- Jun 17, 2015
- China New Town Development sets up an RMB10-billion partnership with BoCom-Schroder and CDB Capital
(Hong Kong and Singapore, 27 May 2015) ― China New Town Development Company Limited – the future blueprint planner and leading developer of integrated new towns in China (the “Company”, “CNTD”, the “Group”; HKSE: 1278.HK; SGX: D4N.SI), is pleased to announce that CDB New Town (Beijing) Asset Management Co., Ltd (“CDB New Town”), a wholly-owned subsidiary of the Company, Bank of Communications Schroder Fund Management Co., Ltd（交銀施羅德基金管理有限公司）and China Development Bank Capital Corporation Limited（國開金融有限責任公司）(“CDBC”) entered into a limited partnership agreement (the “Agreement”) pursuant to which an establishment of an investment partnership of total amount of RMB 10 billion, the CDB(Beijing)-BOCOMM New-Type Urbanization Development Fund (國開（北京）-交行新型城鎮化發展基金, the “Partnership”) is proposed.
Pursuant to the Agreement, the investment of the Partnership amounts to RMB10 billion in total, and an aggregate amount of RMB 2 billion among the total investment in the Partnership is to be contributed by the entities within China Development Bank system, bringing effective leverage to 5x. Specifically, Bank of Communications Schroder Fund Management Co., Ltd being the senior-tranche limited partner will contribute RMB8 billion at the return rate as PBOC benchmark rate plus 1.60% (currently 7.25% per annum). CDB Development Fund (國開發展基金 ) being the mid-tranche limited partner will contribute RMB0.8 billion at a fixed rate of 12% per annum. CDBC and CDB New Town, the wholly-owned subsidiary of the Company, both being junior-tranche limited partners will primarily enjoy the entire profit of all investments made by the Partnership after the interests above-mentioned are met. The Partnership will primarily invest in fixed-income investments (pure debt or mezzanine type investments), the security and safe exit of which shall be enhanced by commensurate collaterals or guarantees by qualified counterparties. Thanks to the prudent investment style and the powerful influence of China Development Bank, CDBC has maintained solid track record in terms of investment returns over the past 5 years. The Partnership will inherit such investment blueprint and focus on highly-leveraged investment within projects that enjoy high safety coefficients. The Company therefore expects to receive promising investment returns from the Partnership.
Pursuant to the Agreement, the Partnership’s investment will primarily focus on old town reformation, shanty town reformation, primary land development and integrated land and property development; it will also explore investment opportunities in municipal facilities. The new type urbanization of China has been an essential part of China’s national policy. The current leaders of China hold urbanization as the driver to the economic growth. China Development Bank is the most influential policy bank in China. Substantial amount among the 10 trillion assets of China Development Bank has been continuously invested into construction related to urbanization, strengthening the policy bank’s dominance in the field, particularly in shanty town reformation and the development of the country’s pillar industries. Being one of the largest and most influential financial institutions in China’s urbanization, CDBC inherits the privileged position from China Development Bank, holds numerous quality projects and has superb expertise in assessing and managing projects, as well as related risk management. In spite of the Company’s RMB 150 million contribution to the Partnership being a relatively small amount, it is the establishment of co-investment mechanism for CNTD to leverage the large-scale investment with CDBC. Marching forward, it is possible for CNTD to replicate this model systematically and participate in the core business of CDBC, which implies that, with the systematic advantages inherited from China Development Bank and CDBC, CNTD’s share in the investment channels and the management experiences from China Development Bank system is of great help to its rapidly expanding business network and promotion of brand reputation. Furthermore, CNTD’s participation in the Partnership reflects the great importance that China Development Bank and CDBC attach to the Company being the core listed platform of the CDBC pedigree.
It has been just over a year after CDBC’s acquisition of the Company. In terms of business portfolio and financial capabilities, the Company is currently weak in relative terms as compared to CDBC itself. Therefore, support from its parent company is necessary in substantiating the Company’s fast growth. In this RMB10 Billion Partnership, CNTD only contributes RMB150 million, thus the investment risks are to be reasonably balanced and diversified. Moreover, CNTD is able to closely participate in quality projects nationwide via the Partnership. As such, CNTD is expected to enjoy better position in capturing downstream opportunities in the construction related to urbanization, particularly development and operation of new towns and municipal facilities. It does not only help optimize the Company’s revenue model and strengthen its project pipeline, but also in the long term consolidate the Company’s positioning as the core operational platform in urbanization under CDBC.
The spokesman of CNTD comments on the establishment of RMB10 billion partnership, ‘The Partnership represents a leap of CNTD towards the Company’s strategic objectives. The cooperation between CDBC and the Company is not only limited to financing support and project pipelines, but also through the Partnership, which creates a new mechanism of collaboration between the Company and its parent group. The Company looks forward to exploring further in-depth cooperation with its parent company and seeking various directions that are beneficial to the development of the Company. With the support from CDBC, the Group looks forward to accomplishing its blue print in urbanization with a dedication to create value for the shareholders.’