Red Star Macalline, one of China’s largest furniture and home improvement retail center developers, announced on Tuesday that it received approval from the China Securities Regulatory Commission (CSRC) to issue up to RMB 4 billion (USD 579 million) in bonds to qualified institutional investors.
The bonds will be offered for two batches. The first batch, which will have a total value of RMB 2 billion, will mature in four or five years, and bear an annual interest rate between 4.5% and 6.1%. This indicates that the company, which is rated with AAA-level credit, aims to keep its funding cost close to China’s five-year benchmark interest rate of 4.9% for loans from banks.
The company said in its prospectus for the first bond issue that it had 11 furniture-focused shopping malls under construction at the end of 2018, and predicted that a total of RMB 6.68 billion would be needed to complete these projects.
Red Star Macalline also said that it would use RMB 1.8 billion from the first batch of the bonds to repay old debt, with the rest put toward supplementing liquidity.
This bond issuing comes on the heels of Alibaba’s investment of RMB 4.4 billion via convertible bonds in May.
The two companies will cooperate in selling furniture and home products both online and offline, with Alibaba providing technology support in line with the e-commerce giant’s “new retail” vision that integrates digital and brick-and-mortar sales channels.
According to a credit rating report that Red Star Macalline filed with the CSRC, the company, which operated 308 shopping malls at the end of 2018, had a 15.2% market share in China’s home furniture retail sector.
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