Country Garden Raises $813M in Share Sale to Ping An Insurance

One of China’s top 10 developers replenished its cash supplies by selling HK$6.3 billion ($813 million) in new shares to Ping An Insurance as the country’s real estate companies grapple with a shortage of both customers and funds in 2015.

The sale of 2.24 billion newly issued shares by Country Garden Holdings means that the Guangzhou-based developer is selling 9.9 percent of its stock (post-sale) at a 10 percent discount to the company’s share price before the deal was announced. The share transaction was made public in an announcement published on the Hong Kong stock exchange, where Country Garden is listed, on April 1st.

Country Garden’s share sale was the third major effort that the developer has made to deleverage its balance sheet in just over seven months, raising a total of more than $2.1 billion.

The homebuilder conducted a $900 million bond issue in February and this was proceeded by a $400 million rights issue late last August. Company CFO Wu Jianbin declared shortly after joining China’s sixth-largest developer by sales last year that he would halve Country Garden’s financing costs in the next two years.

Even Big Developers Burdened by Debts

The sale by Country Garden, which is controlled by billionaire heiress Yang Huiyan, comes as China’s developers struggle to adjust to the new normal of slowing property sales and more expensive financing.

Last month China’s National Bureau of Statistics revealed that the country’s housing prices fell at a record pace in February, showing signs that government moves to slow a nearly year-long housing slide have so far failed to have effect.

The current slump is bad news to developers such as Country Garden who have grown to giant scale through a fifteen year boom when sales were fast and credit was easy.

Country Garden competitor Shui On Land just last month was forced to put one of its core assets, the Corporate Avenue One commercial complex in Shanghai, up for sale in an attempt to better its balance sheet. In the case of Shanghai-based Shui On, the asset sale was necessary after other attempts at raising funds fell short and the company’s share price slid by 60 percent since late 2012 due to rising costs and disappointing sales.

Country Garden too has seen its stock price punished, with shares in the company sliding more than 45 percent since late 2013. As news of the share sale to Ping An began to leak out last week the stock climbed more than 10 percent to close on Friday at HK$3.28 per share.

Share Sale Proceeds Headed to Malaysia?

In addition to recharging its finances, Country Garden should also be in need of cash to fund its $121 billion Forest City project in Malaysia.

That 2000 hectare site was said to have restarted construction last month with plans to create four new islands from reclaimed land to be located between Malaysia’s Johor State and Singapore.