Developer’s Shares Jump, Sunac Asset Sale: Evergrande Update

(Bloomberg) -- China Evergrande Group shares rallied to end Friday nearly 10% higher and Chinese junk dollar bonds continued to rebound amid signals that authorities will offer support to ease the liquidity crunch in real estate.

China’s banking regulator is set to complete an investigation into the relationship between the property developer and Shengjing Bank Co., the Financial Times reported, citing two unidentified people. Sunac China Holdings Ltd. plans to sell its vast culture and tourism business, according to people familiar with the matter, the latest builder seeking to offload assets during an industry-wide liquidity crunch. 

In other developments, Kaisa Group Holdings Ltd. has dollar-bond interest payments coming due while major Chinese builder Yango Group Co. is waiting to find out whether bondholders agreed to delay payments. Chinese high-yield dollar bonds rose as much as 4 cents on the dollar Friday, according to credit traders, extending day-earlier gains following the market’s recent rout. A gauge of real estate stocks slipped 0.8%, after the biggest two-day gain since 2015 amid short sellers unwinding bearish bets.

Key Developments:

• Sunac China Seeks Up to $560.5m in Top-Up Placement: Terms
• China Developer Sunac Is Said to Explore Sale of Tourism Assets
• More Chinese Property Firms Plan Bond Sales on Interbank Market
• China Market Spillovers to World Limited, Ex-PBOC Adviser Says
• China’s Evergrande-Shengjing Bank Probe Nears Final Stages: FT
• China Junk USD Bonds Extend Gain, Rise 2-4 Cents: Traders
• China’s Developers To See More Consolidation in 2022: CBRE
• China Analysts Warn of Risks in Indebted Developers: News
• Chinese Developer Yango Awaits Verdict on Debt-Extension Offer
• Tencent Sells 43.9m HengTen Networks Shares for HK$86m

China Developer Sunac Offers Shares in Placement (7:04 p.m. HK)

Property developer Sunac China Holdings Ltd. is selling 280 million shares in a top-up placement, seeking up to $560.5 million, according to the terms of the deal obtained by Bloomberg News.

The shares are being offered at HK$15.00 ($1.92) to HK$15.60 each, which represents a discount of 8.5% to 12.0% to Friday’s close. The proceeds will be used for repayment of loans and general corporate purposes, according to the terms.

Sunac Said to Explore Sale of Assets (3:55 p.m. HK)

Sunac China Holdings Ltd. plans to sell its vast culture and tourism business, according to people familiar with the matter, the latest developer seeking to offload assets during an industrywide liquidity crunch. 

The Beijing-based company has approached some potential buyers of the unit, though talks are at an early stage and subject to change, said the people, who asked not to be identified discussing private matters. It acquired the assets, which include hotels, resorts and amusement parks, over the past four years for about 65 billion yuan ($10 billion). Sunac didn’t immediately reply to a request for comment.

More Chinese Property Firms Plan Bond Sales on Interbank Market (1:50 pm HK)

China Merchants Shekou Industrial Zone Holdings Co. and Bright Real Estate Group Co. are both planning bond sales next week on the Chinese interbank market, according to public filings. 

Poly Developments and Holdings Group Co. announced its own pending offering on Thursday.

China’s Evergrande-Shengjing Bank Probe Nears Final Stages: FT (1:25 p.m. HK)

China’s banking regulator is set to complete an investigation into the relationship between Evergrande and Shengjing Bank, the Financial Times reported, citing two unidentified people. The regulator scrutinized how the bank became exposed to Evergrande’s debts and its Chairman Hui Ka Yan’s role in the corporate relationship, according to the report.

There appeared to have been potential regulatory violations by both Shengjing and Evergrande over the threshold of allowable debts owed by a single borrower, the newspaper wrote, citing one of the people.

China Market Spillovers to World Limited, Ex-PBOC Adviser Says (1:10 p.m. HK)

Financial problems faced by institutions like Evergrande are “controllable” and spillovers from the nation’s markets to the rest of the world are limited, a former central bank adviser said.

“Overseas investors don’t need to over-worry about China,” Yu Yongding, a former adviser for the People’s Bank of China, said at the annual Caixin summit Friday. China’s financial system is “still stable,” based on indicators like non-performing loans, he said. “Problems of financial institutions like Evergrande are controllable.”

China Junk USD Bonds Extend Gain, Rise at Least 2 Cents (9:55 a.m. HK)

Chinese high-yield dollar bonds rose at least 2 cents on the dollar Friday morning, according to credit traders, extending day-earlier gains following the market’s recent rout. 

Times China’s 6.2% note due 2026 was indicated 7.2 cents higher at 72.3 cents as of 9:46am in Hong Kong, according to Bloomberg-compiled prices.

KWG’s 6% dollar bond due 2026 was indicated up 3 cents at 71.2 cents, also set for the third consecutive day of gain that would be the longest streak since mid-October.

China Analysts Warn of Risks in Indebted Developers: News (7:55 a.m. HK)

Investors should remain cautious about Chinese property developers with heavy dependence on dollar financing despite a strong rally in their stock prices this week, Shanghai Securities News reports, citing Capital Securities analyst Wang Song.

Many of the developers are facing heavy repayment pressure in the first half of next year, Wang was cited as saying. A marginal improvement in China’s credit policy for the industry has boosted investor confidence recently, but developers’ profitability is unlikely to recover significantly, the report also quotes Citic Securities analyst Chen Cong as saying.

Chinese Developer Yango Awaits Verdict on Debt-Extension Offer (7:30 a.m. HK)

Major Chinese developer Yango Group Co. will soon learn whether bondholders agreed to delay upcoming payments.

Friday is the deadline for owners of three separate notes totaling $747 million to vote on unit Yango Justice International Ltd.’s proposed debt exchange. Those bonds would be exchanged for new notes due September next year. The company has warned that without more time, it “may not be able to repay” the existing bonds at maturity. 

A look at Evergrande’s maturity schedule:

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