Research On The Motivation Of High-cost Issuance Of USD Senior Notes By China Evergrande

As the pillar industry of China's national economy,the real estate industry occupies a pivotal position in the national economy and social development.At the same time,real estate enterprises have made tremendous contributions to local finance and taxation,so Whether a real estate enterprise can continue to operate in a healthy manner is related to the development of local economy.In recent years,under the background of the continuous reduction of leverage and de-financial risks in China,financing has become a problem that China's real estate enterprises have to face.In order to raise more funds and maintain the normal operation of the enterprise,many real estate enterprises turn to issue bonds overseas.However,due to the changing international situation in recent years,coupled with the escalating Sino-US trade war,the cost of real estate enterprises' overseas financing is also rising.China Evergrande Group,as a representative mainland real estate enterprise listed in Hong Kong,has continued to issue USD senior notes in recent years.Since 2018,it has issued multiple US dollar senior notes with rate exceeding 10%.This article selects the case of China Evergrande Group's highcost issuance of US dollar senior notes,and intends to study its motivation for high-cost overseas debt issuance,and strives to provide decision-making references for China's real estate enterprises to conduct efficient financing and regulatory.This paper sort out the existing research and summarize the predecessors' opinions through some research methods,such as literature research,case analysis and comparative analysis.And then researched the overall situation,financial status and financing status of China Evergrande Group,and focused on comparison and evaluation of the cost of China Evergrande Group's issuance of USD senior notes in 2018.The motivation of debt was analyzed and the following conclusions were reached:First of all,the real estate industry,as a capital-intensive industry,has a high asset-liability ratio,which has led to the problem of repayment of due debts,which has become a big pressure on real estate enterprises,real estate enterprises are facing big risks.Since real estate enterprises domestic financing have been limited,and overseas debt has the advantages of less restrictions and higher efficiency,a large number of real estate enterprises are seeking overseas debt issuance opportunities.Secondly,the determination of the cost of real estate enterprises issuing bonds overseas is affected by factors such as the credit rating of the issuing entity,the exchange rate level of the foreign currency,and the bond issuance maturity;on the other hand,it is also related to the external environment in which the company is located,such as political and legal environment,economic environment,social environment and technological factors.In this regard,real estate enterprises should combine their own external environment to formulate a reasonable financing plan to avoid being affected as much as possible.Finally,regarding the keep rising overseas bond issuance costs of real estate enterprises,they should start from the enterprises themselves,improve their own capital structure,accelerate the realization of strategic transformation,enrich existing bond issuance methods,and try new financing instruments.At the same time,they should design reasonable debt issuance scheme to avoid risks caused by maturity mismatches.In addition,enterprises should improve their ability to respond to overseas debt risks,use necessary financial derivatives to avoid risks,to realize the healthy and sustainable development of real estate enterprises' overseas debt issuance.