Evergrande Seeks Up to $613 Million in Hong Kong Share Sale

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Evergrande Chairman Hui Ka Yan
Hui Ka Yan, chairman of Evergrande Real Estate Group Ltd., pauses during the company's annual results news conference in Hong Kong. Photographer: Jerome Favre/Bloomberg

Evergrande Real Estate Group Ltd., China’s third-biggest developer by assets, is seeking as much as $613 million selling shares to refinance debt and replenish working capital.

The company, based in the southern Chinese city of Guangzhou, is offering 747.6 million shares at HK$6.22 to HK$6.36 apiece, according to terms for the deal obtained by Bloomberg. Citic CLSA Securities, Credit Suisse Group AG and Haitong Securities Co. are working on the sale, people with knowledge of the matter said earlier Thursday in Hong Kong, asking not to be identified as the information is private.

Evergrande is raising funds as the Chinese real-estate market starts to recover and the nation’s stock market surges to a seven-year high. Developers in greater China have announced $20 billion of share sales since Jan. 1, already more than the amount of offerings completed in any previous year, data compiled by Bloomberg show.

The price range represents an 8 percent to 10 percent discount to Evergrande’s last close, after the stock more than doubled this year. Evergrande agreed not to sell any more shares for 90 days, with an exception for a possible sale of as much as a 10 percent stake to a financial institution that will be required to keep the shares for a year, the terms show.

A representative for Evergrande wouldn’t comment when reached by phone.

Lowest Ranking

Rival developers, including Country Garden Holdings Co. and Yuzhou Properties Co., have sold shares this year to major equity investors. Foshan-based Country Garden sold a 9.9 percent stake in April to Ping An Insurance Group Co., which may help with the developer’s financing.

Evergrande signed a cooperation agreement with People’s Insurance Company (Group) of China Ltd. in April, which will cover areas including commercial insurance, pensions and health management.

Any equity sale could help Evergrande, controlled by its billionaire Chairman Hui Ka Yan, improve its indebtedness. The firm’s net debt is almost triple its common equity if its perpetual equity instruments are treated as debt.

The company has one of the lowest analyst rankings among Hong Kong-traded developers worth at least $5 billion, according to data compiled by Bloomberg. At least three brokerages, including Goldman Sachs Group Inc. and China International Capital Corp., have cut their recommendations for Evergrande this month, pointing to its high debt obligations.

Evergrande has the most perpetual securities among rated developers with 52.85 billion yuan ($8.5 billion) at the end of 2014, according to Moody’s Investors Service. Issuing perpetuals can help companies cut debt ratios as international standards allow the proceeds to be counted equity. However, they are often treated as debt by analysts.

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