Vanke Rights Issue Financing 7 Billion 900 Million Hong Kong Dollar Housing Stock Refinancing Behind The Debt Transfer

This year, listed housing companies including Vanke launched a rights issue financing in Hongkong. As of now, there are more than a dozen Housing enterprises (including property shares) financing about HK $30 billion.

In recent years, with ample funds and low cost of domestic and foreign financing, housing companies are still planning for a rainy day. The reason behind this is that the outstanding debt has reached a peak this year to next year. All kinds of financing means are aimed at relieving the debt pressure that is already or coming, while adjusting the debt structure and reducing the cost of capital.

Vanke rights issue is intended to be negotiable.

In June 4th, Vanke issued a notice to issue rights issue financing. The company entered into an agreement with the relevant agency on placing over 300 million new H shares at a price of HK $25 per share.

The above allotment shares accounted for 20% of Vanke's existing H shares and about 2.79% of all existing issued shares, accounting for 16.67% and 2.72% respectively after the issuance and issuance of shares.

The total amount of allotment proceeds is expected to be HK $7 billion 890 million if the allotment shares are fully allotted, and the net proceeds will be estimated at HK $7 billion 865 million.

Vanke said that the rights issue transaction is the lowest share allotment project in the history of the domestic real estate company's H-share size and discount, and it is also the lowest price issue of the new Hongkong stock market since 2019, with a discount of more than 500 million dollars.

This is also the second largest share financing in the housing stock market since the beginning of this year, second only to the HK $8 billion of China's rights issue financing in January.

In March 28th of last year, Vanke had allotted 262 million 991 thousand shares for HK $29.68 / share, and the total net proceeds from the sale were expected to be HK $7 billion 780 million.

Although the rights issue of the listed company does not pay interest, the new shareholder can enjoy dividends paid by the company when it comes in, and in the long run, it will affect the original shareholders' interests. Last April, after the completion of Vanke's rights issue, the dividend payment was adjusted from 10.70 yuan per 10 shares to 10.45 yuan.

Vanke's valuation is different in the market. But for Vanke, it is not hard to see that the issue of shares is more to solve the problem of H shares circulation.

Because of B's turn to H, Vanke H-shares' plates are very small. In 2018, Vanke Dong mi Zhu Xu said at the shareholders' meeting that Vanke H-share was only 11.9%, and its market value was HK $about 30000000000, which was very small in Hong Kong stock and liquidity was "very low". Some large foreign funds have repeatedly suggested increasing the liquidity of Hong Kong stocks.

The chief executive of the Vanke Group, Zhu Ji Sheng, has also indicated that the issuance of H-shares is to meet the needs of international institutional investors and meet the requirements of the Hong Kong stock exchange. In addition, it also has strategic considerations and needs to increase the proportion of overseas projects. If cross border funds are used, regulatory policies do not support much, so all overseas financing will be used for overseas business, and exchange rate risk will also be hedged.

After the completion of the placement, Vanke H shares can also meet the lower requirements of HKEx's 15% public shareholding. In principle, the circulation of Hongkong H-shares should not be less than 25%, and some cases may be 15%-25% as appropriate.

Yan Yuejin, a well-known real estate analyst, believes that the introduction of more international investors by Vanke will help enhance the liquidity of H-shares. The follow up of international investors will help some institutions to pay more attention to Vanke H shares to solve their circulation problems.

In addition to improving H-share liquidity, Vanke's rights issue can also increase net assets and slightly improve the company's capital structure and ease its debt financing needs.

As of the end of the first quarter of this year, Vanke net debt ratio was 35.2%, an increase of 0.54 percentage points from the end of 2019, and short-term debt pressure of 53.3%, down 4.51 percentage points.

In the first quarter, Vanke issued a total of 32 billion yuan bond issuance applications approved by the SFC and issued a 3 billion 500 million yuan corporate bond with a minimum coupon interest rate of 3%.

Debt adjustment is in progress.

Not only Vanke has its own wishful thinking, but a number of housing companies have allocated shares this year.

Following the announcement of the second day of the announcement of the issuance of the rights issue by the Hong Kong, Xincheng and Shimao, the evergreen life service also announced that it would sell 134 million shares in the form of "old and new". The total amount of financing is expected to be HK $1 billion 579 million, HK $11.78 per share, or 6.95%.

Yan Yuejin said that most of the rights issue financing is because of the great thirst for capital introduction. In addition, Hongkong's capital market is expected to reform strongly this year. This kind of rights issue is echoing the reform. With the epidemic situation in the past, real estate stocks or property stocks are likely to rise.

In fact, behind the tide of the rights issue financing of housing companies and their property stocks, they are generally adjusting their debt structure, simply replacing low cost debt with high cost debt, and adjusting the ratio of local currency to foreign currency.

Orient Securities said that 2020-2021 years will be the peak period of debt repayment of Housing enterprises, and then the scale will gradually decrease, and the overall solvency pressure will be controllable. Relative to the local currency debt, due to the gradual increase of the 2020-2022 year dollar debt repayment scale, and the uncertainty of the macro environment may affect the issuance of the US dollar debt, some of the housing enterprises' debt payments have greater pressure.

This year, housing enterprises credit debt, ABS and overseas debt totaling more than 600 billion yuan.

According to the "2019 Housing enterprises overseas bond interest rate list" information, in 2019, the financing cost of overseas bonds was generally high, and the average coupon rate of bonds reached 9.13%.

Because rights financing is different from debt financing, debt maturity is debt service. As a direct financing action with equity changing funds, rights issue has no debt repayment pressure in the future. This is a financing method that has little burden.

Therefore, the rights issue financing plays a positive role in adjusting the financing structure and debt structure. In order to obtain large amounts of low cost capital, we choose to carry out the rights issue financing, and adjust our debt structure smoothly.

Vanke said that the proceeds from the rights issue will be used to supplement working capital, which is specifically used to repay debt financing outside the group, but will not be used for domestic development.

Since the issuance of shares, since April, the housing enterprises have made a lot of domestic bond issuing financing to take advantage of the loose financing window of domestic financing, so as to replace the offshore debt with higher cost.