Country Garden seeks US$493 million from share placement to help repay offshore debt amid liquidity crunch

Chinese developer to place out 1.463 billion new shares at HK$2.68 each to raise HK$3.87 billion (US$493.2 million) of proceeds after fees

Stock to be placed out at 17.8 per cent discount to its last traded price on Monday, when it rallied on news of Beijing’s easing measures

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Barricades from recent Covid-related lockdowns block an entrance leading to Country Garden’s Fengming Haishang residential development in Shanghai in July 2022. Photo: Bloomberg

Zhang Shidongin ShanghaiandJiaxing Liin Hong Kong

Published: 11:02am, 15 Nov 2022Updated: 4:23pm, 15 Nov 2022

Country Garden Holdings, China’s fourth-largest developer by market value, is seeking HK$3.87 billion (US$493 million) of net proceeds from a stock placement to help repay offshore debt after a liquidity squeeze that crashed the industry over the past two years.

The home builder plans to sell 1.463 billion new shares at HK$2.68 each, or 6 per cent of its existing capital, to undisclosed investors. The price represents a 17.8 per cent discount to its last-traded price of HK$3.26 on Monday. The placement is being made under a mandate previously approved by its shareholders.

Country Garden, which is based in Foshan in southern Guangdong province, hired UBS and JPMorgan Chase to find buyers for the shares for a 1.25 per cent commission of the gross proceeds.

“Country Garden is leveraging its recent stock rally to rake in money,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “The issue is with the pricing. After the wild price swing, how many investors are willing to buy the placement stocks based on the market price?”

Country Garden’s co-chairman and controlling shareholder Yang Huiyan. Photo: Weibo

Shares of Country Garden slipped 1.8 per cent to HK$3.20 on Tuesday, after earlier losing as much as 15 per cent. The stock had surged 223 per cent this month through Monday as China began to selectively bail out some debt-stricken developers. The central bank last week issued a 16-point plan that included asking commercial banks to boost lending to them.

Since Beijing began curbing excessive debt among weak developers to protect the financial system, China’s real estate market has seized up with unprecedented debt defaults. Banks have shut off liquidity tap while offshore bond investors demanded extra risk premium to lend to troubled developers.