China Evergrande seeks $1.5 billion via HK tower financing
HONG KONG: Highly leveraged property firm China Evergrande Group is in talks with financial institutions to raise about $1.5 billion (1.2 billion pounds) this month by offering its Hong Kong office tower as collateral, two sources with direct knowledge of the matter said.
The fund-raising plan by China’s No 2 developer, under the supervision of its CEO, Xu Jiayin, by sale underscores the pressure the developer is under, as China’s property sector slows and Beijing’s capital controls have restricted its ability to pay offshore debt, which stood at $16.4 billion as of the end of June.
Evergrande bought the office tower in Wan Chai, a bustling business district by day and red-light district by night on Hong Kong island, for HK$ 12.5 billion (1.22 billion pounds) in 2015 from Chinese Estates Holdings.
Evergrande, which has yet to fully settle the transaction, plans to use the capital raised from refinancing the tower partly to pay back offshore debt and make dividend payments, one of the sources said.
The sources requested anonymity because the talks were private.
While the practice of raising money by offering property as collateral is not uncommon among highly leveraged Chinese developers, it is unusual to securitise a building that has yet to be fully paid off, a property market expert said.
Evergrande had agreed to pay off the tower in instalments to Chinese Estates within six years of the sale.