(Yicai Global) June 29 -- Poly Developments & Holdings Group, China's largest property developer by sales in the first five months of the year, and three other builders have received regulatory approval to raise a total of CNY19.9 billion (USD2.7 billion) through private placements.

Poly will raise CNY12.5 billion by selling 819 million shares to fund 14 real estate projects, the Guangzhou-based firm said in a filing yesterday. CCCG Real Estate, Greattown Holdings, and Hubei Fuxing Science and Technology announced the same day that they aim to raise CNY3.5 billion (USD483.4 million), CNY2.6 billion, and CNY1.3 billion, respectively.

The funds will be used mainly for investing in their respective property projects, supplementing liquidity, and paying backing debts, according to the statements.

Poly and CCCG are large state-owned builders, while Greattown and Fuxing are small to mid-sized private developers. This indicates that all developers of various backgrounds and financial standing have the chance to get regulatory support for equity financing, Liu Shui, enterprise research director at the China Index Academy, told Yicai Global, adding that the speed of equity financing among real estate firms will gather pace from hereon.

Last November, the China Securities Regulatory Commission ended a 12-year suspension on new share sales by listed property developers as part of a package of policies aimed at bolstering the flagging real estate market. Developers were then allowed to refinance on the capital markets through private placements of new shares, mergers and acquisitions, and overseas fundraising.

But the first private placement was approved by the CSRC only at the end of last month, when China Merchants Shekou Industrial Zone Holdings was given the okay to raise CNY17.4 billion, of which CNY8.5 billion went to fund projects in six cities.

Shifting Focus

As raising funds this way does not increase an issuers’ debt, the regulator may pay more attention to an applicant’s plans for how to use the funds efficiently, rather than its current financial position, China Real Estate Information said in a report.

That should open the door for equity financing for developers whose debt situation is not so good but still controllable, enhancing their prospects, it added.

More developers are expected to receive the green light for private placements soon, Liu noted, adding that this will improve their liquidity and financing environment in a relatively noticeable way.

But although the latest approvals boosted property market confidence, institutions doubt whether developers that have already defaulted can get the regulator’s nod to raise funds through private placements.

For developers with relatively high financial vulnerability, a reasonable private placement plan and a sound feasibility study on projects that would benefit from the new funds are needed, the report said, adding that firms also need to convince the regulator how much their decision-making process has change in order to avoid repeating the mistakes that got them into to the current predicament.

“Some developers in default are likely to use this opportunity to find a way out of their difficulties,” it said.

Defaulters, including Jiangsu Zhongnan Construction Group, Jinke Property Group, China Fortune Land Development, and Greenland Holdings, are among the listed builders awaiting the CSRC’s approval for proposed private placements, Yicai Global learned.

Editors: Tang Shihua, Futura Costaglione