Evergrande taps key partners for more capital
Wong Ka-chun, Peggy Sito and Tim LeeMaster
Evergrande Real Estate Group, the Guangzhou property developer that last month cancelled a proposed initial public offering because of poor investor response, has now turned to its strategic partners in a bid to raise more capital.
Sources said the company was in talks with Deutsche Bank, Merrill Lynch and Singapore's Temasek Holdings - which together own US$400 million worth of convertible bonds in Evergrande - with a view to selling them an enlarged stake.
The increased holding was likely to be priced below the level at which the partners bought in a year ago, the sources said.
'The partners have agreed to take up a larger stake but some details are still pending discussion,' one source said, adding that the deal would be a win-win solution for the developer and its partners. 'Evergrande will have new money for development while the three investors can get a larger piece of the firm and lower their average acquisition cost.'
A spokesperson at Evergrande confirmed that there were talks with the three investors.
A spokesperson for Temasek said the investment holding group was 'comfortable with our current shareholding'.
Evergrande's latest capital-raising bid follows its withdrawn share offering on March 25 and a failed follow-up bid to attract new strategic partners in a private placement after inviting potential bidders to visit projects in Changsha, Wuhan and Chengdu. It hoped to raise as much as US$400 million via a new private placement.
The developer proposed spending up to 72 billion yuan (HK$80.38 billion) on property development by the end of next year, of which 30 billion yuan was scheduled for this year and the remainder for next. 'They hope to launch as many as 38 completed projects within the next two years,' said a source.
The developer tried to raise HK$16.5 billion via an initial public offering in Hong Kong last month but failed to draw strong retail and institutional investor interest.
While the fund-raising plan has not yet been finalised, another source said the company was unlikely to proceed with earlier plans to team up with United States developer Donald Trump and Orient Overseas Group to bid an estimated 5 billion yuan for the landmark East Tower commercial site in Guangzhou's new central business district, Zhujiang New City.