HONG KONG, Sept 22 Property developer Sunac
China Holdings Ltd said late on Wednesday that a
subsidiary would buy a 17 percent stake in smaller peer Jinke
Property's enlarged capital for 4 billion yuan
($599.75 million) in a private placement.
This comes after Sunac said on Sunday it would purchase
Legend Holdings' China property assets for $2.1
Sunac, which has been on a M&A drive over the past two
years, attempted to merge with Greentown China and buy
troubled Kaisa Group, but both deals fell through.
"(Sunac) is optimistic about the future prospects of Jinke
Property and believes that the subscription is a good investment
opportunity and will bring good investment returns," Sunac said
in a statement last night, citing Jinke's presence in core
The Chinese real estate industry is seeing a surge in home
prices and sales in first- and second-tier cities, while smaller
cities are still under pressure from large housing overhang.
The payment is due Friday evening, said Sunac. Jinke will
raise a total of 4.5 billion yuan in the private placement,
according to a company statement to the Shenzhen stock exchange.
Other investors are Hwabao Trust and Chongqing International
Trust with 1.9 percent and 0.2 percent shares of the enlarged
Shares of Sunac climbed 1.2 percent in early trades on
Thursday, while those of Jinke jumped by the daily 10 percent
Ratings agency Fitch said on Wednesday the deal with Legend
would strengthen Sunac's operational depth in the cities it
forayed into over the past year, namely the second-tier cities.
Fitch, however, said it would consider rating action if
Sunac's expansion increased its leverage above 45 percent.
The developer's net debt to adjusted inventory ratio rose to
over 40 percent after the deal with Legend and other land
acquisition in the second half, from 25 percent at the end of
Moody's also said on Tuesday the Legend deal is credit
negative as the acquisition would keep the company's debt
leverage at elevated levels.
($1 = 6.6695 Chinese yuan)
(Reporting by Clare Jim; Editing by Subhranshu Sahu)