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Greentown eyes Wharf share-sale to cut debt
Source: Agencies |
June 9, 2012, Saturday
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DEBT-LADEN property developer Greentown China plans to raise HK$5.1 billion (US$657 million) by selling stock and issuing convertible bonds to shareholder Wharf Holdings.
Chinese mainland home builders are offloading equity and projects to raise funds as more than two years of austerity measures from the government bite, benefiting cash-rich Hong Kong developers looking to expand on the mainland.
"The deal will help Wharf to expand in China much faster," said Cusson Leung, Hong Kong property analyst with Credit Suisse. "Rather than acquiring projects one by one, by taking a stake in a large developer it instantly has increased its presence in China quite significantly."
In two tranches, Greentown will issue 490 million new shares to Wharf at HK$5.20, a discount of 2.8 percent to the closing price on Thursday. In addition, Greentown plans to sell HK$2.55 billion of convertible bonds to Wharf, run by billionaire Peter Woo.
After the share sale, Wharf's stake in Greentown will rise from 2.1 percent to 24.6 percent, and increasing to 35.1 percent if the bonds were converted into stock.
With Greentown forecast to generate earnings of 2.5 billion yuan (US$392 million) this year, Wharf stands to earn around 615 million yuan from its equity stake, excluding the bonds, a high rate of return.
Hangzhou-based Greentown has been selling off projects to pay down its massive debt load. At 149 percent, its net gearing ratio at the end of last year was the highest among major Chinese developers, according to a Credit Suisse report, far ahead of second-placed Poly (Hong Kong) at 94 percent.
Chinese mainland home builders are offloading equity and projects to raise funds as more than two years of austerity measures from the government bite, benefiting cash-rich Hong Kong developers looking to expand on the mainland.
"The deal will help Wharf to expand in China much faster," said Cusson Leung, Hong Kong property analyst with Credit Suisse. "Rather than acquiring projects one by one, by taking a stake in a large developer it instantly has increased its presence in China quite significantly."
In two tranches, Greentown will issue 490 million new shares to Wharf at HK$5.20, a discount of 2.8 percent to the closing price on Thursday. In addition, Greentown plans to sell HK$2.55 billion of convertible bonds to Wharf, run by billionaire Peter Woo.
After the share sale, Wharf's stake in Greentown will rise from 2.1 percent to 24.6 percent, and increasing to 35.1 percent if the bonds were converted into stock.
With Greentown forecast to generate earnings of 2.5 billion yuan (US$392 million) this year, Wharf stands to earn around 615 million yuan from its equity stake, excluding the bonds, a high rate of return.
Hangzhou-based Greentown has been selling off projects to pay down its massive debt load. At 149 percent, its net gearing ratio at the end of last year was the highest among major Chinese developers, according to a Credit Suisse report, far ahead of second-placed Poly (Hong Kong) at 94 percent.
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