What’s new: Cash-strapped private developer China Fortune Land Development Co. Ltd. (600340.SH) announced it is selling 12.4 billion yuan ($1.8 billion) worth of assets to China Resources Land Ltd. to pay back its liabilities, according to a Wednesday exchange filing.
China Fortune Land will transfer its shares and creditor rights in four subsidiaries located in southern China regions to the state-owned property giant. The shares are deemed as having no value and priced at only 4 yuan in total, as three of the four firms booked net losses in the first three quarters of 2022.
The creditor rights are priced at 12.4 billion yuan. An asset appraisal institution initially valued the rights at 13.2 billion yuan, but China Fortune Land offered a discount to account for the weak market sentiment, according to the filing. The firm is estimating a 2.1 billion yuan pre-tax loss via the deal.
The context: China Fortune Land was an early casualty of the government’s efforts to deleverage the debt-laden real estate sector, defaulting on an offshore bond in early 2021. Since then, dozens of privately owned developers have either defaulted or sought to extend the amount of time they have to pay back their debts.
By the end last month, China Fortune Land had failed to repay a total of 60.2 billion yuan in debt on time, according to a filing earlier this month. It has reached an agreement with onshore creditors to restructure 126.6 billion yuan in debt, and 89% of offshore creditors have agreed to support a proposal to restructure $6 billion worth of U.S. dollar bonds, the filing read. The proposal will be submitted for a vote next month.
China Fortune Land has disposed of assets over the past year to meet debt service obligations. Earlier this month, it unveiled a plan to issue new shares via a private placement after regulators lifted restrictions on developers’ refinancing.
Related: Chinese Developers Rush to Sell Shares Under Policy Easing
Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Bertrand Teo (bertrandteo@caixin.com)
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