(Bloomberg) — Chinese companies are rushing to take advantage of a recent equities rebound to raise funds, using what may be a narrow window before the market falters again.
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Poly Developments and Holdings Group is considering raising as much as 12 billion yuan ($1.7 billion) via notes that can be turned into equity, Bloomberg reported Monday. Separately, Yankuang Energy Group Co. said it plans to raise funds through the sale of shares listed in Hong Kong while MMG Ltd. proposed a rights offering in the city.
The firms join other Chinese companies seeking to raise cheap funding through equity or equity-linked notes following signs of life in the country’s stock market. Key benchmarks in mainland China and Hong Kong have rebounded from their lows this year, giving companies more confidence that their funding will prove successful.
Convertible bonds have been particularly popular as they give firms the flexibility to raise funds cheaply without immediate stock dilution, at interest rates that are usually lower than on regular debt. Alibaba Group Holding Ltd. and JD.com Inc. raised $7 billion together through the tool last month. Poly’s offering, if it happens, will be rare in that only three Chinese developers have raised over $1 billion through a convertible over the past twenty years, Bloomberg data show.
“If the equity rally of the China property sector continues, which is a big if, we might see more developers tapping the CB market,” said Zerlina Zeng, senior credit analyst at Creditsights Singapore LLC.
The moves may gather pace as the Chinese stock rebound starts to show signs of weakening momentum. Some hedge funds have taken profit following a rally in property developer stocks while others have built short positions, according to JPMorgan Chase & Co.
A Bloomberg Intelligence stock index of listed developers surged more than 70% over the month through May 17, when Beijing unveiled a housing rescue package that included cutting mortgage rates and down-payments. Still, the gauge fell in the following two weeks as doubts emerged about whether the measures will be enough to arrest the property crisis.
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