China’s BoCom agrees to support eight property firms

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BEIJING — China’s Bank of Communications Co Ltd (BoCom) said on Thursday it has signed pacts to support eight property firms, answering Beijing’s call to ease a severe liquidity crunch in the sector.

Authorities have been stepping up measures in recent weeks to help the property sector, which makes up about a quarter of the economy, after many developers defaulted on debt obligations and were forced to halt construction of homes.

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The bank said it would deepen co-operation with the property firms, including Longfor, Gemdale and Greentown, in terms of property development loans, loans for M&A deals and bond investments, according to a statement released by the lender.

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BoCom said it will “actively carry out the responsibility of a state-owned bank” and to “continue to optimize the allocation of real estate credit resources.”

Last month, six of China’s biggest commercial banks, including BoCom, lined up at least $162 billion in fresh credit to property developers.

Among them, BoCom agreed to provide a 100 billion yuan ($14.34 billion) credit line to Chinese developer Vanke and a 20 billion yuan credit line to Midea Real Estate Holding Ltd.

In addition to enhanced credit support, property developers are also rushing to raise funds via debt issuance and the sale of equity after Beijing eased restrictions on the funding channels.

Seazen Holding Co Ltd will raise as much as 2 billion yuan in medium-term notes, according to its bond prospectus published Thursday on the website for China major bond issues (www.chinamoney.com.cn).

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The proceeds will be used to construct property projects, repay the developer’s dollar bonds and replenish its operating capital, the prospectus said.

Still, despite recent measures, many analysts believe the sector will

take some time to recover

, as the weak economy is weighing on home buyers’ confidence and willingness to spend.

Citigroup said in a report on Wednesday it was lowering its earnings and target price estimates for some developers including Sino-Ocean (3377.HK), CIFI (0884.HK)and Longfor (0960.HK) due to weak property sales and profitability. ($1 = 6.9748 Chinese yuan renminbi) (Reporting by Ziyi Tang and Ryan Woo; Editing by Christian Schmollinger and Kim COghill)

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