Property developer China Vanke raises HK$3.92 billion in share sale

MAJOR property developer China Vanke on Thursday (Mar 2) said it had raised HK$3.92 billion (S$672.6 million) in a share placement in Hong Kong, in the first test of investor appetite for a mainland developer share sale in 2023.

State-backed Vanke said in a filing that it sold 300 million shares at HK$13.05 per share, versus its offer price range of HK$12.93 to HK$13.20 apiece, the term sheets of the deal launched on Wednesday showed.

The pricing was at a 6.12 per cent discount to Vanke’s Wednesday close of HK$13.90.

Vanke shares fell 4.9 per cent to HK$13.22 on Thursday, against a 0.1 per cent decline in the Hang Seng Mainland Properties Index.

The Shenzhen-based developer said it intended to use 60 per cent of the proceeds to repay outstanding overseas debt financing. It plans to use the rest to replenish its working capital.

It would not use the proceeds for new domestic residential developments, it added.

Vanke has US dollar notes due in April and May – US$971 million and US$650 million respectively – based on data from financial information provider Refinitiv.

A person with direct knowledge of the share sale told Reuters that nearly a hundred institutional investors participated in the share placement, including those from the United States and Europe. 

There were sizeable orders from sovereign funds and long-only funds, the person added, without giving details.

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Vanke declined to comment.

Since mid-2021, China’s property sector has been grappling with a liquidity crisis, with many developers defaulting on, or delaying, debt payments as they struggled to sell apartments and raise funds.

Vanke, viewed as a good-quality developer by the market, is among those with the largest onshore credit lines in place.

It received approval to issue about 30 billion yuan (S$5.9 billion) in notes recently, and it is planning to sell up to 15 billion yuan of new shares in Shenzhen, where it is also listed.

JP Morgan said Vanke’s placement, while not a “total surprise”, came earlier than expected because it is in a blackout period prior to an earnings announcement.

“We believe Vanke might have wanted to take advantage of the current window to place H-shares first, especially before a potential wave of placements in the second quarter of 2023,” the investment bank said, adding that it expected more equity-raising in the sector.

JP Morgan noted Vanke’s placement price was one of the narrowest among recent sales, where the average discount was 12 per cent to 13 per cent. It did not think the placement hinted that the developer was in distress, as its financing activities have been smooth.

Vanke’s share sale represented 13.6 per cent of its enlarged H shares, and 2.51 per cent of its enlarged total share capital, including shares issued in both Hong Kong and Shenzhen.

CLSA and Citi are the placing agents of the share sale. REUTERS