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Naomi Rovnick

Peggy Sito

Mid-sized mainland property developer Evergrande Real Estate Group plans to raise as much as US$1 billion in an initial public offering by the end of this year.
The bid for a public float on the Hong Kong stock market  would be the second by the group after it aborted a larger share sale that aimed to raise US$2.1 billion in March last year and could be one of  as many as a dozen imminent capital-raisings planned by Chinese developers, said investment bankers.  
Evergrande abandoned its first public offering  after a sudden crash in the mainland property market that was triggered when the central government ordered domestic banks to cut lending to developers and homebuyers to avert a real estate bubble.
However, with the market showing signs of strong recovery, property developers are bidding to replenish their cash reserves.
Evergrande's banking advisers Credit Suisse, Goldman Sachs and Merrill Lynch have taken more than 50 potential investors in the new share sale on tours of its building sites in the cities of Guangzhou, Chongqing and Wuhan.
Both the bankers and fund managers confirmed that the visits conducted over the past fortnight were pre-listing marketing trips.
A banking source has confirmed that the share sale is planned for the end of this year and said  Evergrande would try to raise between US$500 million and US$1 billion this time around.
Another source briefed on  the fund-raising plans confirmed these amounts, but officials of the company and its banking advisers declined to comment.
Evergrande is likely to  put a 20 per cent stake on the market,  and if the shares were sold at the top end of their price range, the  initial offering would value the company at a maximum of US$5 billion, according to investors and bankers briefed on the plans.
Based on this proposal, company owner Xu Jiayin would retain 80 per cent of the business he founded, which could be worth  as much as US$4 billion on paper.
Since he started the business, Mr Xu has sold equity stakes to private backers and investment banks, according to financiers who have advised on these past deals.
A successful share offering would mark a huge reversal in Evergrande's fortunes. The firm embarked on a major 'buy now, pay later' land  acquisition spree in 2006 and 2007, buoyed by generous loans from Wall Street.
Capital employed leapt from 4.5 billion yuan (HK$5.1 billion) in 2006 to 17.9 billion yuan in 2007, according to a Credit Suisse research note published in February last year.
Between 2006 and  last year, investors including Credit Suisse, Deutsche Bank and Merrill Lynch gave  US$832 million to the developer, either in loans or pre-listing share purchases, and the group's total borrowings stood at US$1.4 billion in February last year,  Credit Suisse said in another research note. 
 Privately held  Evergrande has not been obliged to make more recent figures available.
Last year's share offering was meant to pay off this debt pile and, after withdrawing from the share sale,  the developer turned to private backers for yet more funds.
In April last year, Evergrande raised US$502 million by selling a 13 per cent stake to Merrill Lynch, Deutsche Bank and New World Development chairman  Cheng Yu-tung in a private equity placement.
The mainland property market is now showing early signs of recovery. Home prices in 70  key cities rose 0.2 per cent in June from a year earlier, the first annualised gain in seven months, according to National Development and Reform Commission statistics.
Prices in some first-tier cities, such as Beijing, Shanghai and Hangzhou, saw larger increases.
The company launched its first five-star hotel, the Evergrande, in Guangzhou last month. At a  presentation, Mr Xu said the  developer had sold 12.9 billion yuan worth of homes in the six months to June this year.
It sold 2.9 billion yuan of properties in the whole of 2007, according to Credit Suisse. Evergrande has not made figures available for last year.
Additional reporting by Peggy Sito
Second try
Beijing's curbs on loans to sector derailed the group's first IPO bid 
Evergrande aborted in March last year a plan to offer new shares worth, in US$: $2.1b



Evergrande revives IPO but halves size to US$1b