(Yicai Global) July 27 -- Shares in Country Garden plunged as much as 15 percent today after the Chinese property developer said it will raise funds through a private placement of new shares at an issue price 12.6 percent less than yesterday’s closing price to improve liquidity and repay debts.

Country Garden’s share price [HKG:2007] was trading down 14.5 percent at HKD3.18 (USD0.41) as of 2:30 p.m. China time. Earlier in the day it sank to HKD3.16.

Country Garden will sell 870 million newly issued shares at HKD3.25 (USD0.41) apiece to secure HKD2.8 billion (USD360 million), the Foshan, southern Guangdong province-based company said yesterday. The stock finished at HKD3.72 that day.

The proceeds will improve Country Garden’s financial situation and liquidity and will be used to refinance existing foreign debt, supplement working capital and fund future development, it said.

The private placement is equivalent to around 3.6 percent of the expanded share capital. Once completed, the shareholding of Co-Chairwoman Yang Huiyan will be diluted to 59 percent from 61.2 percent.

Long-term investors and existing shareholders have been closely tracking the firm’s latest developments as sales recover, and as a result the final offering was overbooked and the share issue increased to 870 million from 840 million, Country Garden said.

Country Garden is China’s second-most indebted developer after China Evergrande Group with debts of CNY1.6 trillion (USD220 billion) as of the end of 2021, giving it an asset-liability ratio of 84.5 percent.

This is Country Garden’s second round of financing this year. Earlier in the year, it issued HKD3.9 billion (USD576.8 million) in convertible bonds at a coupon rate of 4.95 percent that are due in 2026. The proceeds were used to repay foreign debts of USD770 million.

Editor: Kim Taylor