Agile - only the worst of the best

Beijing

AGILE Property is crumbling. The Chinese real estate developer needs urgent financial assistance after the authorities detained its chairman and it had to cancel a US$360 million rights issue. The shares fell by as much as 30 percent on Monday. Yet in China's property sector, it is just the worst of the best.

Chinese developers' most vital asset isn't land but cash. They tend to sell projects up-front, and then use the proceeds to pay for construction. But most borrow to buy new plots. Agile's land bank for future projects has expanded by 20 percent over two years. Its borrowings, including a US$475 million loan due to HSBC and Standard Chartered by the end of this year, have increased by 53 per cent over the same period. As a result, Agile's EBITDA in the twelve months to June was just 2.7 times its interest payments, according to Moody's, compared with 3.5 times in 2013.