Country Garden (2007) is to become one of the first private Chinese developers to receive offshore loans that could help their debt repayment, but Chinese real estate stocks plunged yesterday led by a 17 percent drop in Country Garden Services (6098) amid a flurry of share sales.
In the latest sign of support for the stricken property sector, the Industrial & Commercial Bank of China (1398) plans to provide US$300 million (HK$2.34 billion) in offshore loans to Country Garden backed by a domestic guarantee, Chinese media outlet Cailian reported yesterday. The exact amount is not final yet, according to the report.
The news followed a separate announcement by the Bank of China (3988) last Friday that its Hong Kong branch will offer an offshore loan of an unspecified amount to Longfor (0960). The credit will be backed by a guarantee provided by the Bank of China's Chongqing branch. Longfor took out the loan on Friday to meet its liquidity requirements, it said.
Big Chinese banks led by ICBC have pledged at least US$179 billion of funding to property developers to ease the turmoil in the real estate market. That came alongside other measures, including allowing some developers to sell onshore debt with guarantees, giving them more access to home presale funds, and ending a ban on onshore equity raising.
Reuters reported earlier this month that China told its four state-owned banks to provide developers offshore loans to pay back foreign debt.
However, stocks in the sector tumbled in Hong Kong after Country Garden Services chairwoman Yang Huiyan agreed to trim her stake at a 10.9 percent discount to last Friday's closing price of HK$5.06 billion.
Yang could lend part of the proceeds to the holding company for debt servicing, or she could use it to buy back bonds in the secondary market, said Daniel Fan, senior credit analyst at Bloomberg Intelligence.
Shares of Country Garden, which is also chaired by Yang, ended 5.2 percent lower. Longfor lost 11 percent. State-run China Resources Mixc Lifestyle Services (1209) and China Overseas Land & Investment (0688) slid 6.8 and 4.3 percent.
Seazen Group (1030), which agreed to sell shares to raise HK$1.96 billion in a placement, finished at 16.5 percent lower. The deal will provide funding to repay offshore debts and use as general working capital, it said in a filing.
Meanwhile, CIFI (0884) announced plans to sell a stake in a unit to create liquidity and reduce leverage. Its shares declined 7.3 percent.
