Cash-strapped developers get access to refinancing, M&A deals
China’s securities regulator announced on Monday the resumption of mergers and acquisitions (M&As) by real estate developers and refinancing by the listed developers, among five newly announced measures that take effect immediately, in an attempt to invigorate the slumped property sector.
The fresh move, adding to a flurry of recent government actions to stabilize the housing market and the economy at large, is meant to let listed developers use the capital market to ease their funding woes, market observers said.
The China Securities Regulatory Commission (CSRC) vowed to support the implementation of plans to improve premium property developers’ balance sheets, and help the housing market to revive dormant assets, prevent financial risks, and steadying macroeconomic fundamentals.
The new measures include the resumption of M&A deals and supporting financing by real estate developer, which allows for eligible developers to list their shares under reorganization plans.
The funds raised will have to be used by the concerned developers in outstanding property projects, the replenishment of working capital and debt repayments, read the statement. The funds can’t be tapped for land auctions or new projects development.
The housing market is concerned with its outstanding assets, which suggests that “idle land and unfinished buildings will top the agenda in real estate bailouts”, while expansion of property projects will come to a halt, Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Monday.
Refinancing by listed developers was also reinstated. And, the measures include a revision of developers’ overseas listings, specifically in Hong Kong. Under the new measure, H-share firms, whose principal business is real estate, can resume refinancing.
Additionally, the securities regulator announced the launch of a real estate private equity investment fund trial.
The announcement is the “third arrow” in the quiver of the regulators to revitalize the housing market, in addition to the previous two rounds of bailouts that featured loan extension and bond financing, according to Yan Yuejin, research director at Shanghai-based E-house China R&D Institute.
The equity financing measures could prompt investors to make long-term commitments to developers and avoid the dilemma of those firms having to make bond repayments, said Yan.