China’s famously indebted developer now appears to be among the most sought after by investors, after China Evergrande Group attracted RMB 60 billion ($9.05 billion) in investment in the run-up to its long-awaited mainland listing.
Ranked as China’s largest developer by sales in 2016, the real estate giant controlled by billionaire Xu Jiayin announced to the Hong Kong stock exchange today that it had raised the new capital from six mainland investors, who are led by a unit of appliance retailer Suning and an infrastructure firm belonging to the Shandong provincial government.
The investment group have agreed to purchase a total of 14.11 percent of Hengda Real Estate, which is Evergande’s principal mainland unit. Hengda is slated to inject its assets into mainland-listed Shenzhen Real Estate (000029.SZ) to achieve the proposed backdoor-listing.
Evergrande Mainland Unit Now Valued at RMB 425B
This latest fund-raising round values the mainland company at RMB 425 billion, and comes after Evergrande’s Hong Kong-listed shares have surged 480 percent this year in anticipation of the mainland listing.
In addition to Suning and Shandong Highway Group, which each agreed to subscribe to RMB 20 billion in shares, Shenzhen Amer International, Jiayu Vehicle Accessories Ningxia, Guangzhou Yehoo Investment and Ding Xiang Sichuan Equity Investment Fund are all among the investor group, according to the announcement.
The investors join subscribers to earlier tranches of equity in Hengda, with Evergrande now having raised a total of RMB 130 billion by selling some 36.6 percent of the mainland company’s equity. The equity sale also serves to reduce the developer’s once industry-leading debt to equity ratio by 40 percent – down from 240 percent at the time of its mid-year report.
Evergrande Sets New Timeframe for Mainland Listing
Evergrande first announced plans for its mainland listing in October last year as the Shenzhen-based firm looked to take advantage of the enthusiastic valuations available from mainlander investors.
According to this latest exchange filing, Evergrande is now giving itself until January 2021 to complete the shift to a mainland exchange, after earlier targetting January 2020. If Evergrande fails to meet its deadline, the company warrants that it will repurchase its shares from investors.
Last year Wang Jianlin made a similar guarantee when he delisted his Dalian Wanda Commercial Properties from the Hong Kong exchange with the goal of relisting in Shanghai. Although Wang promised to pay his investors a guaranteed minimum return of at least 12 percent on the share buy-back plan, Wanda has yet to confirm a time frame for the listing some 13 months after buying back all of its Hong Kong-listed shares.