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More sad news for Agile.
Corruption probe puts heat on Agile Property
Detention of chairman not the first time firm is placed in the spotlight, having been involved in sexual assault and corruption cases previously
15 October, 2014,
Chen Zhuolin has been ordered to stay at a designated residence while investigations continue.
Agile Property Holdings is no stranger to scandal, but the detention of its chairman and founder on the mainland amid allegations of corruption has raised the heat on the Guangdong-based developer to unprecedented levels. Chen Zhuolin has been ordered by the Kunming City People's Procuratorate to stay at a designated residence - a form of house arrest - while investigations continue.
Agile said in a filing to the Hong Kong stock exchange on Friday it was not aware of any other information related to Chen's condition.
The detention followed mainland reports that alleged corruption at Agile's projects in Yunnan.
An online report, denied by Agile, raised allegations of money laundering and said former security chief Zhou Yongkang, who is being investigated for graft, had a close relationship with Agile's executive director Chan Cheuk-yin, Chen's youngest brother.
Agile said Chen's wife, Fion Luk Sin-fong, and Chan had been appointed executive directors and acting co-chairmen in Chen's absence - a similar move it made in 2012 when Chen was arrested for alleged sexual assault.
"This time, the impact on the company is believed to be more serious than the one in 2012," Bocom International analyst Alfred Lau said. "There are a lot of uncertainties in the probe. What is the issue and how big will the investigation be?"
Chen was arrested in Hong Kong in August 2012 for allegedly assaulting his secretary during a private party at his home in Purves Road, Happy Valley.
Shares of Agile fell 12 per cent in four days from August 31, 2012, after the company confirmed Chen's arrest. The case was closed in March last year after the prosecution dropped the charges. Chen was required to give a written apology and pay the victim's medical bills of about HK$4,000.
But that was not the first major scandal to rock the company since its listing in Hong Kong in December 2005.
Chen founded Agile with his brothers in Zhongshan, Guangdong, in 1989, as a furniture maker. The company moved into property in 1997 with investments in Zhongshan and then expanded to other parts of the province in 2002.
But it was a 20 billion yuan Hainan Clearwater Bay project, a tourist resort joint venture with Morgan Stanley, that set the company on the road to fame, fortune and controversy.
In February 2009, investment bank Morgan Stanley fired the managing director of Morgan Stanley Real Estate in Shanghai for suspected violation of the United States Foreign Corrupt Practices Act.
Mainland media reported that the joint-venture project had triggered a graft investigation. Agile denied the report, but it led to a sell-off in its shares.
The case ended when the former executive was jailed for nine months in the US for corruption in a Shanghai property deal.
Analysts said Agile had made a lot of money from the Hainan project, which had also established its unique brand. That success spurred Agile to embark on another tourism development in Yunnan - now the subject of controversy.
Mainland media said Agile officials involved in projects in Yunnan were under investigation.
Analysts said Agile was expected to be hit hard in the near term. The company's shares plunged as much as 30.8 per cent on Monday after they resumed trading, before the loss was pared to 17.2 per cent at the close. The stock regained 5.06 per cent yesterday to close at HK$4.15.
Agile has not commented on the reports of problems in Yunnan. In a conference call with analysts on Monday morning, it said it had three projects in Yunnan and planned to invest more than 3 billion yuan (HK$3.8 billion) this year.
To tackle its cash problem and to repay a US$475 million offshore loan maturing soon - after suddenly cancelling a HK$2.8 billion rights issue - the company said it was talking to its partners on asset disposals worth about 20 billion yuan.
It also said it would speed up revenue flows due to more flexible pricing of new launches.
"The street is concerned about the default risks of Agile," Edison Bian, the head of China property at UOB Kay Hian (Hong Kong), said in a research report released on Monday.
But Bian added there was still hope. "Agile is still one of the largest developers in southern China, and many of the projects are well known. The company is in talks with a few large, listed developers on potential cooperation, which will turn out to be supportive to the stock if fulfilled."
Agile Property Holdings cuts rights issue to HK$1.65b
Thursday, 16 October, 2014,
Agile Property Holdings yesterday announced a reduced rights issue to raise funds from a wary market amid signs that the Communist Party's top anti-corruption agency is now investigating the beleaguered company. The developer said it had "lost contact" with an executive director who was overseeing a project in Yunnan province that was now being investigated by the Central Commission for Discipline Inspection.
Agile has been embroiled in controversy since reports that it allegedly assisted in money laundering, and that former security tsar Zhou Yongkang had a close relationship with Chan Cheuk-yin, one of Agile's directors and chairman Chen Zhuolin's youngest brother. Agile denied the report.
Shares in the developer, suspended since October 3, plunged 17.2 per cent on resumption of trading on Monday after it was confirmed that Chen had been detained on the mainland. The news deepened investors' concerns over the cash-strapped developer's ability to repay a US$475 million offshore loan maturing in December.
After calling off a rights issue to raise HK$2.8 billion last Friday amid a ratings downgrade over refinancing risks, Agile said it now aimed to raise HK$1.65 billion by issuing 435.23 million rights shares at HK$3.80 each. The rights issue is being underwritten by the trustee of the Chen family trust. Moody's Investors Service last night said the proposed issue was credit-positive but added that the detention of its executive director negatively affected its management capacity.
The Guangdong-based developer said it intended to use the proceeds from the rights issue to refinance part of the existing bank loans that would mature in December.
According to Kenny Tang Sing-hing, a general manager at AMTD Financial Planning, the rights issue would partly ease the financial pressure on the company.
Macquarie, however, said the news that there was no trace of a senior executive added to the company's uncertainties.
Agile said it was not able to contact Huang Fengchao, who was responsible for overseeing the group's projects in Yunnan and Hainan provinces.
It said company staff had met anti-graft and local officials on Monday to brief them about Yunnan's Tengchong resort project.
But it said neither the company nor Huang's family had received any legal documents regarding Huang from any governmental, regulatory or judicial authority.
Tengchong is one of the three tourism resort projects in Yunnan being developed by Agile, which told analysts on Monday it would invest more than 3 billion yuan (HK$3.79 billion) in the projects this year.
Agile said it was also in discussion with banks on extension for outstanding loans. But worries about the company's ability to settle loans persist.
Agile's shares continued their slide yesterday, falling 4.81 per cent to close at HK$3.96. The stock has lost 17 per cent since resuming trading on Monday.
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