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PAG agrees $150m investment in Chinese property developer

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PAG’s absolute returns division will invest in China-focused shopping mall operator Zall Development Group through a $100 million convertible bond issue, with the option to subscribe to a further $50 million worth of bonds. Assuming full conversion, the private equity firm would own 9.75% of the Hong Kong-listed developer.

Pacific Alliance Asia Opportunity Fund, which closed on $275 million in 2006, will subscribe to the bonds, which have an interest rate of 5.5% per annum and will mature in June 2018. They convert into 378.1 million new shares at a price of HK$3.01 apiece, according to a regulatory filing.

"This transaction significantly enhances our financial position and enables us to take full advantage of future business opportunities. The investment will further boost our strength in expanding and replicating our successful business model nationwide," said Yan Zhi, chairman and CEO of Zall.

The company's major projects - a combination of wholesale market properties and commercial properties - and land bank are located in Wuhan, Shenyang and Changsha. Its flagship project is North Hankou International Trade Center in Wuhan.

Zall posted a net profit of RMB1.17 billion ($190.5 million) in 2012, down from RMB1.18 billion the previous year. Turnover declined from RMB2.54 billion to RMB1.49 billion.

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