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A Chinese state-owned enterprise will take more than a quarter of a stake in a cash-starved property developer amid efforts by Beijing to help some domestic real-estate companies facing liquidity issues that has limited their ability to meet debt obligations.
China South City Holdings
1668,
will raise 1.91 billion yuan (US$299.71 million) by placing shares to Shenzhen SEZ Construction and Development Group or SZCDG, the developer said Friday.
Upon completion, SZCDG will own a 29.28% stake in China South City, making the state-owned enterprise, a unit under the Shenzhen State-owned Assets Supervision and Administration Commission, the single largest shareholder of the property developer.
Debt defaults are piling up in China’s property sector with businesses under pressure due to falling home sales, government curbs on borrowing and a bond-market selloff that has nearly shut the market for new deals.
Earlier this month, conglomerate China Evergrande Group
3333,
sought help from the government of its home province, Guangdong, due to liquidity problems. The company, which is the world’s most indebted developer with around US$300 billion in liabilities, has set up a risk-management committee that includes representatives from several state-backed entities to work and engage with Evergrande’s creditors.
China South City will issue 3.35 billion new shares to SZCDG for HK$0.57 a share, a 17.39% discount to the last traded price of HK$0.6900 a share.
Proceeds from the share placement will be used to repay debt, the company said, adding that it will benefit from the state-owned company’s financial strength.
The subscription would “provide the company with an opportunity to broaden its shareholder and capital base, lower financing costs and improve debt maturity profile, as well as diversify funding channels,” China South City said.
