Sunac China Holdings Ltd (1918.HK), a Chinese property developer, announced on Thursday that it planned to sell shares to raise HK$4.52 billion ($580.09 million) for debt repayment and general corporate reasons.
Sunac China Holdings Ltd. (1918.HK), China’s third-largest developer, raised $580 million in a top-up share offer on Wednesday, following a liquidity issue that caused the developer’s dollar bonds to plummet.
The Hong Kong-listed developer wants to sell 452 million new shares to controlling shareholder Sunac International Investment Holdings, representing 8.3 percent of the enlarged share capital, according to a filing with the Hong Kong Stock Exchange.
The new shares will be offered for $10 each in Hong Kong, representing a 15.2 percent discount from Wednesday’s closing value of $11.80 in Hong Kong. The controlling shareholder will purchase the new shares after selling the equivalent number of existing shares to third-party investors at the same price.
Half of the approximately $50 million in net revenues from the sale will be used to service debt, while the other half will be utilized for operations, according to the business.
Sunac later stated that it has sufficient funds to pay down short-term debt and has no intentions to issue additional shares at this time. According to Sunac, the regulatory climate for the industry is strengthening, and they are completely confident in the market’s continued stability and health.
This did little to reassure investors about the company’s long-term financial viability. Sunac’s 2024 dollar bond slid 2.7 cents on the dollar to a new low of 46.3 cents, erasing a late Wednesday recovery from intraday lows. The company’s 7.95 percent note due 2022 and 6.5 percent bonds due 2023 are also at new lows. The stock dropped as much as 20% in one day, setting a new intraday low.
Sunac is one of China’s top developers, scrambling to avoid a cash crunch after a government crackdown effectively shut down the industry’s access to the dollar bond market, prompting a record increase in defaults and raising fears of a slowdown in Asia’s largest economy. International credit risk assessors believe Sunac to be a higher-quality borrower among junk-rated developers.
This is the second time in two months that shares have been sold. Sunac Services Holdings Ltd, the company’s property management division, generated $953 million in November 2021 by selling more stocks and a holding in the company.
Earlier this week, a court-ordered asset freeze on one of the company’s units sparked concerns about the company’s financial stability. Sunac has worked out a solution with a business partner and is now attempting to have the court orders lifted.
Sunac is owing $141.3 million in debt principal and interest current quarter, and $1.65 billion in debt principal and interest in the second quarter, according to data.
Sunac sold offices and hotel developments in Hangzhou and Shanghai, offered shares on the market, borrowed from its principal shareholder, and sold a part in Sunac Services Holdings Ltd in late 2021 to deal with its debt concerns. It’s also considering selling its culture and tourism business, which it bought for CNY65 billion ($10.21 billion) during the last four years.