Evergrande Plans Stability, Looking to Raise US$174.21 million for Funds
China's property market cooldown has produced enough concern for the country to start looking for financial solutions. One of these is to raise funds through asset-backed securities worth 1.21 billion yuan (US$174.21 million).
Evergrande has been China's second-leading builder in terms of sales, according to SCMP. It's not the first time that the real estate group had received funding for such an undertaking. Initially, it had been approved to raise 1.24 billion yuan on November 22, citing the same concerns about the cooling down of the property market.
The Evergrande group was reported to be in debt and had raised US$1.8 billion in tranche notes. It had also issued B-rated bonds in an effort to further raise funding for their embattled assets. Analysts have also graded the bond as 'junk', raising questions as to how the real estate group aims to bounce back from its latest problems.
A month earlier, Evergrande was reported by Reuters as selling 60 billion yuan ($9.05 billion) worth of their shares to be used for Shenzhen Real Estate. The aim is for Evergrande to raise enough for a backdoor listing in Shenzhen, a move to gain a few or more investors from the recently growing pool from the mainland. It was part of the group's plan to raise more funds for paying off debts.
The fundraising raised the company's investments from an initial 30 billion yuan to 50 billion yuan, raising a total of 130 billion yuan from investors' money coming in. Those investors are entitled to the property group's 36.5 percent of equity interest.
The latest round of China's property market slowdown had property developers looking for ways to sustain their refinancing needs. It doesn't help that the residential property market was also slowing down, an effect by the government's efforts to curb down on housing to ease the rise of prices in the market.
In total, there are about US$46.3 billion worth of onshore bonds and offshore bonds totaling US$17.3 billion that these property developers are waiting to mature. Credit rating firm Moody's have analyzed this as a sort of waiting game for small and low-rated developers, who are currently waiting for the maturation of bonds, and are scrambling for resources to refinance themselves in the meantime.
Interest costs for offshore bonds have risen up, said the credit rating agency, and they believe that it will stay that way for the time being.