Cash-strapped Agile Property gains some credit breathing space

Embattled mainland developer Agile Property has gained some breathing space over its bank loans by agreeing to go ahead with a delayed rights issue, easing immediate concerns about its fate following the detention of chairman Chen Zhuolin.

The Guangdong-based developer, controlled by the Chen family, said in a stock exchange filing on Sunday that lenders including HSBC and Standard Chartered had agreed to extend, for 12 months, up to US$265 million of a US$475 million loan facility maturing in December, on condition that a proposed US$210 million (HK$1.6 billion) rights issue was completed and the net proceeds used to repay the loans.

"It solves the company's most urgent refinancing need and will ease its immediate liquidity risk," said Fu Bei, a senior property analyst at global ratings agency Standard and Poor's.

The agency downgraded Agile's long-term corporate credit rating to BB-minus from BB with a negative outlook earlier this month after Chen was put under house arrest at the end of last month and the company had to scale down a HK$2.8 billion rights issue.

The firm has appointed Chen's wife, Fion Luk Sin-fong, and youngest brother, Chan Cheuk-yin, as acting co-chairmen and co-presidents and sped up asset disposals and property sales.

Agile said lenders including Hang Seng Bank, HSBC, BNP Paribas, Standard Chartered and China Construction Bank had also agreed to amend certain clauses in a 36-month HK$2.6 billion loan facility, announced in June this year with a green shoe option of HK$3 billion, so that it would no longer be a default event if either Luk or Chan - or both - replaced Chen as chairman or co-chairmen, within 15 business days of him ceasing to act as company chairman.

Late last night in stock exchange filings, Agile announced it would go ahead with the HK$1.6 billion rights issue. It will be underwritten by Top Coast Investment, the trustees of the Chen family's trust.

"With the full support from the banks, the group will push forward its core business development to generate attractive returns to shareholders and to provide customers with products of the best quality," Luk said.

Agile has been caught up in President Xi Jinping's widening crackdown on corruption. The firm has been unable to contact Huang Fengchao, an executive director in charge of projects in Yunnan and Hainan provinces. It has denied reports that it assisted in money laundering and that the mainland's former security tsar Zhou Yongkang had a close relationship with Chan.

Agile's shares closed up 2 per cent at HK$4.17 yesterday, while China Vanke shares lost 3 per cent to HK$13.98 after the mainland's biggest developer by sales reported slower growth in net profits in the third quarter than in the first half.

Agile said it would soon launch new projects in cities including Shanghai, Guangzhou, Xian, in Shaanxi province, and Wuxi, Nantong and Zhenjiang in Jiangsu province.

The developer's contracted sales rose 12 per cent to 28.6 billion yuan (HK$36.2 billion) in the first nine months of the year, with the average selling price down 20 per cent during the period.

Edison Bian, chief China property analyst at UOB Kay Hian, said: "Agile's new co-chairs have shown great capabilities in taking the large developer through the most difficult time."