TheChek News Flow

Authorities have stopped publishing data on banks, oil and debt

The West’s window into the Russian economy is closing.

In recent days, authorities stopped publishing data on government debt, trade statistics and oil production. The central bank limited the volume of financial information that local banks have to publish regularly while lawmakers are working on a bill banning lenders from sharing data with foreign states.

The growing blackout is part of an effort by the Russian authorities to protect the economy and domestic companies from further sanctions by the West following Moscow’s invasion of Ukraine. Limited data means that Washington and Brussels will have less visibility on whether and how their sanctions are biting into the Russian economy, making it more challenging to find new targets and fine-tune future sanctions rounds.

“They are trying to obscure the economic picture,” said Elina Ribakova, deputy chief economist at the Institute of International Finance. “We have bans on Russian media and now the same goes for statistics access. The Iron Curtain is coming up from both sides.”

The sanctions have cut off Moscow from much of the Western financial infrastructure. Economists are predicting a deep recession, combined with steep inflation. Russian unemployment is rising amid an exodus of Western companies.

Last week, a branch of the Russian energy ministry that releases monthly oil production and export data said it was limiting “the dissemination of information that can be used as additional pressure on the Russian market and its participants,” according to Russian state newswire TASS.

The agency has indefinitely stopped the distribution of monthly crude oil production data as well as data on the shipments of fuel oil from Russian refineries and gas-processing plants to domestic and export markets, TASS said.

Such information from one of the world’s top oil producers is crucial at a time of high crude prices. Russian President Vladimir Putin recently said that Western sanctions have stymied Russia’s energy industry. While oil-data watchers have more than one way way of collecting statistics, including tanker tracking and information from traders, the lack of timely official Russia numbers would make it harder to monitor global supply.

In that way, the data limits help “cloud the picture of the problems the Russian energy industry is facing,” said Mikhail Krutikhin, a partner at independent consulting firm RusEnergy.

The blackout isn’t total: The government still publishes mainstay figures such as those for inflation, gross domestic product and a host of other data. But the scope of the releases has narrowed.

On Tuesday, the central bank suspended the release of the foreign-debt payment schedule, which typically lays out the external debt that Russia needs to pay in a schedule based on its maturity. Paying foreign debt has become a sensitive issue as Moscow teeters on the brink of a default on its international bonds. With a big chunk of its foreign reserves sanctioned, Russia now can’t make certain payments in dollars. Earlier this month, S&P Global moved Russia into default on its foreign-debt credit rating after the government attempted to make a payment on a dollar bond to investors in rubles.

A spokesperson for Russia’s central bank didn’t respond to a request for comment.

On Thursday, the country’s Federal Customs Service suspended its monthly publication of data on exports and imports. The data normally contain thousands of categories of goods and services that Russia imports and exports, including items as varied as live sheep, nuclear equipment and vulcanized rubber.

“I support this decision and consider it justified in order to avoid incorrect estimates, speculations and discrepancies in terms of import deliveries,” said the head of service Vladimir Bulavin. The central bank had earlier also suspended the publication of trade data.

Analysts may be able to reconstruct some of the trade impact on Russia by examining data from its top trading partners, but it is a laborious process and it could take time for a picture to emerge.

On the banking front, local lenders won’t be required to publish some financial statements for the period from Dec. 31, 2021 to Oct. 1, 2022, the central bank said Tuesday. Banks also don’t have to disclose capital and risk information during the same period. And on Wednesday, the State Duma, Russia’s lower house of parliament, approved a draft bill that would ban Russian banks from sharing banking secrets with foreign states. That includes data on customers and their transactions as well as about beneficiaries and beneficial owners.

Restrictions on banking data could conceal a banking crisis. Sanctions imposed by the U.S. and European nations were aimed at hobbling Russia’s financial system. It cut major Russian banks’ access to the dollar and other reserve currencies and severed some of the lenders from the Swift global-payments messaging system.

Last month, the central bank said it would temporarily cut the volume of financial reporting required from lenders to “limit credit institutions’ risks associated with the sanctions imposed by Western countries.”

The data blackout “can impact the design of sanctions, particularly financial sanctions, if crucial information is missing,” said Maria Shagina, visiting senior fellow at the Finnish Institute of International Affairs.

The blackout represents a U-turn for Russia, which built a robust infrastructure for data gathering and dissemination following the fall of the Soviet Union. Russia had worked for years to improve its creditworthiness with foreign investors and was rated investment grade before the war.

While official statistics from other emerging markets often have been criticized by analysts and international institutions for their data quality or government influence, Russian data have been widely accepted by independent economists.

“It used to be: Publish it unless there is a reason to hide it. Now it looks like: Hide it unless there is a reason to publish it,” said Janis Kluge, an expert on the Russian economy at the German Institute for International and Security Affairs. “As long as the data was not too political, the statisticians could continue publishing it.”

One exception was official mortality figures during the pandemic, which revealed a discrepancy between lower official Covid-19 deaths and significantly higher excess mortality, or deaths above the long-term average. Analysts have accused Russia of undercounting Covid-19 deaths and playing down the pandemic’s severity, a charge Russian authorities have denied.

Now, the limits imposed on official statistics are much more widespread—and economists expect the data restrictions trend to continue.

“It’s getting more and more challenging and we might get to a point where we’d be inferring from satellite photos about what’s happening in the Russian economy,” Ms. Ribakova said.

Sun Hongbin’s company is trying to avoid defaulting after missing a dollar-bond payment earlier this month

More than a decade ago, Sun Hongbin was forced to sell his property business to a rival after a Chinese government crackdown on soaring housing prices caused it to run short on cash.

The China-born businessman said he learned his lessons from the failure and made a comeback with another company, Sunac China. It sold apartments in mostly rich cities like Beijing and Shanghai and grew into one of the country’s largest developers, with the equivalent of more than $93 billion in contracted sales last year.

Mr. Sun, a naturalized American citizen in his late 50s, is now trying to prevent Sunac from suffering the same fate as China Evergrande Group EGRNF -4.73% and other rivals that have spiraled into default following government-imposed curbs on borrowing.

Sunac’s fortunes have changed drastically in just a few months. As recently as last autumn, many investors—and global credit rating firms—viewed Tianjin-based Sunac as one of the nation’s strongest private real-estate developers. But a selloff in Chinese property bonds and diminishing home buyer confidence have caused a prolonged market dislocation and industry slump that has imperiled many real-estate companies that previously raised billions from sales of dollar bonds.

The economic backdrop has gotten worse this year. In Shanghai, one of Sunac’s biggest markets, a lockdown of the city’s 25 million residents has halted apartment presales, an important source of cash for developers. Sunac’s contracted sales in March plunged 54% from a year earlier, following a 33% decline in February.

Last week, Sunacmissed a $29.5 million interest payment on a U.S. dollar bond for the first time, and it is trying to cobble together funds within a 30-day grace period to stay afloat, according to people familiar with the matter. The company also didn’t meet a March 31 deadline to release its 2021 results, causing a trading suspension for its Hong Kong-listed shares. Sunac’s dollar bonds were recently bid at around 21 cents on the dollar, according to Tradeweb, levels that imply a default is highly likely.

Mr. Sun declined to comment through a Sunac spokesman. Late last year, he reached into his own pocket and provided a $450 million interest-free loan to Sunac, demonstrating “his long term confidence and long-term commitment to the group,” a company filing said. In recent days, Sunac has also told offshore bondholders that the company intends to make its missed dollar-interest payment, according to people familiar with the matter.

“He has lost a company before, so he does not want the same thing to happen again,” said James Wong, executive director and a fixed-income portfolio manager at GaoTeng Global Asset Management in Hong Kong. “You can see that he is trying hard to repay, and is not laying flat,” Mr. Wong added.

Mr. Sun is no stranger to adversity. In the late 1980s, after earning a master’s degree in engineering from Tsinghua University in Beijing, he worked for the company currently known as Legend Holdings Ltd. , which controls Chinese computer giant Lenovo Group. Shortly after leaving the firm, Mr. Sun was convicted by a Beijing court of misappropriating 130,000 yuan, the equivalent of about $20,153, during his tenure, and sentenced to five years in prison.

He was released after about a year and a half and eventually managed to get his 1992 conviction overturned. After leaving prison in 1994, Mr. Sun founded a residential developer called Sunco Group. It grew rapidly by scooping up land and building middle-income housing in Tianjin and more than a dozen other cities, while borrowing heavily in the process.

Average selling prices of homes nearly doubled over the next decade, according to data from China’s National Bureau of Statistics. By 2005, however, Beijing had rolled out many measures to cool the market.

Sunco’s liquidity became constrained, and to prevent the company from collapsing, Mr. Sun sold most of it to a Hong Kong-based developer in 2006 and 2007.

“A failure is a failure, and there is no need for an excuse. We’ve made mistakes in areas such as cash-flow management and expanding too fast,” Mr. Sun mused on Chinese social media some five years later, referring to Sunco’s issues.

Mr. Sun shifted his attention to Sunac, which he founded before Sunco was sold, and rode the wave of another housing surge in China. By focusing on high-end residential compounds—with gyms, cinemas, swimming pools and manicured gardens—in economically prosperous cities, Sunac’s contracted sales grew from the equivalent of $3 billion in 2011 at current exchange rates to nearly $90 billion in 2020.

Mr. Sun, who used to be a prolific blogger on Weibo, documented some of the company’s milestones.

“I received a call from an investor this morning,” he wrote one day in January 2012, the day after Sunac said it would buy a majority stake in a property development project from a rival. The investor had wondered about Sunac’s cash position and whether it was stable. “I said that there is no need to worry about cash flow. I won’t trip over the same stone twice,” Mr. Sun wrote.

That same year, he also mused that “doing business in the real-estate market is like planting crops. When the weather is good and the rain is timely, we will all have good harvests. In droughts or floods, there can be no crops.”

In 2017, Sunac was flush with cash and spent billions expanding into the entertainment and tourism industries. It paid $9.3 billion for the hotel and theme park assets of Chinese conglomerate Dalian Wanda Group and invested in a company that mainly does film production. Mr. Sun predicted that “with upgrades in consumption, industries such as big culture, big tourism and big entertainment will grow explosively.”

Sunac ranked as China’s third-largest developer by contracted sales at the end of last year, according to CRIC, an industry data provider. Mr. Sun’s fortune also swelled to more than $9 billion in 2021, according to Forbes. Sunac’s borrowings, meanwhile, also grew to $47.5 billion by June 2021 thanks in part to a flurry of bond sales in the preceding years and the company’s acquisitions.

Last July, Sunac raised $500 million from selling dollar bonds with coupons that were below 7%. Fitch Ratings, which gave the bonds a high speculative grade rating of BB, cited Sunac’s strong sales and ongoing efforts to reduce leverage.

Then, in September, market sentiment changed. A document circulating online appeared to show a request for government help to ease liquidity issues at one of Sunac’s subsidiaries. Sunac quickly said the leaked letter was a draft that was never sent. In the next few months, its shares and bonds tumbled further.

Sunac moved quickly to sell assets and has so far raised more than $3 billion by selling assets including a minority stake in New York-listed Chinese real-estate brokerage Ke Holdings Inc. and part of its ownership in a property services business. It has also transferred shares in some projects working on unfinished properties to state-owned developers and trusts.

But no developer can stay in business for long with borrowing channels shut, sales dropping precipitously for months and facing a wall of debt maturities creeping up. This month, Fitch withdrew its Sunac rating after slashing it to CC, which is one level above default. It said the company has billions of dollars in debt coming due this year and “diminished investor confidence” could further limit its access to funding.

Yao Yu, founder of YY Rating, a Chinese independent credit research firm, said if Sunac ends up in default and has to enter a long and complex restructuring like Evergrande, that could have a bigger negative impact on market sentiment because it had been managed a lot more prudently, yet it became a casualty of the market downturn.

“Mr. Sun is a person with integrity, but all Chinese private developers have built up leverage in the past, and are now facing the same liquidity problem,” Mr. Yao said.

Kingdom’s senior princes are trying to raise cash and avoid scrutiny from Crown Prince Mohammed bin Salman

RIYADH, Saudi Arabia—Saudi princes have sold more than $600 million worth of real estate, yachts and artwork in the U.S. and Europe since the kingdom’s de facto ruler tightened the purse strings of the ultrawealthy ruling family.

The transactions represent a radical change of fortune for senior princes who funneled windfalls from oil booms in the 1970s and 1980s into some of the world’s most exclusive markets. The vast sums of money were spent largely on hard-to-sell assets or drained by spending that reached $30 million a month for some royals with large staffs and lavish lifestyles, making them vulnerable to recent changes in government policy.

Now, some royal family members are selling assets abroad to generate cash after Crown Prince Mohammed bin Salman, the kingdom’s 36-year-old de facto ruler, dried up many of the sources of money they had used to maintain their extraordinary spending habits, said people close to the princes conducting the sales.

The princes need cash to pay routine bills including for property maintenance, taxes, staff salaries and parking fees for their airplanes and boats, the people said. In some cases, the people said, they are also motivated by a desire to hold less ostentatious assets to avoid attracting the attention of Prince Mohammed, who has curtailed their privileges and access to state funds in the Al Saud family since his father took the throne in 2015. The Saudi government is aware of the sales.

These people don’t work, they have huge staffs and they’re afraid of [Prince Mohammed],” said a person familiar with the transactions. The princes, the person added, want “cash in their back pocket and not to have visible wealth.”

Among the assets sold recently are a $155 million British country estate, two yachts more than 200 feet long, and Mughal jewels gifted as wedding presents by a late king. The sellers, including former ambassador to Washington Prince Bandar bin Sultan, were once among the most powerful people in Saudi Arabia.

“They’ve clearly been cut down to a disciplined, defined regimen and are having to live on that,” said British historian Robert Lacey, who has chronicled the Saudi ruling family since the 1980s. Prince Mohammed is “here for the long term and he’s reshaping things in a long-term fashion.”

A representative for Prince Bandar said he has sold all his assets abroad “because he saw bigger benefits to investing in the kingdom with the amazing job the crown prince is doing and creating all the investment opportunities.”

Prince Mohammed has sidelined relatives viewed as potential rivals—including an uncle and older cousin detained in 2020—and curtailed perks for thousands of royals, including paid vacations abroad or electricity and water bills at their Saudi palaces. Such perks had amounted to hundreds of millions of dollars in annual costs for the Saudi government.

Top royals accumulated billions of dollars a year through oil and real estate sales as well as business deals involving the government, from which Prince Mohammed has gradually cut them off. The government is squeezing royal family members in other ways, launching this year a tax of $2,500 for each domestic worker beyond the fourth employee, costing some royals hundreds of thousands of dollars a year.

U.S. diplomatic cables from the 1990s published by WikiLeaks show that some royals used to generate wealth by taking loans from local banks without paying them back, expropriating land from commoners, or exploiting the foreign-labor visa system for profit. People familiar with royal finances say princes continued to benefit from such schemes up until Prince Mohammed came to power. A system of stipends for thousands of Saudi princes, which the U.S. cables said cost the government billions of dollars a year, remains intact according to one of those people.

Many princes have adjusted their lifestyles due to shifts in the global economy and changes inside Saudi Arabia that have “turned off the taps,” according to this person.

“They had a standard of life that was beyond any expectation,” said another person familiar with the transactions. “The expenditure is out of this world. It takes time for them to adapt.”

The Saudi media ministry didn’t respond to questions about the finances of royal family members.

Some of the Saudis who are currently liquidating assets were detained temporarily in Riyadh’s Ritz-Carlton hotel in 2017 in what critics called a shakedown and power play by the crown prince, who described it as an anticorruption move. Many were released only in exchange for financial settlements. Arrests of prominent figures have continued, according to the anticorruption commission.

The Ritz detainees included the late Prince Turki bin Nasser. The former air-force commander was among the Saudi officials investigated by the British Defense Ministry on suspicion of receiving sweeteners from BAE Systems PLC in return for lucrative contracts to supply jet fighters and other military equipment to the kingdom, in what became known as the Al Yamamah arms deal in the 1980s.

Most Saudi royals no longer have access to such deals under Prince Mohammed. Representatives of Prince Turki’s estate couldn’t be reached and a surviving brother didn’t respond to questions about the British investigation, which the prince never addressed publicly.

Prince Turki sold his 203-foot yacht in 2020 and a $28.5 million home in Los Angeles’s exclusive Beverley Park community in 2021, according to people familiar with the transactions. He died before the home sale was completed; his family couldn’t be reached for comment. The terms of his settlement following detention at the Ritz couldn’t be learned. His net wealth was previously estimated at over $3 billion, according to a Saudi official.

Others selling their assets were never detained. For example, in 2021, Prince Bandar sold a $155 million country estate in the Cotswolds west of London, according to people close to him and familiar with the transaction. He was once near the center of Saudi power, and two of his children now have prominent positions as ambassadors to Washington and London. The British government in 2007 ended its probe of allegations that he was enriched from the Al Yamamah deal without making any findings. Prince Bandar has strongly denied that the sums involved represented secret commissions to him.

Prince Bandar is the son of the late Prince Sultan bin Abdulaziz, one of the major branches of the royal family whose income sources have dried up under Prince Mohammed. Prince Turki was Prince Sultan’s son-in-law.

Prince Sultan’s riches accrued in large part from his access to government funds, staff and resources over nearly half a century as defense minister, say people familiar with his estate. Bank statements reviewed by The Wall Street Journal show that in one year alone, he transferred tens of millions of dollars from government accounts at the Saudi American Bank directly to proxy accounts in Switzerland to help fund his lifestyle. “That has 100% stopped,” said a person familiar with the activities.

Feeling pinched by Prince Mohammed’s moves, Prince Sultan’s heirs unloaded a mansion in London’s Knightsbridge neighborhood that sold for a record $290 million in 2020, according to people close to the royals and familiar with the transaction.

One of Prince Sultan’s sons, Prince Khalid bin Sultan, who commanded troops alongside Gen. Norman Schwarzkopf during the first Gulf War in 1991, sold a Paris mansion next to the Eiffel Tower for over $87 million in 2020 and a 220-foot superyacht in 2019, according to people close to him and familiar with the transactions.

Some of Prince Sultan’s children are also trying to mortgage their global assets to raise money to make up for a shortfall from traditional sources of income, people familiar with those efforts said. One of them, Prince Fahd bin Sultan, was sued by Credit Suisse in November for allegedly defaulting on loans he took to refinance a $55 million superyacht and a $48 million estate south of London, court documents show.

Princes Khalid and Fahd, reached through a representative, declined to comment.

Gary Hersham, founder of luxury-property specialists Beauchamp Estates, who was involved in several of the Sultan family’s transactions, said that in general, the younger generation of Saudi royals no longer needs or uses the grand estates that their predecessors purchased. They are big spenders and would rather have cash, he said.

“They want less ostentation, that’s the trend,” he said, noting some smaller home purchases recently.

China’s capital ramps up testing to halt outbreak; Hangzhou restricts movements in some parts of tech hub

HONG KONG—Beijing said it is at a critical point in its efforts to halt a Covid-19 outbreak in the city, as new cases spread from school students and a tour group, while deaths in Shanghai more than tripled from a day earlier.

The Chinese capital recorded 22 new cases on Sunday, its highest daily tally this year. Shanghai, which a week ago had recorded no new deaths in the latest wave of infections, said 39 Covid patents died Saturday—more than three times Friday’s toll.

While still low by global standards, the latest numbers are a challenge to the ability of China’s top leaders to wipe out outbreaks with their zero-Covid policy. As pockets of infections flare up in the country’s most important cities, local officials are desperate to avoid a repeat of the economic disruption and growing public discontent seen in the financial hub of Shanghai, large parts of which have been under lockdown for weeks.

But the Chinese leadership has vowed to stick to their zero-Covid strategy, which has helped regions such as Jilin province successfully contain the virus after six weeks of lockdowns, they said. The northeastern province is the hardest-hit region after Shanghai. Cases have also been rising the past week in Jiangsu and Hebei, the provinces surrounding Shanghai and Beijing.

In Beijing, the infections included several cases in a middle school in Chaoyang District, and three family members of one of the infected students. Other cases were traced to a tour group and a delivery worker.

The virus had been spreading undetected among different communities for a week, Beijing health officials had said Saturday. More cases will be found as the city steps up its screening efforts, they said.

After the school was sealed off and classes suspended, Beijing’s Communist Party boss Cai Qi visited the site and ordered more Covid tests for all the middle and primary schools in Chaoyang. He also ordered the suspension of all face-to-face tutoring in the district.

Presiding over a meeting on Saturday, Mr. Cai said speed was vital to containing infections.

“This wave is menacing and stealthy, and its origin unclear—and transmission fast,” he said.

The new fatalities brought the death toll in China’s current outbreak to 89, all but two of them in Shanghai. Existing ailments such as late-stage cancer or diabetes were the direct cause in all of Shanghai’s cases, in which the average age of victims was 81, a city health official said Sunday.

Shanghai added 21,058 new cases on Saturday, bringing total infections in the city of 25 million to 490,000 since a wave of the highly contagious Omicron variant hit the financial capital on March 1.

Of those who died, only five were vaccinated against Covid, said Zhao Dandan, a deputy director of Shanghai’s health commission. The city would add more medical resources to treat severe cases, she said, urging eligible elderly people to get vaccinated as soon as possible.

There have been outbreaks at many of Shanghai’s 800 nursing homes since Omicron hit the city in early March. In one facility, the Donghai Elderly Care Hospital, at least 40 patients died by April 6 after the virus spread through the hospital, a Wall Street Journal investigation showed.

Only 62% of Shanghai residents aged 60 and over are vaccinated. The rate drops to 15% for the 800,000 residents who are over 80, the latest official data show. Meanwhile, most, if not all, the vaccination sites are closed as the lockdown continues in many parts of the city.

Over the weekend, many residents who have been quarantined at home for weeks saw metal fences being erected around their buildings, as the authorities ordered another round of restrictions to wipe out the remaining infections. Some of the barriers have been removed after residents protested, according to social-media posts that were verified by the Journal.

City leaders met Saturday evening in Hangzhou, a technology hub that is home to Alibaba Group Holding Ltd. , after more than 100 new cases were detected in the city since Tuesday. They ordered compulsory tests for all residents of Gongshu District and several neighborhoods in other areas, vowing to spare no resources in wiping out the virus.

Movements of residents in those areas were restricted for three days effective Saturday, the officials said in a statement.

It wasn’t yet possible to determine the source of the outbreak, which has already spread to schools, hospitals, supermarkets and other business venues. “The virus is likely to spread wider,” they said.

Buyout group has taken four ‘Reits’ private since the start of the pandemic

Blackstone has opened a new front in the private capital industry’s quest to supplant the stock market, taking aim at publicly listed real estate investment trusts that have fallen out of favour with investors as inflation and recession fears weigh on public market valuations.

The private equity group’s acquisition of listed student housing operator American Campus Communities for $13bn earlier this week was the biggest in a string of such takeovers. It followed last year’s $6bn acquisition of Extended Stay America, a lodging chain geared towards out-of-town workers and others who spend long spells away from home.

“Right now people are nervous about rising interest rates,” said Jonathan Litt, chief investment officer of Land & Buildings, an activist fund focused on real estate investments, explaining why some public real estate investment trusts or Reits are trading at steep discounts.

“I think we’ve seen this movie before,” he added. “We know real estate does really well in a rising rate environment. But the Reits have gone down. When companies are trading in the public market at discounts to their fair value, we’re going to see those companies go private.”

Blackstone is in pole position to buy out listed real estate companies with languishing stock market valuations, having raised $63bn for its private Reit, called Blackstone Real Estate Income Trust, since it was launched in 2018. The group has taken four listed real estate companies private since the beginning of the pandemic in 2020.

Like Extended Stay and ACC, Blackstone’s private Reit is organised as a real estate investment trust, a popular type of investment vehicle that pays out most of its income every year in exchange for an exemption from corporate taxes.

But unlike publicly listed Reits, which trade continuously on the stock market at a market price that can be volatile, Blackstone’s real estate product is a private vehicle. That means investors have fewer ways to cash out, although they can generally sell their shares back to the fund at fair value during a monthly window.

The arrangement can be attractive to investors who are more interested in smoothing out market bumps than in making sure they always have a fast way to liquidate their investments.

“I don’t know how many times the Reit market has gone up or down by 10 per cent or more over the past decade,” Blackstone president Jonathan Gray told the Financial Times. “It is not necessarily reflective of what’s happening at any one time in real estate . . . There’s much greater volatility.”

ACC, which owns more than 100 halls of residence and housing units near the campuses of prestigious universities including Princeton and the University of California Berkeley, was a case in point.

The housing operator’s shares were trading for $50.33 as recently as February, more than 20 per cent shy of the $64 net asset value calculated by analysts at Piper Sandler, an investment bank.

The lacklustre share price prompted Litt’s Land & Buildings fund to agitate for corrective action, including asset sales.

But Blackstone’s offer of $65.50 a share provides ACC’s shareholders with a faster way to realise the value of the investment. “We don’t think there is going to be a topping bid,” said Piper Sandler’s Alex Goldfarb.

Analysts say that Blackstone’s income-oriented investors may be willing to accept lower returns than some other real estate groups, in exchange for the expectation of regular disbursements. But Blackstone said there are other reasons why it is able to offer public market shareholders an exit at an attractive price.

“Owning and controlling ACC with our long-duration capital will give us the opportunity to add badly needed supply around major universities across the US,” said Nadeem Meghji, who heads Blackstone’s real estate arm in the Americas.

“This is an asset class where there simply isn’t enough high-quality inventory,” he added. “It is something we want to help solve.”

Blank-cheque companies have struggled to secure so-called Pipe funding to complete deals

Hedge fund Elliott Management is investing in a special purpose acquisition company deal, marking a rare bright spot for blank-cheque investment vehicles that have fallen from favour and left dealmakers scratching around for investors.

Elliott and New York-based Siris Capital are investing $20mn in the so-called Pipe of a Spac deal for travel technology group Mondee, according to people briefed on the deal.

The Spac deal values Mondee, which operates a collection of digital travel platforms, at $1bn.

Special purpose acquisition companies soared in popularity at the peak of the coronavirus pandemic, becoming Wall Street’s most sought-after investment product. Spac sponsors raise money from investors and publicly list the vehicles as a cash shell before searching for a private company to merge with and take public.

After listing on the stock market, Spacs typically require more capital to fund the acquisition, preferably via a Pipe deal with a well-known investor that can serve as a vote of confidence in the target company’s prospects.

But as the appetite for blank-cheque transactions has sharply subsided amid a string of failed deals and heightened regulatory scrutiny, the Pipe financing market has dried up. Dealmakers have been forced to sweeten the terms on offer or secure other sources of more expensive financing.

The deal for Mondee bucks the trend and shows that while the Spac market has become more challenging, investors are willing to stump up cash for attractive companies with a successful record. That marks a shift from the investments in fledgling pre-revenue firms that were a staple of the Spac boom at its peak.

Elliott and Siris are investing in Mondee’s Pipe at the standard price of $10 per share and the Pipe is all common equity, which is also unusual in the current environment. Dealmakers have been increasingly offering discounted Pipes or convertible debt with juicy interest rates as part of the Pipe in an attempt to woo investors and prevent deals being cancelled.

So far this year 21 Spac mergers have been abandoned, compared to three in the same period last year, according to Dealogic data.

“The Pipe market is brutal,” said one M&A lawyer. “Any Pipes that do get put into place are structured with convertible [debt] or something that gives investor some degree of downside protection.”

Elliott and Siris did not respond to requests for comment.

California-based company Mondee generated net revenue of $93mn in 2021, up 41 per cent compared to 2020 as the travel sector recovered from the economic impact of the Covid-19 pandemic.

It is merging with ITHAX Acquisition Corp, a blank-cheque vehicle led by Orestes Fintiklis, founder of private equity group Ithaca Capital Partners, which focuses on the travel and hospitality sectors. In 2018, Fintiklis gained attention for evicting the Trump Organisation from a Panama Hotel over mismanagement.

The $20mn investment adds to a previously agreed $50mn Pipe backed by investors including Morgan Stanley Investment Management and Arc Pe, a Miami-based private equity group.