China New TOwn

China New TOwn (CNTD) - China Development Bank International Holdings (CDBIH), has agreed to subscribe for some 5.3b new shares in CNTD, which represents about 54.32% of the total issues shares of the enlarged capital base. The CDB Capital platform was established back in 2009; in the past four years, they have expanded to more than 20 cities in China, so they are a very dominant player in this field. CDB has a competitive advantage - its network with local governments, and deep pockets to raise substantial funds at competitive rates, and it is also worth noting that CNTD has entered into a disposal master agreement with SRE Investment Holding Limited (SREI), the original controlling shareholder, which will hold 14.91% of the enlarged total share following the transaction. Under the terms of the agreement, SREI has agreed to purchase CNTD's non-core assets for a total consideration of Rmb2.07b. These assets include schools, hotels, exhibition centres and hospitals, which were built to enhance the value of the towns. bThis adds a little bit of a sweetener for shareholders because these assets have traditionally been loss-making to the company. SREI is contemplating buying this basket of assets at book value. Down the road, future new towns developed by CNTD will have such amenities run by its strategic partners. Both the subscription and proposed disposal are subject to shareholders' approval at CNTD's extraordinary general meeting, scheduled for Dec 30 at 10am.