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Bloomberg
As some Chinese tycoons slow acquisitions to focus on digesting their
massive debt loads, one property billionaire is moving the other way.
Sunac China Holdings Ltd. Chairman Sun Hongbin over the past year oversaw an acquisition spree that culminated with Monday’s $9.3 billion purchase of assets from Dalian Wanda Group Co. While the deal set a record for China’s property industry, it also may bring Sun’s company another claim to fame: the title of China’s most indebted developer.
Sun is leading an ambitious expansion at Sunac even as other deal-hungry conglomerates have cooled their pace of acquisitions this year amid greater scrutiny from China’s leaders. For the 14-year-old Sunac, which is dwarfed in market value by industry leaders such as China Vanke Co. and China Evergrande Group, the deal raises concerns the firm is straying beyond its core expertise of residential property and taking on high leverage levels.
The deal may boost Sunac’s net gearing to 300 percent from just over 208 percent at the end of last year, said Raymond Cheng, a Hong Kong-based analyst at CIMB Securities Ltd. That could push Sunac’s gearing above that of the current reigning champion of leverage, China Evergrande Group, according to Cheng, who said his estimate counts perpetual securities as debt and could change based on additional financial information from the companies.
“The market is seeing Sunac as the new Evergrande,†Cheng said in an interview, adding that Evergrande’s net gearing may have eased to below 200 percent from 432 percent. Sun is seeking to ease concern on Sunac’s leverage levels, saying in a Caixin interview that that the company won’t raise extra debt for the Wanda deal, using its own funds for the transaction. In addition, high-leverage deals have paid off for Sunac in the past, according to Citigroup Inc., which cited examples such as land purchases in 2014 and 2015. Investors backing the company’s growth story have fueled the shares’ gains of 129 percent this year.