Chinese developers’ path to switch to A-share listing in stock market ‘full of challenges’

Future Land, which recently became the first mainland Chinese developer to successfully complete a shift listing from the mainland B-share market to the A share market, said the process was “full of challenges”.

Future Land’s A shares were listed on the Shanghai Stock Exchange on December 4.

“We encountered the stock crash (in June) and IPO suspension when pushing forward our restructuring,” Future Land’s executive director Kenny Chan said.

“Some of our investors worried if we could pass the process, but we just kept our pace and obtained all the approvals through the worst environment.”

Future Land originally owned a subsidiary (Jiangsu Future Land) listed in China’s B-share market. Future Land’s parent Future Land Development is listed in Hong Kong.

The mainland’s B-share market is long seen as marginalised and illiquid. It is denominated in foreign currency and used to be open only to foreign investors.

That’s why Future Land was eager to convert its listing to the A share market. To achieve this, it proposed to issue A shares to all shareholders of the B-share listed subsidiary along with absorbing and merging with the latter by way of a share swap.

Chan said it was very challenging and time consuming to get approvals from all the counterparties, such as Shanghai Stock Exchange, the China Securities Regulatory Commission and shareholders. He said regulators have been cautious with private companies and strictly vetted their financial documents.

Chan said listing in both the A-share and H-share markets are the safest and ideal structure for Future land, adding that the expanded financing channel has helped the company significantly reduce financing costs both onshore and offshore.

“Many big domestic banks started to grant us credits,” Chan said.

Upon completion of restructuring in November, Future Land issued a 2 billion yuan domestic bond with an interest rate as low as 4.5 per cent, versus its 8.9 per cent domestic bond issued in 2014. Its Hong Kong-listed parent placed a 6.25 per cent US$250 million senior note last month, compared with its previous notes issued with a coupon rate of more than 10 per cent.

Chan said most new lending recently has been used to redeem old debts and will not add leveraging in the company.The total financing cost has saved one percentage point to seven per cent so far this year.

Future Land’s contracted sales rose 34 per cent year on year in the first 11 months of the year to 28.1 billion yuan, having hit the full year sale target of 28 billion.

“We have grown to a company with billions of sales without raising money from the B-share platform since 2003. I believe our strong performance is the key to the success of our shift listing,” Chan said.