Debt-ridden Sunac 'scraps bond sale'

PUBLISHED : Wednesday, 09 March, 2011, 12:00am
UPDATED : Wednesday, 09 March, 2011, 12:00am

Sunac China Holdings, an indebted mainland property developer whose chairman has a checkered past, has cancelled a planned bond sale, two sources involved in the transaction said.

Tianjin-based Sunac joined the Hong Kong stock exchange last October, after at least two previous attempts at an initial public offering dating back to 2004.

Sun Hongbin, Sunac's chairman, was jailed for embezzlement in the early 1990s. He served two years of a five-year prison sentence and his conviction was overturned in 2003.

The developer announced last week it had tasked Deutsche Bank, Goldman Sachs and Standard Chartered with selling US dollar bonds.

The marketing roadshow for the bonds began yesterday. Sources involved in the transaction said Sunac had cancelled the deal due to a lack of investor interest. Sunac halted trading in its shares yesterday morning. It closed on Monday at HK$2.60.

One real estate investor, who declined to be named, said it was 'Sun Hongbin's interesting past, as well as the company's already high debt', that had made his fund pass on buying Sunac's bonds.

Sunac has 1.797 billion yuan (HK$2.08 billion) of net borrowings, representing 142 per cent of shareholders' funds.

Investors are steering clear of indebted mainland developers amid signs the Beijing government will order the nation's banks to stop lending to the real estate sector in a move to cool red-hot property prices.

China Banking Regulatory Commission head Liu Mingkang said this month that bank lending had been 'abnormally explosive' over the last two years. 'Banks should explore ways of conducting comprehensive stress tests on real estate loans,' Reuters reported Liu as saying.

In August 1992, Sun was convicted of 'misappropriation of funds' from his former employer, investment giant Legend Holdings, Sunac's IPO prospectus said. Though his conviction was later overturned, the retrial court found he did transfer cash from Legend to an unnamed third party.

Money woes

Sunac's net borrowings, representing 142 per cent of shareholders' funds, stand at, in yuan, almost: 1.8b