Joy City in HK$6.36bn rights issue

Three of Joy City’s shareholders have agreed to purchase some 76% of the rights issue at HK$1.35 per share.
Joy City owns properties in Shanghai, among other Chinese cities
Joy City owns properties in Shanghai, among other Chinese cities

Joy City Property, Cofco Group’s real estate business, aims to raise up to HK$6.36 billion ($820 million) in a rights issue to help pay down the December acquisition of Joy City Malls.

Some 4.74 billion shares in Joy City Property will be offered at HK$1.35 per unit on the basis of one share for every two existing shares, according to an announcement on the company’s website.

The offer period will last until March 17 and only be made available to qualified existing shareholders. If the rights issue is fully subscribed, the total amount raised will be used to pay down the outstanding HK$6.23 billion still owed on the Joy City Malls acquisition. The remaining balance will be used for general working capital purposes.

Moody's described the proposed rights issue as credit positive for Joy City Property's parent but said it would not immediately impact Cofco HK's A3 issuer rating or its stable rating outlook.
 
"The proposed rights issue is consistent with our expectation that the acquisition consideration would be funded by a combination of debt and equity," Kai Hu, a Moody's senior credit officer, said in an emailed statement.

Well supported

The Government of Singapore Investment Corporation (GIC), China Life, and Achieve Bloom — a wholly-owned subsidiary of Cofco Group — own a combined 7.25 billion shares in Joy City Property, or 76.42% of its issued share capital. The three investors have signed an irrevocable and unconditional agreement to purchase up to 3.6 billion rights shares, representing 75.84% of the total rights shares initially offered by the company, the announcement said.

If the entire rights issue is not fully subscribed, Achieve Bloom, the main shareholder, may subscribe to convertible preference shares, which will be issued at the same price as the rights issue price.

The rights issue was launched on an non-underwritten basis. Although Joy City and Cofco are technically not acting as underwriters either, they have effectively ensured the deal's success, a source who has worked on past Cofco deals told FinanceAsia. “Even though it’s not underwritten, for all intents and purposes, the three largest shareholders are ensuring the full proceeds will be raised through these structures,” the source said.

BOCI, Goldman Sachs, HSBC and JP Morgan are advising on the rights issue.

In December, Cofco Land Holdings acquired Joy City Malls for HK$12.46 billion. Its assets include city complexes, a commercial property in Beijing, and non-controlling interests in two properties located in Beijing and Shanghai.

Cofco Land was renamed Joy City Property after the acquisition, which was handled by Goldman Sachs, BOCI and HSBC.

As of December 4, Joy City owned 18 commercial property projects — including mix-use complexes, commercial properties, hotels and a tourism project — in Beijing, Shanghai, Sanya, Chendu, Nanchang, Suzhou and Hong Kong.

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