Evergrande raises $600m in top-up placement

Evergrande Real Estate Group defied plunging markets on Thursday and raised $600 million in a top up placement.

The Shanghai Stock Exchange Composite Index plummeted 6.5% in one day, while Chinese property stocks fell a similar amount amid concerns Chinese brokerages are tightening margins.

The roller-coaster ride this week has wiped tens of billions in market value off of some Hong Kong-listed companies, and led some investors to question whether the recent rally in A-share and H-shares is experiencing a temporary pullback or has run its course.

Brokerages experienced similar declines. Citic Securities and Haitong Securities each slid more than 2% on Thursday as more firms raised margin-financing requirements. The declines come less than one week after Huatai Securities’ blow-out IPO, allowing China’s largest stock brokerage by trading volume to secure HK$34.7 billion ($4.5 billion) in its flotation.

Plunging markets aside, the block in Evergrande had been highlighted before, so some research argued that it was viable — at the right price. Analysts also noted that Evergrande is one of the most highly traded southbound stocks, and could therefore ride out the storm.

The deal launched Thursday in Hong Kong, with 747.6 million primary shares on offer in the Guangdong-based developer at an indicative price range between HK$6.22 to HK$6.36 per unit, representing a high 8% to 10% discount to the May 27 close of HK$6.91 per unit, according to a term sheet.

Unable to sell the shares at this price range, the syndicate convinced the issuer to restructure the deal and lower the price range to HK$5.67, a hefty 18% discount, and increase the number of shares on offer to 820 million from 747.6 million.