China Evergrande says property services unit seeks to raise up to $2 billion in IPO

In this photo illustration taken on 24 Sept. 2020, the Evergrande Group logo is seen displayed on a smartphone. The Evergrande Group or the Evergrande Real Estate Group (previously Hengda Group) is China’s second-largest property developer by sales.

Sheldon Cooper | SOPA Images | LightRocket via Getty Images

China Evergrande Group said on Monday its property management unit is seeking to raise up to HK$15.8 billion ($2.04 billion) in an initial public offering (IPO), a plan likely to help improve cash flow at the debt-laden property developer.

Market concern has mounted in recent weeks that Evergrande whose borrowings totaled 835.5 billion yuan ($123.93 billion) at the end of June – was headed for a cash crunch.

The offer price for shares in Evergrande Property Services Group is HK$8.5 to HK$9.75, the developer said in a filing.

If an over-allotment option is exercised in full, the sale will generate as much as HK$18.2 billion.

The shares will start trading on Hong Kong’s stock exchange on Dec. 2.

Evergrande Property Services in a separate statement said it has signed cornerstone investment agreements with 23 investors.

Huatai Financial Holdings (Hong Kong), UBS, ABC International, CCB International, CLSA and Haitong International are joint sponsors of the listing.

In a separate filing on Sunday, Evergrande said it has entered into supplemental agreements with most of the remaining strategic investors of unit Hengda Real Estate to not demand repayment of their investment, following the termination of a long-awaited backdoor listing plan in Shenzhen.

As a result, strategic investors holding 125.7 billion yuan ($19.17 billion) worth of equity interest in Hengda Real Estate, out of 130 billion yuan in total, have entered into supplemental agreements to hold their shares as ordinary shares.

Evergrande said it has repurchased the remaining 4.3 billion.

Evergrande’s share price edged up 0.2% in late morning trading on Monday, compared with a 0.2% fall in the broader market.

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