China Fortune Land to raise US$1.78 billion from asset sales to repay creditors

Cash-strapped developer to sell four projects to state-backed rival China Resources Land to help repay creditors

Company expects to take a loss on the transaction, with payments to be staggered over four years

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View of the stand of China Fortune Land Development at a Shanghai expo in March 2019. Photo: AFP

Published: 5:00pm, 29 Dec 2022

China Fortune Land Development has agreed to sell its interest in four projects as part of an ongoing effort to pare its debt burden since capitulating under Beijing’s “three red lines” policy to curb excessive leverage among weak developers.

The developer will sell its entire interest in the assets at a token sum of 1 yuan each, to Hong Kong-listed firm China Resources Land, according to exchange filings in Shanghai and Hong Kong. The state-backed buyer has agreed to settle 12.4 billion yuan (US$1.78 billion) of debt tied to the assets.

China Fortune expects to take a 2.13 billion yuan loss in the transaction as the effective price is below the book value of the assets, it said. The proceeds would be used to repay creditors, it added.

The transaction is to be completed in several phases, subject to conditions and state approvals, over four years. The first payment of 4 billion yuan is expected to be made in March 2023 while the final payment of 2.4 billion yuan is due in December 2026, the filings showed.

A view of China Resources Land logo in Chongqing, China. Photo: Getty Images

Beijing began squeezing weak developers in August 2020 when it imposed leverage thresholds to control systemic risk in the industry, shutting them out of the loan and bond markets for fresh capital. The policy has since sent scores of developers into crisis, triggering more than US$20 billion of debt default along the way.