Mainland China developer Country Garden eyes property management service spin-off
Mainland property firm eyes sweeping changes in bid to establish itself as blue-chip developer
Country Garden, China's sixth-biggest developer in terms of sales, aims to spin off its property management services as early as this year, alongside another plan to raise at least 6 billion yuan (HK$7.5 billion) via onshore bond issuance, its chief financial officer, Wu Jianbin, told the South China Morning Post yesterday.
The company is going through sweeping changes in an effort to establish itself as a blue-chip developer like rivals such as China Overseas Land and Investment and China Vanke, instead of being perceived as a mass producer of cheap homes in tier-three and tier-four cities, many of which are suffering severe housing gluts.
About 15 months into the job, Wu has cut Country Garden's funding cost to 6.5 per cent from 8.5 per cent, through a HK$3.20 rights issue in September, sale of a 9.9 per cent stake to Ping An Insurance for HK$6.3 billion in April, and the refinancing of several offshore notes paying over 11 per cent. Because of that improvement, Moody's last week raised its corporate family and senior unsecured debt ratings to Ba1 from Ba2.
Wu said Country Garden had applied to issue bonds onshore, in two steps, totalling 6 billion yuan or more, which would pay about 5 per cent a year. "All documents have been submitted and approval will come very soon," he said.
A capital market rally since the second half of last year and regulatory relaxations have boosted developers' fundraising activities. Fundraising by the 108 developers tracked by consultancy China Real Estate Information Corp was up 70 per cent in the first five months of the year to 368.5 billion yuan. However, a 30 per cent stock market plunge since mid-June has thrown the outlook for the second half into doubt.
When asked if Country Garden had any plan to issue A shares to take advantage of much higher valuations onshore than in Hong Kong, following rivals Dalian Wanda Commercial Properties and Guangzhou R&F, Wu said it had none "right now".
"Hong Kong is an international market and fundraising can be really quick when in need," he said. "The process is slow onshore, and companies cannot decide on the timing."