Evergrande to sell $1.5B stake in Chinese bank as it scrambles to avoid debt default
Global News
Shengjing Bank, one of the main lenders to Evergrande, had demanded that all net proceeds from the disposal be used to settle its debt to the bank.
Scrambling to avoid defaulting on its debts, cash-strapped China Evergrande Group said on Wednesday it plans to sell a 9.99 billion yuan ($1.5 billion) stake in Shengjing Bank Co Ltd to a state-owned asset management company.
Shengjing Bank, one of the main lenders to Evergrande, had demanded that all net proceeds from the disposal be used to settle the financial liabilities of the property developer due to the lender, Evergrande said in an exchange filing.
That requirement suggests that Evergrande, which missed a bond interest payment last week, will be unable to use the funds for other purposes such as another interest payment to offshore bondholders of $47.5 million due on Wednesday.
The payment deadline is being closely watched by investors as the developer’s next big test in public markets. Shares of Evergrande rose as much as 15% on Wednesday.
Evergrande has rapidly become China’s biggest corporate headache as it teeters between a messy meltdown with far-reaching impacts, a managed collapse or the less likely prospect of a bailout by Beijing.
The 1.75 billion shares, representing 19.93% of the issued share capital of the bank, will be sold for 5.70 yuan apiece to Shenyang Shengjing Finance Investment Group Co Ltd, a state-owned enterprise involved in capital and asset management, Evergrande said in its filing.
Shenyang Shengjing’s stake in the bank will be increased to 20.79% after the deal to become the bank’s largest shareholder. Evergrande’s stake in the bank would be reduced to 14.75% from 34.5%.
“The company’s liquidity issue has adversely affected Shengjing Bank in a material way,” Evergrande Chairman Hui Ka Yan said in the statement.
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