First off, to put HK$9.8bn into perspective, here is the amount of funds raised by HK-listed companies’ rights issues this year:
Source: HKEx (Note: Provisional figure up to the end of August 2014)
Below are the terms:
· Sales Plunge. Autumn is a peak period, but sales remained weak.
· Debt-to-equity ratio is high.
o According to the Lex Column in the Financial Times, net debt to equity ratios range from 30 per cent at China Overseas Land (688 HK) to nearly 120 per cent at Evergrande Real Estate (3333 HK).
o Agile has a net debt-to-equity ratio of 99 percent, compared with the average of 61 percent among its peers, according to data compiled by Bloomberg.
· Chinese property developers’ debts would be higher if we consider the “perpetual securities” as debt instead of equity. WSJ - “As of June, eight listed property developers had issued perpetual securities totaling 86.5 billion yuan ($14.1 billion), nearly double the 44.1 billion yuan recorded in the whole of 2013.”
· The rights issues come at steep prices: a 20-30% discount to already battered share prices (see above table for YTD share performances or below for a 5-year price chart)
5-year price chart:
Source: Google Finance