Singtao Daily   Hong Kong   April 15, 2010

Evergrande Real Estate Group (3333), whose earnings doubled in 2009 according to the recent release, announced to issue 600 million US dollars (about 4.65 million HK dollars) of senior notes to Chinese Estate (127) (350 million US dollars) and its president Joseph Lau（250 million US dollars）due in 2015 with an annual interest rate of 3%. Joseph Lau said it was the first time for him and his company to make so huge an investment in Evergrande.

According to Xia Haijun, vice-chairman and CEO of Evergrande, the company now holds 13.5 billion yuan of cash plus the capital raised by the issue of senior notes this time, which amounts to 18 billion yuan of cash, so it will have sufficient capital for property development and acquisition.

Leading Chinese mainland real estate industry in cash holding

Xia Haijun said, Evergrande, always paying close attention to the change of capital market, had predicted last year the Chinese mainland would gradually tighten up the monetary policy in 2010, so it decided to raise 1.35 billion US dollars of capital by issuing 750 million US dollars of senior notes in January this year and 600 million US dollars this time. He also said given that the monetary policy will tighten up from now to the second half this year and developers will find it more difficult to borrow money, there will be more opportunities of acquisition at parity price in the market. Therefore the net proceeds of the additional senior notes issued by Evergrande will amount to 585 million US dollars.

Xia Haijun said, Joseph Lau had subscribed 150 million US dollars of senior notes when Evergrande issued notes in January, bought 50 million US dollars of Evergrande stocks when the company went listing, and spent together with Chinese Estate 600 million US dollars on purchasing newly-issued senior notes this time, so he has made a total investment of 800 million US dollars (about HKD 6.2 billion) in Evergrande. Xia also said that his company had meant to issue public senior notes on the stock market, but after discussing with Joseph Lau, who wanted to buy all the notes, the company considered the proposal convenient and efficient, thus deciding to sell all the notes to “Big Lau”. Lau also claimed that they will remain a long-term holders, so other bonds of Evergrande will be hardly affected. Moody, a credit rating agency confirmed that Evergrande has a steady prospect of credit and loan and increasing issues in notes can provide Evergrande with additional capital to carry out rapid development plan. Evergrande is experiencing booming sales with the contracted sales of 8.4 billion yuan, which complies with Moody’s prodict.

Joseph Lau, who had bought all the senior notes of Evergrande, told us that it is the first time for him and his company to make so huge an investment in one company and he has full confidence in Evergrande.

Making a big stake for the first time

Joseph Lau explained that he has confidence in the sales performance of Evergrande who ranked the first in China in terms of sales amount and led china in profits, and believes that Evergrande will make even better achievement. He also admitted that the senior notes of Evergrande are quite attractive and there are some bonds of mainland property stocks with even higher interest rate which will be issued in the market but he didn’t invest in it for the high risks. He pointed out that his confidence in Evergrande is quite solid because Evergrande, focusing on the markets of second- and third-tier cities which have lower risk than that of major cities, will have little regulation pressure, and also because Evergrande boasts rich and low-cost land reserves. He said his company had invested 10 billion yuan in Chengdu real estate, and there were also projects in mainland cities such as Beijing and Shanghai, however he can’t manage like Evergrande who has property development in 28 cities in China due to the lack of human resources. Therefore he chooses to invest in Evergrande to share its remarkable achievement.