Update | Jushenghua borrowed heavily to purchase stake in mainland China developer Vanke, filing shows
Jushenghua says it borrowed 6.43 billion yuan to fund Vanke stake purchase
Concerns over excessive leverage within China’s corporate culture were back in focus on Wednesday, after property and insurance group Jushenghua provided details on how it managed to buy 9.7 billion yuan worth of stock in Vanke to become the largest shareholder in China’s No 1 residential developer.
Jushenghua said in a regulatory filing on Wednesday that it had used financial leverage, borrowing twice the amount of its own cash investment to buy Vanke’s mainland-listed shares traded in Shenzhen.
So far the investment has paid off, as Vanke’s shares were recently at a fresh five-year high.
However, revelations of Jushenghua’s move unnerved investors, sending the Shenzhen-listed share down 2.9 per cent at 20.48 yuan on Wednesday.
Vanke announced earlier this month that Jushenghua and affiliated group Foresea Life Insurance, held a combined 20 per cent stake as of December 4, overtaking state-owned China Resources to become the developer’s largest shareholder.
About 6.43 billion yuan worth of its Vanke share purchase was funded using financial leverage from seven separate sources, the company said in the filing. Jushenghua spent a total of 9.65 billion yuan between November 27 to December 4 to acquire the stake.