Sunac Share Sale Raises $580M as Developer Faces Bond Deadline This Month

Mainland developer Sunac China Holdings continues to make moves to shore up its financial position, including a planned HK$4.52 billion ($580 million) share sale to a holding firm controlled by the family of chairman Sun Hongbin.

In the top-up deal underwritten by Morgan Stanley, Sunac International Investment Holdings, which is also the controlling shareholder of the Tianjin-based group, will subscribe to 452 million newly issued shares in China’s fifth-ranked developer at a price of HK$10 each after selling an equal number of existing shares at the same price to at least six third-party investors, Sunac said Thursday in a filing with the Hong Kong stock exchange.

Half of the proceeds of the deal are earmarked for general corporate purposes and half for the repayment of loans, according to Sunac, which has RMB 3.5 billion ($550 million) in domestic bonds becoming puttable in January and another RMB 4 billion becoming puttable in April.

“Subject to the fulfilment of the above conditions, the parties expect that the completion date of the subscription will be on or before 26 January 2022,” the developer said.

Sell-Off Ensues

The HK$10 price represents a 15.3 percent discount to the HK$11.80 closing price of Sunac’s HKEX-listed shares on Wednesday. Traders reacted to the proposal with a sell-off in Thursday’s session, as the stock plummeted 22.6 percent to close at HK$9.13.

Sun Hongbin, whose net worth Forbes estimates at around $4 billion, appears to be taking cues from the example of China Evergrande chairman Xu Jiayin, who reportedly has ploughed more than $1 billion of his personal fortune into salvaging the world’s most indebted developer.

Sunac, which slid from fourth to fifth among China’s biggest-selling developers last year after its contracted sales fell by nearly RMB 27 billion in 2021, has taken a vigorous approach to solving its cash crunch, including a series of stock and asset sales in recent months.

In November, the developer raised $953 million through the sale of new shares and a stake in its property management unit, with the top-up placement alone raising about $653 million, Bloomberg reported.

In December, Sunac revealed that it had dumped a further $530 million worth of stock in troubled housing broker Beike, bringing its total sell-off to $1.084 billion since June.

Sunac announced last week that its property management unit was scrapping a planned $360 million acquisition of Modern Land’s services affiliate after the rival developer defaulted on a $250 million offshore bond.

Declining Health

Long one of China’s most aggressive acquirers of real estate projects, Sunac had been a buyer in the mainland property market as recently as last June, picking up a pair of finished buildings in Hangzhou from cash-strapped China Oceanwide Holdings for RMB 2.2 billion ($340 million).

But by November, Fitch Ratings had downgraded its outlook on the distressed-asset enthusiast to “stable” from “positive”, citing Sunac’s declining contracted sales and sales collection.

A Hong Kong-based financial analyst who spoke to Mingtiandi likened Sunac’s plight to that of Shimao Group Holdings, a once-healthy Shanghai-based developer stung by reports that it aims to sell all of its real estate projects.

“For Sunac, the situation is slightly similar to Shimao, but they (Shimao) are doing so much worse,” said the analyst, who asked to remain anonymous. “How they (Shimao) interact with the market is a disaster, while Sunac has been doing fine for some time and the communication with the market is better for this time around.”

Bloomberg reported Thursday that Shimao was looking for an extension to make repayments on RMB 1.17 billion ($183 million) in asset-backed securities due in a few weeks. The company will meet with investors Monday to work out an agreement, according to documents seen by the news agency.