Property developer China Vanke raises almost $500 million share sale

Major property developer China Vanke said on Thursday it had raised 3.92 billion Hong Kong dollars ($499 million) in a share placement in Hong Kong, in the first test of investor appetite towards 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 their offer price range of between HK$12.93 to HK$13.20 apiece, according to the term sheets of the deal launched on Wednesday and seen by Reuters.

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

Vanke shares fell as much as 5.3% to HK$13.16 early on Thursday, but narrowed losses to 3.7% by noon, versus a 0.5% fall in the Hang Seng Mainland Properties Index .HSMPI.

The Shenzhen-based developer said it intended to use 60% of the proceeds to repay its outstanding overseas debt financing, and the rest to replenish working capital.

It added it will not use the proceeds for new domestic residential development projects.

Vanke has $971 million and $650 million dollar notes due in April and May, respectively, according to Refinitiv data.

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

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

It has received approval to issue around 30 billion yuan ($4.35 billion) notes recently and is planning to sell up to 15 billion yuan new shares in Shenzhen, where it is dual-listed.

JPMorgan said Vanke’s placement, while not a “total surprise,” came earlier than expected because it is in a blackout period prior to 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 2Q23,” the investment bank said, adding it expected more equity-raising in the sector.

JPMorgan noted Vanke’s placement price was one of the narrowest among recent such sales, where the average discount was 12%-13%, and that it did not think the placement hinted Vanke was in distress as its financing activities have been smooth.

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

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