Sunac China Holdings (HKG: 1918) shares are up 30% today on what we assume is a byblow from the Ping An story. That’s the seeming insistence that the insurance company should take over Country Garden, the bust property developer. Our view on the Ping An/ Country Garden combination is that it would be a disaster but maybe that’s just us.
We’ve talked before of Sunac: “The actual way to read the story, we think: “The way we would tell this story. Sunac China is somewhere between deep in the mire and near bust like many China property companies. There is to be a debt reorganisation. There is some capital within the group but that was at the Services level. This special dividend allows that to be moved up to group level and be applied to underpinning the new debt structure at group level. It makes a reconstruction of the balance sheet easier/ more likely. Thus the share price move.” We’re not sure whether that’s worth an over 100% share price move but then the information flow out of China into the western markets is often restricted and also in the wrong language for us.”
Sunac China is indeed deep in the economic mire.
Sunac China Holdings share price from Google Finance
Sunac has filed for bankruptcy protection in the US. “One of China’s leading property developers, Sunac, has filed for bankruptcy protection in the United States, shortly after winning approval from its creditors to restructure nearly $10 billion worth of debt. The company filed a petition for Chapter 15 protection with the US Bankruptcy Court for the Southern District of New York on Tuesday.” Chapter 15 means the US courts will leave the process alone while it’s dealt with by the courts of anther jurisdiction. There was also that approval of the restructuring plan: “Creditors of Sunac China Holdings Ltd (1918.HK) have approved its $9 billion offshore debt restructuring plan, the company said on Monday, marking the first approval of such debt overhaul by a major Chinese property developer.”
But the issue, here and today, is that if the Chinese government is willing to intervene to bolster Country Garden via the Ping An deal then is it willing to also protect or bolster other such bust property developers? That’s what is driving up the Sunac share price today.
