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Xinyuan Real Estate Co., Ltd. Message Board

  • gnostocks gnostocks Dec 13, 2013 10:47 AM Flag

    13% notes?

    I am long XIN. Bought in at $1.77. Price target is (or at least was) $10 in the next year and maybe $15 (would likely cash in a lot at $15). Why are they issuing notes at 13%? That seems very high yield for a seemingly healthy company. I am not bashing or accusing this of being a scam. I am just wondering if I am missing something here. I guess there is some currency risk since the notes are USD and they operate in China... but 13%?

    Sentiment: Buy

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    • They're a small Chinese based company. They obviously believe they can use the money to make more than13%. The debt is rated B+ which while not great at least shows they are not considered a fraud.

    • Good question, One explanation would be, their pe=3 means yield of company is 33% so even at that rate it is good to leverage. However it seems that it is possible to raise a loan at much lower rates. So why would the company take such a loan? if all is kosher, I would guess that the deal collateral for the loan is a risky asset, since otherwise the deal is illogical.
      Since the company is audited by an affiliate of EY, I don't suspect wrong doing!

      Sentiment: Hold

    • There is little currency risk....but there is ample principal risk since XIN's major assets are located mostly in China.

 
XIN
2.85-0.03(-1.04%)Sep 3 4:05 PMEDT