In recent years, Guizhou Province's urban investment companies have frequently defaulted on non-standard bonds, resulting in greater pressure on bond refinancing.

Some people in the market suggest that Guizhou can adopt "Maotai Debt Transformation".

At the time, this sounded a bit funny; now it seems that "Maotai's debt reduction" is gradually approaching.

The reporter learned that Kweichow Moutai Group (600519.SH), the parent company of Kweichow Moutai Group, plans to issue 15 billion yuan of corporate bonds next week, with an inquiry range of 2%-3.5%. This will be the company’s first time financing in the bond market.

This financing is mainly used for the equity acquisition of Guizhou Expressway Group Co., Ltd., repayment of interest-bearing debt, supplement of working capital needs, etc.

According to the issuance documents, the issuance term of this bond is no more than 7 years (inclusive).

The specific term plan, rights-containing clause design and issuance time of each bond issue shall be arranged by the issuer based on market conditions and capital needs.

The bond term is 3+3+1 years, and it is not yet certain whether it has a redemption right or a put right.

If Moutai's final issuance interest rate is determined to be between 2% and 3.5%, its interest rate will be similar to the interest rate of Guizhou local government bonds, and may even be lower than that of Guizhou local government bonds.

In addition to Moutai Group's bond issuance to acquire Guizhou Expressway, measures such as the establishment of a financial company to add bond underwriting business and the reduction of Moutai shares held by Guizhou Provincial State-owned Capital Operation Co., Ltd. all show that in the process of resolving local debt in Guizhou, Moutai Group has become

A force that cannot be ignored.

"For Guizhou, Kweichow Moutai has taken a key step in auxiliary debt. Of course, Moutai, a high-quality asset, mainly indirectly guides the resolution of debt risks by leveraging capital leverage." Chief Fixed Income Analyst of Tianfeng Securities

Sun Binbin said.

Judging from market feedback, these measures have boosted market confidence in Guizhou urban investment bonds to a certain extent.

Some market participants joked that maybe the Guizhou urban investment bonds you buy in the future will smell like soy sauce.

"Guizhou's urban investment bonds have improved this year. The fund trust regulations require that the proportion of non-standard trust investment should not exceed 50%, and the coupon rate of Guizhou urban investment bonds is higher. Many trusts bought Guizhou urban investment bonds, and some of them were non-standard and converted to standard.

" said a credit analyst from a medium-sized securities firm in Shanghai who often goes to Guizhou for research.

However, according to Sun Binbin's statistics, from the perspective of the primary market (net financing level) and the secondary market (credit spread and excess spread), the market still has reservations about Guizhou Urban Investment Bonds.

Perhaps although Guizhou Province's current yield level is indeed high and it is a veritable high-yield area, the endless credit incidents in the region have also discouraged investors.

In mid-September this year, Moutai Group announced that it planned to issue 15 billion corporate bonds in the form of small public offerings.

The purpose of the funds raised is to, after deducting relevant issuance expenses, be used to acquire the equity of Guizhou Expressway Group Co., Ltd. (hereinafter referred to as Guizhou Expressway), repay interest-bearing debts, supplement working capital needs, etc.

Industrial and commercial registration information shows that Guizhou Expressway Group is 100% owned by the Guizhou Provincial State-owned Assets Supervision and Administration Commission, and its business scope includes the operation and management of the construction, maintenance, toll collection, and services of expressways and ancillary facilities.

According to data from Enterprise Alert, as of the end of June this year, Guizhou Expressway’s interest-bearing liabilities were RMB 258.1 billion. Assuming the interest rate is calculated at 5%, the annual interest expense is RMB 13 billion.

Last year, Guizhou Expressway's operating revenue was 20 billion. This year, affected by the epidemic, operating revenue fell sharply.

In short, Guizhou Expressway’s debt burden is not light.

Guizhou Expressway has begun to mitigate debt risks.

According to the bond prospectus disclosed by Guizhou Expressway Group Company in February this year, in June 2019, the company signed a financing re-arrangement project syndicated loan contract with China Development Bank and other banks to replace existing debt of 135.4 billion yuan.

Data shows that as of the end of September 2019, the syndicate has issued a total of 70.01 billion yuan in loans, 66.2 billion yuan in debt replacement, and the remaining debt of 69.2 billion yuan will be replaced as scheduled.

The rating company believes that the replacement will further optimize the company's debt maturity structure and reduce the company's short-term repayment pressure.

A person from the credit department of a joint-stock bank said that for banks, highways are one of the few credit assets that can achieve both high investment and low non-performing assets.

For local governments, highway debt repayment mainly relies on toll revenue, but the annual toll revenue is significantly smaller than the debt principal. Local governments are under great debt pressure, so they need to restructure the debt and smooth out the terms.

It becomes the demand of local governments.

"Moutai Group is not short of money, and many credit lines are useless. Moutai Group's bond issuance is more likely to send a signal that Kweichow will play its Moutai card well." A bond trader in Beijing said, "

After raising funds from bond issuance and investing in shares, it will have little effect if it is used directly to repay the debt of the expressway group; if it is pooled into the province's debt working capital, the capital effect can be amplified." Meng Xiangjuan, chief fixed income analyst of Shenwan Hongyuan, believes that this will help to marginally improve the market.

Confidence in Guizhou Urban Investment is marginally beneficial to the valuation of Guizhou Provincial Urban Investment Bonds.

The reporter learned that the bond is expected to be issued in bookkeeping on November 4. The security is called "20 Moutai 01". The main rating and debt rating are both AAA, and the interest rate range is 2%-3.5%.