New Issuer: China Merchants Land Limited China Merchants Land has picked Bank of American Merrill Lynch, DBS, Industrial and Commercial Bank of China as joint global co-ordinators, joint lead managers and joint bookrunners for a potential credit enhanced bond dominated in USD. The deal follows a reverse IPO which changed its business from consumer electronics to property development. Standby Letter of Credit and High Credit Rating The proposed 5 year notes from CML are rated A2 by Moody s and have the benefit of the Standby Letter of Credit denominated in US dollars issued by Industrial and Commercial Bank of China (Asia) Limited as the letter of credit bank. Reverse Takeover By acquiring listed small-cap company in Hong Kong, reverser takeover allows mainland companies to tap into Hong Kong bond market and access to an extra financing channel. This reverser takeover by China Merchants Lands Limited and the new bond issuance opens up and provides a new source of financing that would not be available before. Company Background China Merchants Land is now under China Merchants Property Development, which has 74% of CML s ownership, and serves as a supplementary and strategic arm for the core company. CML consists on the initial company, not a property developer and was which formerly known as Tonic Industries Holdings Limited, and four property developers as its subsidiaries. Supported by Strong State-owned Parent Company As a subsidiary of China Merchants Group and China Merchants Property Development, China Merchants Land benefits from the experienced and stable management team that was installed by CMPD and processes a strong state-owned background and is in a pole position to benefit and leverage from the platform of the China Merchants Property Development. Moreover, given CML is carrying the well-known China Merchants Group s name, CML will be able to leverage its strong capability to raise funds at low cost through diversified financing channels.
Table 1: Information Summary Issuer Name China Merchants Land Limited Issue Date 12/11/2013 Currency USD Coupon Rate 4.021% Issuance Price 100.00 Minimum Investment amount USD 200,000 Incremental Amount USD 1,000 Maturity Date 12/11/2018 Years to Maturity 5 Call Schedule N/A Call Price N/A Coupon Frequency Semi Annually Rating at Issuance A2(Moody s) Letter of Credit Bank ICBC Bank Source: ifast Compilations Standby Letter of Credit and High Credit Rating The proposed 5 year notes from CML are rated A2 by Moody s and have the benefit of the Standby Letter of Credit denominated in US dollars issued by Industrial and Commercial Bank of China (Asia) Limited as the letter of credit bank. In the event of default or the issuer has failed to comply with the amount that is payable under the Terms and Condition of the bonds, the drawing from the LC bank, ICBC Bank, will be payable in U.S. dollars and shall satisfy the obligations of the issuer in respect of the amount payable under the Terms and Condition of the bonds, namely the principle and the interest payment. Reverse Takeover On 24 April 2013, China Merchants Property Development Company Limited, the mother company of China Merchants Land Limited, entered into a share purchase agreement in respect of the sale and purchase of the shares in 4 property developers, namely Harpen, Converge, Sino Action and Happy City. The share purchase agreement will transfer the holding of these four companies from CMPD to CML and allow China Merchants Land Limited to acquire the equity interests in these subsidiaries. The acquisition was successfully completed on 1 November 2013 and on the same day, the issuer changed its name from Tonic Industries Holdings Limited to China Merchants Land Limited. Since the implement of stricter financing rules in China, reverse takeover has been a trend among mainland property developers. By acquiring listed small-cap company in Hong Kong, reverser takeover allows mainland companies to tap into Hong Kong bond market and access to an extra financing channel. This reverser takeover by China Merchants Lands Limited and the new bond issuance opens up and provides a new source of financing that would not be available before. Company Background After the acquisition, China Merchants Land is now under China Merchants Property Development, which has 74% of CML s ownership, and serves as a supplementary and strategic arm for the core company. CML consists on the initial company, not a property developer and
was which formerly known as Tonic Industries Holdings Limited, and four property developers as its subsidiaries. After the capital injection and management installation from CMPD, CML s business will now focus on real estate development and related business in China. Its current portfolio of property development projects consists of eleven projects in various stages of development in Foshan, Guangzhou, Chongqing and Nanjing, with a primary focus on the development of residential properties, as well as integrated residential and commercial properties, which includes apartments, villas, offices and retail shops. As of July 2013, CML has an aggregate gross floor area of approximately 6,292,403sq.m. in China. And for the three years ended 31 December 2010, 2011 and 2012, and the seven months ended 31 July 2013, the revenue of the Core Group, namely the four property developers that were acquired by CML, was RMB 1,342.73 million, RMB 3,341.47 million, RMB 4,288.51 million and RMB 4,520.01 million respectively. Supported by Strong State-owned Parent Company China Merchants Group CML s ultimate parent company, China Merchants Group (CMG) was founded in 1872 and is the forerunner of China s national industry and commerce. The three core business sectors of CMG are transportation and related infrastructure, financial investment and management, and property development and management. As of the end of 2012, the Group had the total assets of RMB 391.8 billion, assets under management of RMB 3.76 trillion, and total profits of 26.47 billion. Its total profits was ranked tenth among all state own enterprise. China Merchants Property Development CML s immediate parent company, China Merchants Property Development, a real estate subsidiary of China Merchants Group, was founded in 1984, is one of the first property developers in China. It develops and invests in leading real estate projects ranging from landmark office buildings to residential properties in Beijing, Shanghai, Shenzhen and other major cities of China. As of the end of September, CMPD s property sales has increased 27.14% year on year to RMB 31.41 billion in the first nine months of this year. CMPD sold a total of 1.99 million square meters of property in the nine month period, up 15.11% year on year. The total asset, operating income and net profit as of September 2013 all increased 12.91%, 45.37% and 49.06% respectively. Moreover, CMPD s debt profile remains at a health and controllable level, with debt/assets at 21.9%. As a subsidiary of China Merchants Group and China Merchants Property Development, China Merchants Land benefits from the experienced and stable management team that was installed by CMPD and processes a strong state-owned background and is in a pole position to benefit and leverage from the platform of the China Merchants Property Development. Moreover, given CML is carrying the well-known China Merchants Group s name, CML will be able to leverage its strong capability to raise funds at low cost through diversified financing channels.
Table 2: Summary of Financials of the Core Group Jul 2013 Jul 2012 Change Income Statement (RMB 000) Revenue 4,520,005 2,228,215 102.85% Cost of Sales 2,449,353 992,009 146.91% Gross Profit 2,070,652 1,236,206 67.50% Selling and Marketing Expenses 50,698 49,145 3.16% Net Profit 1,076,571 398,073 170.45% Balance Sheet (RMB 000) Jul 2013 Dec 2012 Non-Current Assets 1,337,878 1,673,548-20.06% Current Assets 20,156,727 21,421,392-5.90% Current Liabilities 16,282,379 18,566,048-12.30% Total Assets less Current Liabilities 5,212,226 4,528,892 15.09% Reserves 922,542 896,319 2.93% Cash and Cash Equivalents 2,273,303 2,131,760 6.64% Source: China Merchants Land Limited and ifast Compilations
Table 3: Summary of Bond Covenants Key covenants/clauses Interest Payments - The Notes will bear interest at a rate of 4.021% per annum, payable semi-annually Final Redemption - Redemption at par. Unless previously redeemed or purchased and cancelled, the Notes will mature and become payable at their principal amount on 11 December 2018 Status The Bonds constitute direct, general and unconditional obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured obligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatory and of general application. Form and Denomination The Bonds will be issued in registered form in the denomination of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. Payments - All payments of principal and interest by the Issuer will be made free and clear of, and without withholding or deduction for any taxes or duties, unless such withholding or deduction is required by law. Governing Law The Bonds and the Trust Deed and any non-cont ractual obligations arising out of or in connection with the Bonds and the Trust Deed are governed by English law. Standby Letter of Credit The Bonds have the benefit of the Standby Letter of Credit denominated in US dollars issued by Industrial and Commercial Bank of China (Asia) Limited as the LC Bank in favour of the Trustee, on behalf of the holders of the Bonds. Source: China Merchants Land Limited and ifast Compilations
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