China Vanke

Baoneng pledges 182m Vanke shares as collateral to Ping An Securities in repurchase agreement

Shares represent 1.65 per cent of Vanke’s total issued capital

PUBLISHED : Monday, 13 March, 2017, 10:33pm
UPDATED : Monday, 13 March, 2017, 10:56pm

Baoneng Group subsidiary Jushenghua has pledged 182 million in China Vanke A-shares as collateral to Ping An Securities in a repurchase agreement, according to a filing to the Hong Kong stock exchange by Chinese real estate company late on Monday.

The 182 million shares represent 1.65 per cent of Vanke’s total issued capital.

The pledge comes amid a ban on Baoneng Group chairman Yao Zhenhua from working in the mainland’s insurance industry for 10 years, a move announced by the China Insurance Regulatory Commission (CIRC) last month when Foresea Life Insurance, a unit of Yao’s Baoneng group of companies, was found to have provided “fake materials” and “violated rules for using an insurance fund”.

On Monday, Yao also stepped down as chairman of Foresea Life. The CIRC has additionally suspended sales of Foresea Life’s new universal life insurance policies, which are a major source of Foresea Life’s revenue. Jushenghua is the parent company of Foresea Life.

Yao and Baoneng fell under the spotlight last year when subsidiaries Jushenghua and Foresea Life collectively acquired a 25 per cent stake in real estate firm Vanke, prompting Vanke’s founding chairman Wang Shi to call the group a “barbarian”.

Baoneng was condemned by the Chinese regulators after it funded the purchase of 43 billion yuan of Vanke’s shares through insurance premiums generated by Foresea’s universal life insurance product.

In December, Jushenghua said in a filing that it had used financial leverage, borrowing twice the amount of its own cash investment to buy 9.7 billion yuan worth of stock in Vanke, becoming the largest shareholder in China’s largest residential developer.

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 and December 4 to acquire the stake.

Last month, Vanke filed a lawsuit to invalidate the shares held by Baoneng, now the largest Vanke shareholder.

Vanke claimed that Baoneng violated securities laws in accumulating its 25.4 per cent holding in the developer because it borrowed funds through shadow banks without proper disclosure.

In a lawsuit filed with the Shenzhen Luohu District People’s Court, Vanke asked the court to deem Baoneng’s share purchases “invalid” and to limit Baoneng’s shareholder rights, including voting rights, until the latter “corrects” its actions.

China Vanke’s shares on Monday closed up 3.05 per cent at HK$21.95.