Country Garden global bond sale stalls in gloomy market outlook

Country Garden Holdings, the mainland's largest developer by land bank size, has postponed its first global bond sale because of unfavourable market conditions, according to an e-mail sent to investors.

The Guangdong-based developer had cut the sale's size by one-third to about US$1 billion and raised the yield to attract investors but was still forced to pull it as sentiment worsened on news of further losses related to subprime loans at major financial companies in the United States.

Morgan Stanley and the American International Group joined other major banks in booking losses on subprime mortgage-related assets and investors are also concerned that more bad news would emerge as the New York attorney-general announced a probe into the US home loan industry.

'The news from the US overnight was universally negative. US investors are not ready to engage in [Country Garden's bond sale] and that will have an impact on investors globally,' said a syndicated banker who worked on the deal.

Country Garden had hired Bank of China International, Citi, Deutsche Bank, HSBC, JP Morgan, Morgan Stanley and UBS to arrange the sale.

Standard & Poor's rated the bond BBB-minus, the lowest investment grade. Moody's Investors Service rated it Ba1, one notch below investment grade. 'Yields of [US] dollar bonds issued by Chinese property developers went to their widest points in the morning but they have since recovered after Country Garden postponed the sale,' said a Hong Kong-based hedge fund manager.

US dollar-denominated bonds by mainland developers have already weakened significantly over the past two weeks, especially after Country Garden proposed a major sale because it might dry up liquidity in the region's high-yield market.