Developer's rights share issue seeks HK$5.29b
Kowloon Development plans to use proceeds to finance mainland projects
Shares of medium-sized property developer Kowloon Development slumped 3.49 per cent yesterday on news of a HK$5.29 billion rights share sale, its second fund-raising exercise in three months.
The stock, which ended a week's suspension yesterday, closed 56 HK cents lower at HK$15.50 after drifting closer to the HK$13.80 sale price of the 383.56 million rights shares.
The fresh proceeds are for partial payment of a 3.5 billion yuan property development in Tianjin and for adding to funds for further acquisitions on the mainland.
The latest cash call saw the company issue 383.56 million rights shares to qualifying shareholders on the basis of every two existing shares for one rights share.
The HK$13.80 issue price represented a 14.07 per cent discount to the last closing price of HK$16.06 on December 13.
To facilitate the rights share issue, the company plans to expand its authorised share capital to HK$500 million from HK$100 million by creating four billion new shares at 10 HK cents each.
The company's controlling shareholder, executive director Or Pui-kwan and his family, with a 58.43 per cent stake, promised to take up the proportion of the rights shares for HK$3.09 billion.
However, HK$2.25 billion of this will be used to offset the equivalent amount of a loan the company owes the Or family.
This means the net proceeds will amount to only HK$3 billion, of which HK$1.1 billion will be used to settle part of the 3.5 billion yuan payment for the Tianjin project and the balance largely for unspecified investments and further acquisitions of property projects.
The payment will go to state-owned rail firm Tianjin Binhai Mass Transit Development, which holds the land-use rights of the project.
Tianjin Binhai will have a 10 per cent interest in the project and Kowloon Development the rest.
The project, in the central business district of Hedong, involves development of serviced flats, office towers and commercial spaces on a gross floor area of 930,000 square metres.
Kowloon Development said it intended to bring in investors to the project, which will result in diluting its interest.
However, it is confident about the project's prospects as a rail line between Tianjin and Beijing is scheduled for completion by 2008, which will shorten the travelling time between the two cities to 30 minutes.
In September, Kowloon Development netted HK$1.13 billion from a share placement to meet funding requirements of its mainland projects.
The company is the latest in a string of property developers seeking equity funding after a HK$524 million share placement by Lai Sun Development, HK$5.5 billion by Henderson Land Development and HK$6.6 billion by Hang Lung Properties last month.