Asset sales accelerate; property shares gain: Evergrande update

Shares and bonds in property companies gained, with China Evergrande Group’s stock jumping the most in 10 weeks after signs of progress in what will likely be one of the country’s largest restructurings.
Image: Bloomberg

China’s efforts to spur asset sales by cash-strapped property developers are starting to gain momentum with a flurry of deals, potentially easing the industry’s debt crisis.

Shares and bonds in property companies gained, with China Evergrande Group’s stock jumping the most in 10 weeks after signs of progress in what will likely be one of the country’s largest restructurings. The company faces coupon payment deadlines totaling $352.5 million on Monday.

Agile Group Holdings Ltd., the junk-rated Chinese property developer, will sell its 26.7% stake in a Guangzhou property joint venture for 1.84 billion yuan ($291 million), the latest sign that asset sales to state-owned firms may help ease the industry’s liquidity crisis. Fellow builder Yuzhou Group Holdings Co. said it won’t pay off two dollar bonds due this week, meaning some events of default will occur.

Key Developments:

  • China Property M&A Deals Gain Momentum in Relief for Developers
  • China Builder Agile to Sell $291 Million JV Stake to State Firm
  • Pudong Bank Prices 30b Yuan Bond Partly for Property M&A Loans
  • Shimao in Talks to Sell Guangzhou Project Stake to SOE: Cailian
  • Vanke Overseas to Raise Net GBP56m From London Property Sale
  • Evergrande Appoints Cinda’s Liang as Non-Executive Director
  • China’s Wild Markets Raise Stakes for Traders Buying Into Rally

Shimao in Talks to Sell Guangzhou Project Stake to SOE: Cailian (12:25 p.m. HK)

Shimao Group is in discussions with state-owned firm China Overseas Land & Investment to sell its stake in the Guangzhou Asian Games City project, Cailian reported, citing unidentified people.

China Property M&A Deals Gain Momentum in Relief for Developers (11:43 a.m. HK)

China’s efforts to spur asset sales by property developers in need of cash are starting to gain momentum with a flurry of deals, potentially easing the industry’s debt crisis.

In recent days, stressed property firms Agile Group Holdings Ltd. and Shimao Group Holdings Ltd. have announced sales of stakes in companies to state-owned enterprises to raise cash. Regional lender Shanghai Pudong Development Bank Co. priced a bond to help fund loans for mergers and acquisitions in the sector, and at least two state-owned developers announced plans to issue such M&A notes.

China Developers’ Dollar Bonds, Shares Extend Last Week’s Gains (10:43 a.m. HK)

Dollar bonds and stocks by Chinese property developers rallied, with the sector boosted by news of asset sales and signs of improved access to funding.

A Bloomberg Intelligence gauge of developer shares gained as much as 2.1% to the highest level since Nov. 12. Chinese high-yield dollar bonds, which are dominated by builders, rose 0.5-2 cents on the dollar, credit traders said, following a week of huge swings.

Pudong Bank Prices 30b Yuan Bond Partly for Property M&A Loans (9:52 a.m. HK)

Shanghai Pudong Development Bank priced a 30 billion yuan 3-year bond at 2.69%, with part of proceeds to be used for funding mergers and acquisitions in the property industry.

The two-part bond’s 5 billion yuan tranche, which will be used to grant loans for such transactions by developers, was 1.79 times subscribed, people familiar with the matter said.

China Evergrande Shares Jump on Progress Signs (9:50 a.m. HK)

Shares climbed in Hong Kong after its dollar bonds jumped late Friday. REDD reported that the Guangdong government plans to release a debt restructuring framework by March. Guangdong’s local government proposes to restructure Evergrande’s debt out of court and plans to separate the offshore debt and assets from the company’s onshore overhaul, according to the report.

“We view this development positively as it provides some guidance on likely recovery values,” said Charles Macgregor, head of Asia at Lucror Analytics. He added that offshore investors may expect to receive 20-25 cents on the dollar.

China Builder to Miss Dollar Bond Payments After Debt Exchange (9:05 a.m. HK)

Yuzhou won’t pay off two dollar bonds due this week which have $104.9 million of combined principal outstanding following a debt exchange last week.

It plans to relaunch the exchange offer this week and said the nonpayments won’t trigger events of defaults on its other dollar notes.

China Builder Agile to Sell $291 Million JV Stake to State Firm (8:15 a.m. HK)

Agile will sell its 26.7% stake in Guangzhou Lihe Real Estate Development, a property joint venture, for 1.84 billion yuan, it said in a Hong Kong stock exchange filing. Purchaser is Guangdong Zhonghai Property, an indirect wholly-owned unit of China Overseas Land & Investment Ltd.

Agile expects to record a gain of around 698.7 million yuan from the sale, and the net proceeds are planned to go toward general working capital and future business development.

Vanke Overseas to Raise Net 56 Million Pounds From London Property Sale (7:07 a.m. HK)

An indirect subsidiary of Vanke Overseas entered into an agreement to sell a property in London to M&G TS Ryder, according to a Hong Kong stock exchange filing.

China Vanke Co. may focus more on expansion in China after the deal, Bloomberg Intelligence senior credit analyst Daniel Fan said in a note. “This might make sense as it’s financially stronger than many Chinese developers and thus more able to buy cheap assets in the downcycle,” he said.

© 2022 Bloomberg

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