretty much closed,' says Neil Ge, who has been appointed to run Credit Suisse's soon-to-be launched securities entity in China. 'So for corporations to raise money, the only way is to tap the bond markets.'
The broadened landscape could tempt more Chinese companies to pile more debt onto their balance sheets. But longer term, the development opens up another money-raising avenue for China's corporations, even as it establishes a new market for investors globally.
Mainland China's corporate-bond issuance has jumped nearly 53% year to date, compared with the same period in 2007, with Chinese companies selling bonds worth about $25 billion, according to Thomson Reuters. Bankers say their China pipelines remain flush for the next few months. 'We are expecting issuance to be twice as big as it was last year,' Mr. Ge says.
China's bond market is still tiny in comparison with the U.S., which has sold $1.2 trillion in bonds this year. But issuance in the U.S. has dropped 41% from last year, according to Thomson. In Japan, corporate-bond issuance has fallen 6% in dollar terms. The credit crunch has lowered demand for higher-yielding, higher-risk bonds, while corporations of all stripes have come under pressure to reduce debt on their balance sheets.
China has helped send Asian corporate-bond issuance to record levels, according to Thomson. Proceeds from corporate debt totaled $91.01 billion year to date, up 3.6% from a year earlier.
In July, Beijing North Star Co., a publicly traded property company partially controlled by the Beijing city government, sold about 1.7 billion yuan, or about $248 million, in five-year bonds. Earlier in the year, Shenzhen Development Bank Co. issued bonds totaling 6.5 billion yuan. And oil producer PetroChina Co. and China Merchants Bank Co. are seeking approval to put on the market new bonds valued at as much as 90 billion yuan.
Western investors in particular are drawn to the debt because of the rising yuan, which would increase the value of interest payments while giving Chinese issuers fewer reasons to offer higher rates, says one Hong Kong-based hedge fund manager. Beijing North, for example, offered investors a coupon rate of 8.2%, while Shenzhen Development Bank is paying 6.1%.
While the bulk of these bonds are sold domestically, foreigners can purchase a limited supply of these bonds through the Chinese government's so-called QFII, or Qualified Foreign Institutional Investor, program.
China's corporate-bond market has also enjoyed a regulatory boost, though it is unclear how much further efforts might go. Last year, the country's stock-market regulator, the China Securities Regulatory Commission, hammered out new rules allowing publicly traded companies in China to sell corporate bonds over the same Shanghai-based system that distributes initial public offerings to retail investors.
Western investment banks are eager to grab the underwriting business, but few are eligible to do so. Chinese regulators require them to have an approved venture on the mainland and first obtain an underwriting license there. For this reason, UBS AG dominates among Western banks, although Credit Suisse is hoping to follow suit.
Chinese property companies are among the biggest issuers, as a weakened domestic real-estate market has put further pressure on their finances, says an investment banker at UBS Securities, the bank's Chinese entity.
The more cash-strapped companies, which had been counting on IPOs that were scotched by declining stock markets, have been able to get financing only through private deals with hedge funds, which are charging hefty rates in return for capital.
Hedge funds active in private debt include Milwaukee's Stark Investments and New York City's D.E. Shaw Group, as well as the internally run hedge funds of large banks, including Merrill Lynch & Co. and Deutsche Bank AG. The funds are hoping to obtain better returns in private deals than are possible at the moment from stocks.
'The market being what it is, the only thing they've got left is private deals,' says Peter Churchouse, a fund manager at LIM Advisors, a hedge fund in Hong Kong.
Because such deals aren't usually publicly disclosed, data on amounts and terms are hard to come by. But in many cases, say hedge-fund managers, the loans can be expensive. Hedge funds say rates on some deals have risen to the high teens, and in some cases exceed 20%. Before markets convulsed last year, privately placed convertible bonds in Asia typically commanded coupon rates of between 8% and 10%, hedge fund managers say.
Capital controls on the mainland mandate that these private loans are denominated in foreign currency and reside offshore.
Some deals contain what are known as 'ratcheting provisions' that allow debtholders to purchase unspecified amounts of equity at discounts over time, say people familiar with the terms, potentially giving them larger stakes of equity than business owners intended.
Some Asian fund watchers worry that the terms could invite a crackdown on foreign firms. A decade ago in the U.S., loan deals that gave lenders ever-higher equity stakes became known as 'death spiral convertibles.' In several instances in the U.S., companies later sued the lenders, alleging the bondholders sold the shares short to push down prices so they could acquire large chunks of equity. Shorting amounts to a bet that shares will fall.
Hedge funds say terms in China typically aren't as harsh. Typically, lenders can't wind up with a controlling stake in a company. Also, Asian regulators have imposed lockups on transactions involving pre-IPO financing. 'Regulators want to make sure that pre-IPO investors aren't advantaged above public shareholders,' says one analyst at Stark Investments.
Fund watchers are monitoring one borrower, Guangzhou property company Evergrande Real Estate Group, to see how such private debt deals pan out. In July, the internal hedge funds at Merrill Lynch and Deutsche Bank pumped about $500 million into the company, according to people familiar with the matter. It was their second infusion in recent months into the company after a hoped-for IPO faltered, spurring its need for cash. Terms of the loans aren't clear, and Evergrande didn't respond to calls or emails for comment.
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与股市多年来的亲密接触出现了危机，中国企业正开始转向债市。
中国大陆的许多大公司正在新发行数十亿美元的公司债券，与全球避免背负债务的大势背道而驰。中国企业的做法受到了人民币升值预期的支持。人民币升值会提高海外债券持有者的回报率，有助于中国公司以成本较低的条款发债。
另一方面，不少现金短缺的中国中小企业迫不得已向对冲基金求助，但向后者借款有时要付出高昂的代价。
中国股市重挫&#12289;银行提高放贷标准和北京的政策制定者希望给经济增长降温&#12289;减缓通胀，这切断了其他的融资渠道。基准上证综合指数今年以来累计跌幅达到了55%左右。
被任命为瑞信(Credit Suisse)在华新设合资公司负责人的葛甘牛(Neil Ge)说，股市的大门基本已经关上。因此对想要融资的企业而言，唯一的途径就是债券市场。
这样的大背景可能会诱使更多的中国企业通过举债来融资。但从中长期来看，这种变化可为中国企业开辟出另外一条融资渠道，甚至为全球投资者建立一个新的市场。
汤森路透(Thomson Reuters Corp.)的数据显示，今年以来中国大陆公司共发行债券约为250亿美元，比去年同期增长了近53%。银行界人士表示，后几个月的债券发行计划仍排得很满。葛甘牛说，我们预计发行额将是去年的两倍。
中国的债券市场与美国相比规模依然很小，今年以来美国已经发行了1.2万亿美元债券。而汤森路透的数据显示，今年美国的发行额比去年同期下降了41%。在日本，按美元计算，公司债的发行减少了6%。信贷危机降低了对高收益&#12289;高风险债券的需求，同时各行各业的公司都面临着降低负债的压力。
汤森路透称，在中国的推动下，亚洲公司债的发行量达到了创纪录的水平，今年以来的发行总额达到910.1亿美元，比上年同期增长3.6%。
今年7月，北京北辰实业(Beijing North Star Co.)发行了人民币17亿元（约合2.48亿美元）五年期债券。北京北辰实业是北京市政府持有部分股份的上市房地产公司。今年早些时候，深圳发展银行(Shenzhen Development Bank Co.)发行了总额65亿元的债券。中国石油(PetroChina Co.)和招商银行(China Merchants Bank Co.)也都在申请发行总额高达人民币900亿元的债券。
香港一位对冲基金经理说，西方投资者尤其热衷于购买此类债券，因为人民币升值会增加利息收入的价值，尽管中国发行方可能缺乏理由开出更高的利率。比如，北京北辰实业的票面利率为8.2%，而深圳发展银行的票面利率为6.1%。
尽管大部分债券都是在国内销售，但外资还是可以通过中国政府的合格境外机构投资者(QFII)机制购买到一些债券。
中国的公司债市场还得到了监管层的推动，不过还不清楚这种推动能发展到何种程度。去年，中国证监会发布新规，允许国内上市公司通过上海证交所向零售投资者进行首次公开募股(IPO)的系统发售公司债。
西方投行非常希望染指这块承销业务，但具备资格的公司是凤毛麟角。中国监管机构要求西方投行在大陆拥有得到批准的合资机构，并首先获得承销许可证。由于这个原因，瑞士银行(UBS AG)在西方投行中独领风骚，不过瑞信有望紧随其后。
瑞银证券有限责任公司(UBS Securities)一位投资银行家称，中国的房地产公司是最大的发行方，国内房地产市场的低迷让他们的资金捉襟见肘。瑞银证券是瑞士银行在中国设立的公司。
还有一些公司的资金状况更为紧张，它们通过IPO融资的希望因为股市的暴跌而破灭，因此只能通过私募渠道向对冲基金融资，而对冲基金常常收取很高的利率。
活跃于私募领域的对冲基金包括密尔沃基的Stark Investments和纽约市的D.E. Shaw Group，以及美林(Merrill Lynch & Co.)和德意志银行(Deutsche Bank AG)等大银行内部运营的对冲基金。目前，这些基金的私营借贷交易可能会获得比股市上更高的回报率。
香港对冲基金LIM Advisors的基金经理卓百德(Peter Churchouse)说，市场到了这种地步，就只剩下私募了。
由于私募交易通常不会公开披露，金额和条款方面的信息很难得到。但对冲基金经理称，许多情况下，这类贷款的成本很高。对冲基金表示，一些交易的利率已经升到16%至19%之间，有时甚至超过了20%。对冲基金经理称，在市场去年转坏前，亚洲私募可转换债券的票面利率通常在8%至10%之间。
中国大陆的资本控制决定了此类交易需以外币进行，并在海外完成。
知情人士称，一些交易包含所谓的“棘轮条款”(ratcheting provisions)，允许债券持有者今后按折扣价购买一定数量的股票，这可能会让他们拥有超出企业所有者意愿的更大数量的股份。
一些亚洲基金业人士担心这些条款可能导致对海外公司的打击。在10年前的美国，让放款人持有更高股份的贷款交易成为了著名的“无底洞可转换债券”。在美国的几个案例中，公司后来都对放款人提起了诉讼，指控债券持有人卖空股票，压低价格，以收购更大数量的股份。
对冲基金表示，中国的条款通常并不这么苛刻。一般来说，贷款人不能获得一家公司的控股权。而且，亚洲监管机构都对IPO之前的融资交易设定了锁定期。Stark Investments的一位分析师表示，监管机构希望确保IPO之前的投资者不比持有公开发行股票的股东更有优势。
基金界人士正在密切关注一家借款方──广州的房地产公司恒大地产(Evergrande Real Estate Group)，以了解私募交易的成功程度。知情人士透露，今年7月，美林和德意志银行的内部对冲基金向该公司提供了约5亿美元资金。恒大地产暂缓上市导致其现金需求激增，这已经是近几个月来这两家对冲基金第二次向该公司注资。贷款条款尚不清楚，恒大地产也未回复要求置评的电话或电子邮件。
