Boland Tower: Country Garden sells subsidiary company shares for 2 billion cash

On December 27, 2024, Country Garden Holdings Co., Ltd. (Country Garden Group) announced the sale of a indirectly held non-wholly-owned limited partnership enterprise, cashing in 2 billion Chinese yuan. The company stated that the proceeds would mainly be used for construction expenses related to projects such as property exchanges.

Country Garden announced the sale of approximately 1.56% of its equity interest in Changxin Technology to Hefei Jianchang Equity Investment Partnership Enterprise (Limited Partnership) and Changxin Technology (as the target company) for a transaction amount of 2 billion yuan. Following the completion of the sale, Country Garden will no longer hold any equity in Changxin Technology.

Established in China on June 13, 2016, Changxin Technology is a joint-stock company primarily engaged in the design and manufacturing of integrated circuits. Headquartered in Hefei, Anhui Province, it has multiple R&D centers and branch institutions both domestically and internationally. The tech company is seen to have significant development prospects in the future.

Regarding the profits generated from the sale of equity, Country Garden anticipated a profit of approximately 590 million yuan in 2024, subject to final auditing.

As the buyer in this transaction, Hefei Jianchang Equity Investment Partnership Enterprise (Limited Partnership) is controlled by the Hefei State-owned Assets Supervision and Administration Commission of the State Council.

Country Garden explained that the group is actively resolving short-term liquidity pressure and believes that the sale and realization of the equity value will benefit the company. The proceeds from the sale are planned to be used for the group’s general operational funds, primarily earmarked for construction expenses related to projects such as property exchanges.

At the monthly management meeting in December, the Chairman of Country Garden Group, Yang Huiyan, reiterated the importance of ensuring the completion of property exchanges.

The Deputy Director of the Financial Intelligent Quantitative Investment Research Center at Harbin Institute of Technology, in a post on December 28, pointed out that Country Garden’s asset disposal is primarily to address short-term liquidity crises and maintain the normal progress of the “property exchange” project.

Country Garden’s mid-year financial report for 2023 revealed a total debt scale of 1.36 trillion yuan, with a high proportion of short-term interest-bearing debt that needs quick repayment. As of mid-2023, Country Garden’s book cash amounted to only 101.79 billion yuan, while short-term debt reached 108.79 billion yuan, indicating a significant liquidity gap.

The expert mentioned that although selling assets can provide some relief for debt and “property exchange” spending, it might not entirely solve the financial pressure. The uncertainty remains regarding whether the fund raised from selling equity can fully support Country Garden in overcoming the crisis, given its asset scale and current debt pressure. While Country Garden still has a considerable amount of equity and assets available for sale, the speed of realization, market acceptance, and the sustainability of future business will be crucial factors in resolving the predicament.

Amid the prolonged downturn in the Chinese real estate market, Chinese real estate companies generally face challenges such as high debt levels, deteriorating financing environments, and weak market sales.