The Wharf (Holdings) (Photo credit: Wikipedia)
Shares in Hangzhou-based property developer Greentown China Holdings skyrocketed Monday as investors hailed a $657 million equity sale to a Hong Kong tycoon. A short while ago, its stock was up 32% at HK$7.05. Last month its credit rating was downgraded by S&P, which warned of ?heightened liquidity risks? over?the next twelve months. Now the betting is that the investment by Wharf Holdings, a vehicle of billionaire Peter Woo, will avert that showdown. The announcement came after the close of trading on Friday, and the stock jumped sharply when the market reopened. The deal involves the sale of new shares to Wharf and the issuance of a convertible bond. Wharf previously held a small stake in Greentown.
As I noted last month, indebted Greentown has been busy trying to offload assets, including a stake in a high-profile downtown Shanghai office project. That sale faces a legal challenge from one of the parties, which may have added to pressure to raise additional capital. Enter Woo, whose holding company owns prime retail developments Times Square and Harbour City in Hong Kong?s Causeway Bay. Woo now has greater exposure to the mainland property sector, which has been squeezed over the past year by Beijing?s policy of curbing speculation and tamping down inflation. He may have calculated that the tightening is over, as China seeks to avert a sharp slowdown in domestic output. There are mixed signals in the property sector, with prices in some cities starting to rebound, but there?s also a large overhang of projects. Greentown will need to show that it can reward investors? enthusiasm by finding buyers for its next wave of residential units.
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