Billionaire sells projects to Evergrande for 20.4b yuan

[SHANGHAI] Evergrande Real Estate Group Ltd will buy 20.4 billion yuan (S$4.4 billion) of projects in China from Hong Kong billionaire Cheng Yu-Tung's family-controlled companies, extending an acquisition spree by the Chinese developer this year.

New World China Land Ltd agreed to sell property in the Chinese cities of Guiyang and Chengdu for 7.3 billion yuan, Hong Kong-based New World China Land said in a statement to the stock exchange on Tuesday.

In a separate statement, Evergrande said it will pay 13.1 billion yuan to buy five developments from Chow Tai Fook Enterprises Ltd., also controlled by the Cheng family.

Ties between Mr Cheng and Evergrande chairman Hui Ka Yan, two of the richest men in China and Hong Kong, go back to at least 2008 when Mr Cheng's family investment company was part of a group of investors that bought a US$506 million stake in Evergrande the year before its initial public offering.

The latest deal comes less than four weeks after Evergrande agreed to buy a separate 13.5 billion yuan of assets from New World China Land.

RAISING MONEY

Evergrande said last week that it would raise US$1.5 billion by selling perpetual securities to investors including Cheng-controlled companies. In the flurry of announcements on Tuesday, the company said that the initial payment rate on those securities had been increased to 9 per cent from 7 per cent, and they would no longer be convertible into equity.

The developer's buying spree this year has included agreeing to pay US$1.6 billion to Chinese Estates Holdings Ltd for Mass Mutual Tower in Hong Kong's Wan Chai district, a record for an office tower in the city. That was only one of a series of properties acquired from Chinese Estates, controlled by billionaire Joseph Lau.

In November, Evergrande announced an investment to enter the insurance business.

On Dec 4, Moody's Investors Service said that Evergrande's initial deal this month to buy assets from New World China Land - which was subject to conditions including shareholder approvals - would be credit negative if it went ahead.

"Evergrande's acquisitive appetite puts pressure on its weak liquidity profile and will keep its debt leverage elevated," Franco Leung, a Moody's vice president and senior analyst, said in a statement.

"A sustained high level of debt leverage will pressure its ratings."

BLOOMBERG