Acile property has become the third Chinese developer in four weeks to announce an equity rights issue to address its high leverage ratio. Guangzhou-based Agile last week announced a HK$2.79bn (US$359m) offering of 696.3m rights shares at a price of HK$4 each on a l-for-5 basis. The price represents a discount of 31.2% to September 19 closing of HK$5.81. The Agile transaction follows country garden's announcement of a rights offer of H<$3.18bn in late August and yuexiu property's HK$3.85bn proposed rights earlier this month. The three developers are looking to reverse a trend over the past two years of increasing leverage in the sector. Property prices are under pressure in China and net gearings are already very high. (See chart.) As such, property developers are looking at ways to raise capital outside the debt markets. This will improve their liquidity and allow them to keep expanding their businesses in a sector where many expect consolidation.
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