21st Century Business Herald reporter Wu Shuying intern Yang Jingyi reported in Shenzhen
Once made a lot of money, but now it has to leave the market with huge losses, the investment process of Chinese real estate in the capital market is the epitome of the ups and downs of housing stocks in these years.
On 21 October 2021, Huaren Land announced that between 19 October 2021 and 20 October 2021, Huaren Land sold notes with a total principal amount of US$48 million for a total consideration of US$20.377 million (approximately HK$159 million) through a series of transactions in the OTC market, and the issuer of the notes was Kaisa Group.
As a result, Chinese Real Estate will record a small loss, but this may be the last resort of Chinese Real Estate.
Prior to this divestment, Huaren Real Estate also returned funds by selling US dollar bills of other domestic housing stocks. At the same time, on the evening of October 6, Huaren Real Estate issued an announcement announcing its intention to privatize. After the completion of privatization, Huaren Real Estate will be delisted from Hong Kong stocks.
The final defeat of the Chinese real estate gambling dollar bills is the epitome of the financing road of housing enterprises in the cold winter. The trend is unknown, and the story of timely stop loss will continue to repeat itself.
Bill risk
According to the announcement, Huaren Real Estate holds a total principal amount of US$225 million of Kaisa Notes, and after the completion of the sale, Huaren Real Estate still has US$177 million of Kaisa Notes in its hands. Proceeds from the disposal totalled HK$159 million and a realised loss of HK$226 million is expected for the full year. The Company intends to use the proceeds of the sale as general working capital for alternative reinvestment.
The background of the sale of Kaisa's US dollar notes by Huaren Real Estate is that the real estate US dollar bond market has continued to fluctuate sharply recently, and at the same time, there have been successive debt defaults of real estate enterprises such as Xinli and Fantasia, which have also triggered a sharp decline in the US dollar bonds of many real estate enterprises, including Sunshine City, China Aoyuan and New Town Development.
In this context, Kaisa's dollar bond market also fluctuates frequently. As a large US dollar bonder, Moody's, an international rating agency, recently downgraded Kaisa Group's corporate family rating from B1 to B2, including the rating on the negative watch.
Moody's expects Kaisa to weaken liquidity and increase financing risks over the next 6 to 12 months, further downgrading Kaisa in light of uncertainty about whether it will have sufficient cash flow to repay all of its mature offshore bonds over the next 12 to 18 months. According to public data, as of now, Kaisa has more than 20 US dollar bonds, with a balance of about 11.7 billion US dollars.
In order to boost investor confidence, on October 14, Kaisa Group issued an announcement that it would select a suitable time point according to the market situation and repurchase some of the senior notes due December 7, 2021 in advance. Kaisa also said that the plan to repurchase some senior notes aims to continuously optimize the debt structure and enhance market confidence through proactive debt management.
Bai Wenxi, chief economist of IPG China, told the 21st Century Business Herald reporter that "the risk of US dollar bonds or US dollar notes currently holding domestic housing stocks has increased, and the current decline in these bonds or notes has caused investors a large floating loss, and selling is a stop loss measure." ”
Huge losses on investment
According to public information, Huaren Real Estate is a veteran real estate developer in Hong Kong, an important asset of the Liu Luanxiong family, mainly engaged in real estate rent collection and equity investment business. Unlike general real estate developers, the main business of Chinese Real Estate is not developing.
As a die-hard fan of domestic housing stocks, Huaren Real Estate is one of the major shareholders of a head housing enterprise, and has also purchased a large number of internal housing stocks such as Kaisa and Zhongliang, which have benefited a lot from the investment in domestic housing stocks.
At the end of last year, Liu Luanxiong and his wife and their Chinese real estate distributed nearly HK$2 billion in dividends from a housing enterprise. However, since the beginning of this year, the crisis of large housing enterprises and the fluctuation of domestic housing stock bonds have also brought no small losses to Chinese real estate.
Bai Wenxi said, "Chinese real estate has been reduced to an investment institution to a large extent, the company's own operational capabilities have declined significantly, and it is not optimistic whether it can be improved in the future." ”
According to Wind data, the net profit of Chinese Real Estate has fallen for six consecutive years, from 6.474 billion yuan in 2015 to 524 million yuan in 2020, with the highest decline of 72% in 2018. Huaren Land once said in the announcement that the Group is already in a challenging and uncertain business environment, coupled with a significant floating loss in investment, since June 30 this year, the Group's financial position has undergone significant adverse changes, and the future prospects may be difficult.
To this end, Huaren Real Estate frequently reduced its domestic housing stocks and sold US dollar bonds of housing enterprises at a loss.
On August 23 this year, Huaren Real Estate announced that the Group sold using US$7 million of Zhongliang Holdings notes with a total principal amount of US$7 million through an over-the-counter transaction, and the principal and interest of US$6.997 million (about HK$54.392 million) were returned after the sale of the notes. As a result of the transaction, Huaren Real Estate had a realised loss of approximately HK$1.341 million during the year.
Chinese real estate also had to cut off the wrist from a close friend. On September 23, Huaren Real Estate announced that from August 30 to September 21, it had sold a total of 109 million shares in a real estate company. The announcement also said that Huaren Real Estate intends to liquidate the shares of the real estate company in the next 12 months, with an expected loss of HK$9.5 billion and still holding 751 million shares. As of now, Huaren Real Estate still holds 4.39% of the company's shares.
In the process of seeking a retreat, in addition to adjusting the investment structure, Chinese real estate is also trying to delist. On the evening of October 6, Huaren Real Estate announced that it would take a private ownership plan to repurchase about 25% of the public shares in the public market at a cancellation price of HK$4 per share, and to privatize Huaren Real Estate for HK$1.908 billion.
Huang Lichong, president of Huisheng International Capital, said in an interview with the 21st Century Business Herald reporter, "The Liu Luanxiong family has been hoping to privatize Chinese real estate for many years, because most of the current business of Chinese real estate is ready-made, there are very few development aspects, and the market value is underestimated. However, several previous privatization attempts have been unsuccessful. It just so happens that this year's huge loss, the accounts are the most ugly in history, so the probability of privatization success is now greater than ever. ”
Bai Wenxi told the 21st Century Business Herald reporter, "Chinese real estate does not need financing to support development, and maintaining the status of listed companies requires higher costs, and after privatization, it will be more conducive to the development of some long-term business." ”
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