China Evergrande seeks US$1.1 billion from stock placement amid rush to trim US$123 billion of debt load
- Developer is offering 490 million shares at HK$16.50 to HK$17.20 each, or a discount of 11.1 per cent to 14.7 per cent to its last-traded price
- Proceeds should tide it through but may not be sufficient to pare down large amount of debt, says Kamet Capital
There is an option to increase the placement by an additional 120 million shares, according to the terms. The transaction is expected to take place on Wednesday and settled on Friday. The shares are subjected to a 90-day lock up.
Controlled by billionaire chairman Hui Ka-yan, the junk-rated developer bought itself some breathing space in late September after striking a deal with investors to avert US$13 billion of repayments by March under a Shenzhen land deal. It is still engaged in a dash for cash by cutting prices on new homes to lure buyers, pursuing listings and spin-offs, and tapping markets for fresh capital to repay maturing debt.
“The placement should tide them through,” said Kerry Goh, chief investment officer at Kamet Capital Partners. “But I don’t think US$1 billion is sufficient for them to be able to pare down their large debt. This is just sending a signal to buy some time from creditors to work out the capital structure through the sale of assets or fundraising.”
A top-up placement will allow Evergrande to raise money quickly from investors without diluting Hui’s controlling stake in the company. News of the offering provided a lift to Evergrande’s bonds, lifting its dollar-denominated notes due 2021. One of the company’s units is seeking to raise as much as 2.1 billion yuan (US$310 million) this week via a new five-year bond sale.