China Evergrande sells $1.5 billion in Shengjing Bank to state company

Cranes stand at a construction site near the headquarters of China Evergrande Group in Shenzhen, Guangdong Province, China, September 26, 2021. REUTERS/Aly Song

  • Shengjing demands payment of his debts
  • Evergrande says the sale will help stabilize Shengjing
  • Evergrande faces Wednesday’s bond payment deadline

HONG KONG (Reuters) – The cash-strapped China Evergrande (3333.HK) It said on Wednesday that it plans to sell a stake worth 9.99 billion yuan ($1.5 billion) it holds in Shengjing Bank Co Ltd. (2066.HK) to a state-owned asset management company while striving to raise funds.

Evergrande said Shengjing Bank has demanded that all net proceeds from the sale be applied to the settlement of the group’s related financial obligations owed to Shengjing Bank.

That requirement means Evergrande, which defaulted on bond interest last week, will not be able to use the money for other purposes such as another $47.5 million interest payment to overseas bond holders due on Wednesday.

Investors are watching the payment deadline closely as the developer’s next big test in the public markets. Read more

Evergrande has quickly become China’s biggest corporate headache as it vacillates between a chaotic meltdown with far-reaching implications, a managed meltdown, or the less likely prospect of a bailout by Beijing. Read more

China Evergrande said in a statement that the 1.75 billion shares, which represent 19.93% of the bank’s issued capital, will be sold at 5.70 yuan per share to Shenyang Shengjing Finance Investment Group Co Ltd, a state-owned company involved in capital and asset management. Submission to the Hong Kong Stock Exchange.

Shenyang Shengjing’s stake in the bank will be increased to 20.79% after the transaction to become the bank’s largest shareholder.

“The company’s liquidity issue has negatively affected Shengjing Bank in a material way,” Hui Ka Yan, president of Evergrande, said in the statement.

“Introducing the buyer, as a state-owned enterprise, will help stabilize Shengjing Bank’s operations and at the same time, help increase and maintain the value of the 14.75% stake in Shengjing Bank held by the company.”

Sources familiar with the matter told Reuters this week that Beijing is urging state-backed companies and real estate developers to buy some of the assets of the embattled Chinese Evergrande Group. Read more

Its stake in the bank will be reduced to 14.75% from 34.5%.

(Reporting by Donnie Kwok and Anne-Marie Rowntree) Editing by Stephen Coates

Our criteria: Thomson Reuters Trust Principles.

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