|Bid||16.560 x 0|
|Ask||16.600 x 0|
|Day's Range||16.400 - 17.580|
|52 Week Range||9.760 - 28.000|
|Beta (5Y Monthly)||1.59|
|PE Ratio (TTM)||11.28|
|Forward Dividend & Yield||0.71 (4.94%)|
|Ex-Dividend Date||Jul 08, 2020|
|1y Target Est||N/A|
(Bloomberg) -- China Evergrande Group shares have had their best start to a year since 2012 after the developer said it plans to redeem a $2 billion convertible bond early, passing a liquidity test as it looks to substantially cut debt.The residential builder said it will redeem the remaining principal of HK$16.1 billion ($2.1 billion) in advance on Feb. 10, according to a filing Monday. The company will tap internal funds of HK$16.5 billion to pay the principal and interest, and the bond will be canceled.Evergrande closed 16% higher in Hong Kong to HK$17.26 Tuesday, the biggest gain since Sept. 30. The stock is also up 16% on the year, the best start in nine years, according to Bloomberg data. Rival developers including Sunac China Holdings Ltd. also surged in Hong Kong after data on Monday showed the nation’s residential sales reached a record last year.The company’s 8.75% dollar bond due 2025 rose 0.8 cent on the dollar to 81.61 cents in Hong Kong, according to prices compiled by Bloomberg.“For bond investors, it would be another milestone on debt reduction on top of recent efforts,” said Daniel Fan, a credit analyst at Bloomberg Intelligence. “It’s a show of strength especially when investors were still concerned about default risk three months ago.”Read more: Evergrande Will Find Out How Good Its Friends Are: Shuli RenThe developer, saddled with a debt pile of almost $120 billion last year, said the early repayment shows its cash strength, and reiterated its pledge to cut debt by 150 billion yuan ($23 billion) this year. China developers are under increased pressure to lower debt under new requirements imposed by China’s regulator known as the “three red lines.” Evergrande’s latest financial figures suggest it breached all three debt metrics under the new rules.Evergrande sold the five-year HK$18 billion convertible bond in 2018, allowing holders to convert their notes to equity by Feb. 14 at HK$33.24 apiece. The share price had been trading at less than half that recently before the redemption plan. The 4.25% convertible bond maturing in 2023 traded close to par at 98.9 cents Tuesday.(Updates with closing share prices throughout)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
China's corporate defaults may set a record this year when a trio of the central bank's debt limits kick in this month, as they crimp the ability by borrowers to use loans to repay their outstanding debt.One in five of China's biggest real estate developers including China Evergrande Group will be barred from borrowing any more money from banks according to the three red lines on debt drawn by the People's Bank of China, the state-owned Economic Information Daily said.The red lines are different limits on borrowings: liability-to-asset ratio excluding advanced receipts at 70 per cent, net debt-to-equity ratio at 100 per cent; and cash to short-term debt ratio at one time, outlined in Beijing last August during a financial symposium.Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China."If a developer crosses all three red lines, its total debt level would not be allowed to increase any more," said S&P; Global Ratings' director Esther Liu, adding that only 6.3 per cent of all rated Chinese developers can comply with the limits. "This means the developer cannot borrow more from banks or other financial institutions if its existing debts have not been paid, or if its overall leverage has not improved."Hui Ka-yan (centre), chairman of China Evergrande Group, during a press conference in Hong Kong on March 26, 2019. Photo: Nora Tam alt=Hui Ka-yan (centre), chairman of China Evergrande Group, during a press conference in Hong Kong on March 26, 2019. Photo: Nora TamThe government, presiding over the only major global economy that actually grew in 2020, is zealously keeping its iron grip on the country's debt to avoid causing systemic risk to banks. Regulators are also anxious to avoid runaway debt from setting off the kind of global financial crisis that followed the US subprime loans defaults in 2008. The real estate and construction industry contribute to about 29 per cent of China's economic output.Chocking off the financial lifelines of borrowers could drive many debt issuers into defaults in China's US$15 trillion bond market at a time of lacklustre consumer demand and uncertain job prospects amid a raging global coronavirus pandemic. Chinese developers have a record 1.2 trillion yuan (US$184.7 billion) of debt due by the end of this year, 36 per cent more than in 2020, according to Beike Real Estate Research Institute.The Chinese central bank and financial regulators are classifying developers - among the heaviest borrowers in China - into four tiers based on the three red lines. The most indebted borrowers, such as China Evergrande Group, are tagged red, and completely barred from taking on more loans.Seven developers, or more than 20 per cent of the 30 biggest of them listed on the stock exchanges of Shanghai, Shenzhen and Hong Kong, are currently tagged as "red," according to a January 11 report by Northeast Securities."It's not entirely clear how this will be implemented in practice, as there's no official release of details," said S&P;'s Liu.Companies would be allowed to borrow more from banks and increase their debt by 5 per cent annually for each redline threshold that they meet, for a maximum yearly debt expansion of 15 per cent, starting from January 1, according to the Economic Information Daily.Six developers are in the orange tier, representing those that fail to meet two of the three red lines. more than 40 per cent are categorised yellow, for meeting two out of the three criteria. Only six successfully fulfil all three requirements and are tagged green.Sun Hongbin (foreground), chairman of Sunac China Holdings Limited at the company's 2018 annual result announcement at the Conrad Hotel in Admiralty on March 29, 2019. Photo: Edmond So alt=Sun Hongbin (foreground), chairman of Sunac China Holdings Limited at the company's 2018 annual result announcement at the Conrad Hotel in Admiralty on March 29, 2019. Photo: Edmond So"Developers have to at least partially meet some of the criteria under the Three Red Lines, to obtain financing form banks and other financial institutions," said Raymond Cheng, property analyst at CGS-CIMB Securities.Guangzhou-based Evergrande, owned by one of China's wealthiest tycoons Hui Ka-yan, had a liability-to-asset ratio of 85.3 per cent, excluding advanced proceeds, a net debt-to-equity ratio at 219.5 per cent while its cash to short-term debt ratio was 0.19, according the broker. Sunac China, the country's fourth-largest home seller, and Greenland Holdings in the sixth place are also tagged red, Northeast said.Evergrande is slightly ahead of Hui's three-year programme to slash 450 billion yuan of debt, having pared the borrowings by 160 billion as of January, 10 months after the developer's chairman outlined the plan, according to an executive familiar with the matter, who declined to be name.Evergrande is spinning off valuable businesses and issuing more shares to raise capital, adding that so far no official action had been taken to cut the company's credit line, the person said.The developer said it plans to redeem a HK$16.1 billion (US$2.1 billion) convertible bond ahead of its February 10 deadline , according to a stock exchange filing on Monday. The company has arranged internal funds of HK$16.5 billion to pay the principal and interest, and the bond will be cancelled, the developer said.Chinese developers and the central bank's three 'red lines'. SCMP Graphics alt=Chinese developers and the central bank's three 'red lines'. SCMP GraphicsBonds sold by at least 85 Chinese companies totalling US$65.2 billion face repayment pressure, according to company and ratings firm statements compiled by Bloomberg. China Fortune Land Development in Shanghai was denied a 1.1 billion yuan loan by Zhongrong International Trust, which may force it to notify investors of a default if it fails to make payments this Wednesday on 55.6 billion yuan of onshore debt and US$4.56 billion of offshore bonds, according to REDD.A Fortune Land spokesperson declined to comment while the developer's bond due June 2022 tumbled 16 per cent to 55.7 cents on the dollar. Its share fell 3.7 per cent to a six-year low of 11.36 yuan.Another upshot of the cap on debt could be to force property prices to drop, as some developers resort to discounts to attract buyers and generate cash to repay their debt. China's home prices have jumped nearly fivefold over the past two decades, making Shanghai, Shenzhen and Beijing more expensive than Los Angeles, Paris, New York and London."The policy is not as bad as investors perceive. It could even be positive from an investment perspective in the long run, as the sector will be less volatile going forward," said Cheng.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.
(Bloomberg) -- China Evergrande Group’s latest round of share buybacks is falling flat with investors, even after the embattled developer snapped up shares at a premium and took major steps to avert a debt crisis.The Chinese real estate firm resumed its buyback spree in the final quarter of 2020, spending HK$1.3 billion ($168 million) to buy shares for as much as HK$17.48 a piece. The buyback has done little to shore up the stock, which closed at HK$14.28 in Hong Kong Thursday. Falling for a second day on Friday, the shares are down 13% since the last buyback on Dec. 2, compared with a 4.3% gain in the benchmark Hong Kong index.The muted reaction from investors underscores the challenges that remain for Evergrande, which faces new sector restrictions on borrowings as it tries to slash a debt pile that soared to $120 billion in June. The urgent need to pay off debt may also force the company to put property sales and cash flow ahead of earnings, according to Bloomberg Intelligence.“The buybacks may not ease investor concerns” given its need to prioritize debt reduction, Bloomberg Intelligence analyst Kristy Hung said in a research note. “Weakness in profitability and long-term growth could still weigh on sentiment.”Evergrande didn’t reply to a request for comment.The massive buybacks -- often at a premium -- have raised eyebrows among investors, given Evergrande’s pressing need to preserve cash to pay off debt.While most brokerages execute trading orders at or close to volume-weighted average prices to prevent the market from sniffing out big buyers, Evergrande often did the opposite. Between late October and early December, the developer repurchased shares as much as 3.7% higher than the average price, according to Bloomberg calculations based on company data. That’s the widest premium for its stock repurchases since at least 2016, calculations show.In another bizarre twist, Evergrande began buying shares two weeks after it sold $555 million of new stock to help reduce its debt pile, negating some of the benefits from the capital raise.The developer, controlled by billionaire Hui Ka Yan, sold shares at HK$16.50 apiece in mid-October. Less than a month later, it started buying them back at an average cost that was higher, including a purchase at HK$16.71 a share on Nov. 9. Capital spent on the latest round of buybacks was equal to almost a third of the money raised from the share sale, according to Bloomberg calculations.“Selling shares to investors at a lower price, then buying shares back at a higher price just weeks after that seems to be a highly irregular capital strategy for a company,” said Travis Lundy, a special situations analyst who publishes on Smartkarma. “Doing so suggests the company is conducting capital activities for reasons which are not strictly fundamental.”Before the share sale, Evergrande had almost run out of fuel to propel the shares higher. After a HK$3.2 billion buyback spree in May and June, the free float of shares trading at Evergrande sat at 22.16%, close to the minimum of 22.04% set by the Hong Kong Stock Exchange, according to calculations. Its remaining quota for buybacks was estimated to be 20 million shares, equivalent to just three trading days based on the average share purchase at the time.While the stock hasn’t rallied since the buybacks, Evergrande’s bonds are recovering after the firm made progress on cutting debt, raised $1.84 billion from a spin off of its property services arm and was thrown a $4.6 billion lifeline from state-owned firms.A key bond of the world’s most-indebted developer hit a four-month high this week, raising the likelihood of its return to the offshore debt market. Evergrande’s most actively traded dollar note has erased all its losses since September after recovering from a crisis of investor confidence.Evergrande reduced borrowings by 158 billion yuan ($24 billion) in the last three quarters of 2020. The developer aims to cut another 150 billion yuan of debt, and set a record annual sales target of 750 billion yuan for 2021.(Updates with company share prices in the second paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.