Vanke shares fell 4.9% to $13.22 on Thursday, versus a 0.1% decline in the Hang Seng Mainland Properties Index .
The Shenzhen-based developer said it intended to use 60% of the proceeds to repay outstanding overseas debt financing, and the rest to replenish working capital.
It would not use proceeds for new domestic residential developments, it said. Vanke has $971 million and $650 million dollar notes due in April and May, respectively, according to Refinitiv data. A person with direct knowledge told Reuters nearly 100 institutional investors participated in the share placement, including from the U.S. and Europe. The person added sizable orders were from sovereign funds and long-only funds, without giving details.
Vanke declined to comment. China's property sector has since mid-2021 been grappling with a liquidity crisis, with many developers defaulting on, or delaying, debt payments as they struggle to sell apartments and raise funds. Vanke, seen by the market as a good quality developer, is among those with the largest onshore credit lines in place.
It received approval to issue about 30 billion yuan ($4.35 billion) notes recently and is planning to sell up to 15 billion yuan new shares in Shenzhen, where it is dual-listed . JP Morgan said Vanke's placement, while not a "total surprise", came earlier than expected because it is in a blackout period prior to earnings announcement.
"We believe Vanke might have wanted to take advantage of the current window to place H-shares first, especially before a potential wave of placements in 2Q23," the investment bank said, adding it expected more equity-raising in the sector. JP Morgan noted Vanke's placement price was one of the narrowest among recent sales, where the average discount was 12%-13%, and that it did not think the placement hinted Vanke was in distress as its financing activities have been smooth.
Vanke's share sale represented 13.6% of its enlarged H shares and 2.51% of its enlarged total share capital, including both shares issued in Hong Kong and Shenzhen. CLSA and Citi are the placing agents of the share sale. ($1 = 7.8490 Hong Kong dollars) ($1 = 6.8942 Chinese yuan) (Reporting by Scott Murdoch and Clare Jim; Editing by Muralikumar Anantharaman and Himani Sarkar)
