Vanke, China's third-largest developer, seeks its second US$1 billion from stock investors to repay foreign debt, ease coronavirus crunch

By Daniel Ren and Pearl Liu ren.wei@scmp.com / https://www.scmp.com/business/china-business/article/3087507/vanke-chinas-third-largest-developer-seeks-ease-coronavirus?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3087507 | June 9, 2020 10:49 AM SGT
China Vanke, the mainland's third-largest home builder, aims to raise its second billion-dollar of fresh capital in as many years from stock placements, after ploughing through a slowdown caused by the coronavirus pandemic.
The homebuilder will sell 315.59 million new shares at HK$25 each to raise HK$7.87 billion (US$1.01 billion), according to a filing to the city's exchange on Thursday. The offer price represents a 4.8 per cent discount to Wednesday's close of HK$26.25.
Its shares jumped 2.3 per cent to HK$26.85 while its Shenzhen-listed A shares fell 0.4 per cent to 26.73 yuan. The refinancing plan comes after the developer reported a 7.7 cent drop in sales for the first five months of this year due to the pandemic.
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The placement follows a similar move in April last year when it raised HK$7.8 billion by selling about 263 million new shares at HK$29.68 each, also to pay down foreign borrowings. About 82 per cent of its 39.2 billion yuan (US$5.5 billion) worth of foreign-currency loans and bonds were denominated in the US currency, according to its 2019 annual report.
"There are no signs that the mainland banks will increase their loan quotas to support developers this year," said Ding Zuyu, co-president of property agency E-House. "The outlook for the mainland home market remains bearish due to the impact of the coronavirus."
China Vanke said on Tuesday that its sales declined in the January to May period by 7.7 per cent to 247.1 billion yuan. Vanke's home sales growth in 2019 slowed to 4 per cent, compared with 14.5 per cent in 2018 and 45.3 per cent in 2017.
Last month, it unveiled a plan to move into pig farming, as a way of diversifying its revenue sources. According to job vacancies advertised on its website, Vanke is planning to breed 250,000 pigs a year.
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It established a new food business that will focus on pig breeding, vegetable growing and corporate catering.
China's economic output shrank 6.8 per cent in the first quarter of this year, its first contraction since 1992, when it started recording gross domestic product growth.
Property was one of the sectors hit hardest by the coronavirus, owing to lockdowns and restrictive measures between late January and April, which hampered business activity. In the first quarter, mainland Chinese home sales plunging by 20 per cent year on year.
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Moody's downgraded the outlook for the property sector to negative and expected nationwide sales to fall by 5 per cent to 10 per cent in 2020.
Beijing, concerned by the sector's boom-and-bust cycle, has taken a hard stance on the past five years. Analysts said that monetary easing introduced to bolster China's wider economy was unlikely to benefit developers, as financial institutions continue to refrain from granting them easy credit.
Meanwhile, Yuzhou Properties, another Hong Kong-listed mainland Chinese developer, said it would not consider placing new shares to raise money, because valuations were too low at the moment.
"We will focus on onshore bonds and getting loans domestically this year, to lower our leverage level," said Chiu Yu Kang, the company's chief financial officer. "We have not had much difficulty in raising money so far."
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