Chinese property developer Seazen to issue add-ons

Under-pressure property developer Seazen Holdings is planning to issue add-ons worth 8 billion yuan (US$1.2 billion) in an attempt to rescue six failing construction projects in various parts of the country.

Photo from CFP

Photo from CFP

By WANG Tingting


Chinese property developer Seazen Holdings is planning to issue add-ons worth 8 billion yuan (US$1.2 billion).

About 70 percent of the money raised will be used to prop up six faltering construction projects in various parts of the country. Like so many projects in China, the Seazen developments are facing a funding crisis.

The remaining 30 percent of the money raised will be rendered directly into Seazen’s starving bank account. With the company’s cash flow situation becoming desperate, the 1.6 billion yuan will at least stave off immediate demands from creditors, and assuage some investor concerns.

Sea of troubles

Seazen Holdings was founded in Jiangsu province in 1993 and is now headquartered in Shanghai. A wide-ranging real-estate group, Seazen spans residential and commercial property. The company builds and sells commercial developments, high-rise residential buildings, low-rise apartments, office buildings and villas.

In 2015, Seazen was listed on the Shanghai Stock Exchange. At the end of June last year, the company had assets amounting to 515 billion yuan. By the end of September, Seazon’s liability ratio was 81 percent. According to the company’s own materials, sales last year amounted to about 116 billion yuan.

In February of this year, the company claimed a presence in 145 cities in China, including many less-celebrated cities like Changchun, Changzhou and Jinan. Seazen claims more than 700 projects are under development or having been completed.

In an exchange filing dated Feb 11, Seazen admitted that it was unable to contact vice chairman QU Dejun. Before joining Seazen in 2017, Qu was a senior executive at a subsidiary of the Dalian Wanda Group. A report at the time from local business media Caixin said Qu was assisting authorities in an investigation involving his time at the property developer and cinema owner.

Last week, Moody's downgraded Seazen’s rating, saying group sales will continue to underperform, and predicting a drop of around 15 percent to around 100 billion yuan this year.

Building for the future

All six projects of the developer earmarked to receive the funds are in pre-sale.  Construction was expected to be completed this year, and the add-on is Seazen’s latest attempt to make sure of on-time delivery.

Seazen is not the first property developer to issue add-ons. More than 14 developers listed in China have come up with add-on plans. In total, these measures amount to more than 60 billion yuan.

In February, sales of new homes in China by big developers were reckoned to have risen on an annual basis for the first time since the middle of 2021. This has been seen by some as a sign of the market bottoming out.

Unpredictable recovery period

A nationwide recovery in home sales would increase the chances that defaulting developers could remain in business and generate enough cash to repay investors.

But it also adds a hurdle to negotiations between property executives and bondholders. Lenders and borrowers may have dramatically different views on how long the sector will take to return to health, and how complete the recovery will be.