(Yicai Global) June 9 -- China’s small and mid-sized regional property developers, hard hit by the economic fallout from the novel coronavirus epidemic, are turning to initial public offerings in Hong Kong in a last ditch attempt to raise funds to avoid going under.

So far this year, 11 developers, including Beijing-based Eagle Holdings and Radiance Holdings, have submitted IPO prospectuses to the Hong Kong Stock Exchange, which has a much faster turnaround period than mainland bourses, the Securities Daily reported today. Five of the applications were filed within the last month.

The sudden outbreak of Covid-19 choked off demand, interrupted sales payments and disrupted domestic and overseas fundraising channels, putting extra pressure on unlisted smaller real estate firms, the report said, citing Yan Yuejin, head of research at the Shanghai E-House Real Estate Research Institute. That came on top of maturing existing debts and government-imposed fundraising curbs aimed at cooling the property market.

The developers will be under intense financial pressure as they line up to go public, said Huang Lichong, head of the finance department at investment firm Huisheng International Holdings. Many will borrow money at higher cost at home and abroad to ease the pressure, which will eventually result in steeper debts, he added.

“Whether the firms can succeed or not in going public is uncertain, especially if they default on debts,” said a source, who wished to remain anonymous.

The debt-to-capital ratio of Guangdong province-based Datang Real Estate, which filed on May 31, was over 11 times in 2017. After two years of deleveraging, this had been reduced to just over double last year, still higher than the sector average which stood at two to one among China’s top 100 listed real estate developers.

Guangzhou-based Seedland Group, which submitted its IPO prospectus on May 20, had debts of CNY46.5 billion (USD6.6 billion) last year, giving it a net gearing ratio of over three times.

Editor: Kim Taylor