(Bloomberg) — Chinese developer Longfor Group Holdings Ltd. plummeted most on record Monday after its billionaire Wu Yajun stepped down as chairman, underscoring investor concern about the health of the company.
Longfor Group Holdings Ltd.’s dollar bonds slumped in early trading, while its shares fell as much as 45% as of 9:38 a.m. Its 4.5% bond due 2028 plunged 12.6 cents on the dollar to 20.1 cents as of 9:08 a.m. in Hong Kong, according to data compiled by Bloomberg.
Wu follows in the footsteps of other billionaires including Soho China Ltd.’s Pan Shiyi and Pan Zhang Xin, after a yearslong government tightening on private companies ranging from tech to property. Concerns have been brewing about the developer that has the highest credit rating in China at BBB.
“It’s definitely a negative for the company,” said Steve Wong, an analyst at Essence International Financial Holdings Ltd. “For whatever reasons, it doesn’t make sense for the chairman to suddenly quit during a real estate crisis. Maybe Wu realized there’s little she can with do given the situation. Even if this year’s debt repayment is settled, next year is still going to look very difficult for Longfor.”
Wu’s resignation reflects its strategy to institutionalize operations, and that Wu’s family office is “firmly optimistic” about the real estate industry, according to a statement to the Hong Kong stock exchange. Longfor has no debt due for the rest of the year.
Longfor’s first half profit grew just 0.8%, the slowest since the first half of 2020 when the pandemic first started. The company was expected to receive a HK$3.5 billion ($446 million) syndicated loan, according to a person familiar with the matter in August. That could have helped to cover 20% of its short-term debt, according to Bloomberg Intelligence.
Wu has a net-worth of $5.7 billion, according to Bloomberg’s billionaire index. Longfor has $7.8 billion worth of outstanding bonds, according to data compiled by Bloomberg.
The company’s bonds are the second-worst performer in a Bloomberg index of Chinese investment-grade dollar bonds. Its 3.375% note due 2027 dropped 10.6 cents to 20.2 cents in Monday morning trading.
–With assistance from Lorretta Chen and Kevin Kingsbury.
(Updates with share and bond price movement throughout story)
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