The upsized primary placement increase for as much as $360m allows Country Garden Holdings to ease investors’ concern. Lately, many fixed income investors worry about the company’s liquidity which is too short. Country Garden Holdings benefits majorly from the raise of share price. It begins with the reports that the Chinese government plans to fund bail out for the distressed property companies.
Country Garden Holdings, the property developer, finally sold 870m of their shares. This is around 3.62% of the company’s enlarged share capital. This is above 840m shares during their debut at HK$3.25. The discount was 12.6%, closing at HK$3.72. The three covered bookings comprise participation from 30 investors. Plus, there are also demands from hedge funds. The five cornerstone investors get above 80% of the deal size. 90-day lock-up is available at the company.
Country Garden Holdings’s shares decreased as much as 4.5% and 13.4% on the next day. This is based on the China’s State Council. The Chinese government has established a fund above Rmb300bn for the unfinished projects from the developers. They hope that it could help developers to complete the unfinished construction. The firm argues that the fund would allocate placement to refinance offshore debt, capital, and development targets.
Analysts from Nomura overview that this placement is credit positive. The short-end yielding the curve would be the company’s first benefit. This is because they want to revive illiquidity. The analyst argued that while the market worries about share placement and valuations timing, they are at low levels. The recovery is very low especially during the policy rumours on constractions.