Credit: Visual China

SHENZHEN, November 9 (TMTPOST) -- China's top insurer Ping An Insurance announced that the company has noticed a Reuters report regarding the company being required by relevant authorities to take a controlling share of Country Garden and the report is completely false.

The insurer said in an announcement released on Wednesday that the company has never received any relevant requirements from the government.

In addition, Ping An Insurance disclosed that the company does not hold any shares of Country Garden as of now. 

Ping An Insurance was the second largest shareholder of Country Garden

In April 2015, Ping An Insurance acquired 9.9% of Country Garden's shares for HK$ 6.3 billion, with a purchase price of HK$ 2.816 per share. After the transaction was completed, Ping An became the second largest shareholder of Country Garden. Since then, Country Garden and Ping An have cooperated in areas such as land investment, marketing, finance, and community services.

Benefiting from the upward cycle of the real estate market from 2015 to 2021, Country Garden handed out high dividends to its shareholders from 2017 to 2020. As of the end of 2021, Ping An received cumulative dividends of 4.97 billion yuan (US$683 million) from Country Garden.

However, one year after investing in Country Garden, Ping An Insurance began reducing its holdings and cashing out.

Ping An Insurance reportedly conducted reduction operations in mid-2016, mid-2018, the end of 2021, and the end of 2022. The shareholding percentage decreased from 9.9% in 2015 to 5.74% at the end of 2022, with a total cash-out of 4.79 billion yuan during this period.

Although there were reduction actions, Ping An Insurance did not  completely sell its share, and the shareholding percentage was always below that of Country Garden Chair Yang Huiyan.

According to the interim report of Country Garden, as of June 30, 2023, there were two companies holding more than 5% of Country Garden's shares. One was Yang Huiyan's Best Limited, holding 52.6% of the shares; the other was Ping An Insurance, holding a stake of 5.37%.

On August 10, Country Garden announced that it was expected to have a net loss of between 45 billion yuan and 55 billion yuan in the first half of 2023 and admited that it was facing temporary liquidity pressure.

On August 11, according to the equity disclosure information of the Hong Kong Stock Exchange, Ping An Asset Management sold 14.094 million shares of Country Garden on the exchange, with an average price of HK$0.98 per share, cashing out HK$ 13.8121 million. After the transaction, the number of Country Garden shares held by Ping An Asset Management decreased to 1.382 billion shares, and the equity decreased from 5.04% to 4.99%.

Since then, there was no news of Ping An reducing its holdings of Country Garden.  When the shareholding is less than 5%, there is no need to disclose reductions.

Now Ping An revealed that it no longer holds Country Garden shares as of the end of the third quarter, which means that from August 11 to the end of September, Ping An completely sold its holdings of Country Garden shares.

Insurers reduce holdings of "property developer stocks" 

Ping An has held significant positions in 13 real estate companies including Country Garden, Sunac, China Fortune Land Development, Longfor, and Xuhui in the past few years. Against the background of the liquidity crisis in property developers, Ping An has reduced its holdings of real estate stocks across the board: the net amount held by Ping An in China Fortune Land Development decreased from 3.621 billion yuan at the beginning of 2022 to 2.522 billion yuan at the end of the year, with a shareholding percentage of 25.02%; the holdings of Country Garden fell from 9.9% in 2015 to zero at the present; the holdings of China Jinmao decreased from 14.02% to 13.36%; and the holdings of Xuhui Holdings were sold from 10.12% in 2017 to zero at the end of 2022.

Ping An's withdrawal from real estate project partners is based on the consideration of maintaining its own cash flows and is a routine action for loss prevention.

During the deep adjustment period in the real estate industry, several insurance funds have successively reduced their holdings of real estate stocks. For example, Taikang Life Insurance reduced its holdings of Poly Developments; Dahua Group Life Insurance reduced its holdings of Jinke Group; Taikang Life Insurance and Taikang Pension transferred their shares in Sunac China Holdings; and Qianhai Life Insurance reduced its holdings of China Overseas Land & Investment.

Since the beginning of this year, insurance funds' investment strategies have shifted from "real estate stocks" to the assets themselves, focusing on real estate investment in commercial properties, industrial parks, and other real estate sectors. For example, China Post Life Insurance acquired 100% equity and debt of Beijing Kunting Asset Management Co., Ltd. for 4.256 billion yuan and took over the "COFCO · Poly Plaza" project; China Life Insurance Group acquired the Shimao Zhuhai Integrated Project for 3.91 billion yuan.

Country Garden faces liquidity problems

Industry insiders said that the market has heard that Ping An of China intends to acquire Country Garden and take over its debt, which may be related to the liquidity pressure that Country Garden has encountered since the second half of this year.

On August 8, 2023, Country Garden failed to pay the interest of two US dollar-denominated bonds totaling 22.5 million US dollars; on August 11, Country Garden's management issued an apology letter, saying that the company is currently facing the biggest difficulty since its inception and acknowledging the liquidity risk.

Subsequently, Country Garden mentioned the restructuring of its domestic debt. On September 20, Country Garden announced that all nine domestic bonds had been extended, involving a total amount of approximately 14.7 billion yuan.

On October 10, Country Garden announced that it will seek a comprehensive solution to its overseas debt. In the announcement, it pointed out that the principal amount of the unpaid debt under a certain debt item was HK$470 million. Regarding offshore debt issues, Country Garden said that it initiated the restructuring of its overseas debt, hired CICC and Huaryan (China) as financial advisors to assist in evaluating the company's capital structure and liquidity situation, and formulating a comprehensive solution.

On October 17, after a 30-day grace period, the interest payment for "Country Garden N20250917" also reached its final maturity date, but some investors said that they still had not received the interest payment for "Country Garden 6.15% N20250917" on the due date.

Currently, Country Garden has 15 outstanding US dollar bonds with a total outstanding amount of 9.3 billion US dollars. There is no principal repayment for US dollar bonds due this year, but there is a maturity amount of 1.55 billion US dollars within one year.

No signifiant improvement for Country Garden's sales in 2023

The sales data released by Country Garden for the first three quarters of 2023 showed that the equity sales amount reached approximately 154.98 billion yuan, a year-on-year decrease of 43.9% and a decrease of 65.4% compared to the same period in 2021. Among them, the sales amount in September was approximately 6.17 billion yuan, a month-on-month decline for the sixth consecutive month, a year-on-year decrease of 80.7%, and a decrease of 86.5% compared to 2021.

Country Garden has shifted its focus from boosting sales to ensuring normal operations and housing delivery.

According to public data from Country Garden's official WeChat account, as of October 31, 2023, a total of approximately 460,000 units have been delivered throughout the year, with a cumulative delivery area of approximately 55.06 million square meters. The delivery projects involve 31 provinces and 237 cities, and some projects have achieved early delivery.

Several industry insiders pointed out that in the future, the handling of debt issues similar to Country Garden may require a comprehensive market-oriented solution and a true recovery of the property sales market.

(1 US dollar equals 7.28 yuan.)

(This article was first published on the TMTPost App, Author | Wang Jian)